A look back at the best from this week in the past.
5 Return On Investment Calculation Tips
Return on investment calculation is critical to using ROI for prioritizing requirements. We’ve discussed how to forecast return on investment by estimating costs and predicting benefits. Here are five tips to help you when calculating return on investment.
The following ROI calculation tips are detailed in this article:
1. Recognize the Risks
2. Discount Future Cash Flows
3. Separate Sales From Expenses
4. Overcome Ozymandias Syndrome
5. Ignore Infinite Elvises
Read on for the details…
Prioritization With ROI and Utility
Prioritization with ROI is generally thought of as a quantitative analysis. For hard ROI, that is true. For soft ROI, it is anything but true. You have to make a prediction of the utility of the requirement or feature. That predicted utility is based on our expected utility, which is based on your past experiences. Your past experiences are reflected in remembered utility, which is a function of experienced utility. How can you know with certainty, and use that to prioritize requirements or features?
How To Measure Costs When Calculating ROI
At a high level, it is easy to describe ROI – the return on the investment. But how do we measure the investment? There’s a problem when we have to go to the next level. Some costs are obviously incurred as part of our actions, and some costs happen even if we don’t take the action. We have to allocate those costs across all our actions or we won’t have an accurate reflection of our investment. Without an accurate model of our investment, we can’t calculate the return on our investment.
Definition of ROI – Return on Investment
We talk about ROI all the time – what is it, in layman’s terms? ROI is the acronym for return on investment. Another way to think of it is “How much profit will we make if we invest in this project?” Profit is revenue minus costs. Technically, the question should […]