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How Do You Handle Indirect Benefits in a Business Case?

Posted by David Svigel on Jan 18, 2013 11:08:08 AM
David Svigel
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Many times an offering may have what a prospect might consider to be indirect benefits. These are benefits that, although real, are harder to directly link to the offering and/or are harder to actually capture. A couple of categories of benefits that often fall into this indirect bucket are labor savings (e.g., productivity gains) or revenue enhancements (e.g., sales growth). If your prospect struggles with the direct linkage of these benefits from your offering, how can you use them in your business case?

What we have found to be effective in those cases is to group all of the benefits into one of three buckets: direct, indirect, and strategic. Strategic benefits (e.g., increased employee satisfaction) are sometimes referred to as intangible benefits. These cannot be easily quantified in financial terms, but are often an important part of the benefit delivered by the solution. These should be called out in the business case, but not included in the financial justification.

Direct benefits are easy. Those are the benefits that the prospect will easily believe and will want to include in the cost justification. The difficult category is indirect benefits. An easy way to deal with indirect benefits is to first build the economic justification based on the direct benefits (using financial metrics such as ROI, IRR, payback period, and NPV). Then show the indirect benefits as pure upside to the business case. Typically those would be listed as the additional financial impact from each of the benefit areas, and then a recalculation of the NPV with the indirect (or upside) benefits.

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Topics: ROI Tools, Value Selling, Sales Strategy