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Return on Investment: Initial

Considerations for Measuring Cost-Savings of AT Reuse

Sara Sack

Director of Assistive Technology for

KansansMay 25, 2007

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What is ROI Analysis?

One of several approaches to building afinancial business case (Solution Matrix)

A performance measure used to evaluate theefficiency of an investment or

A performance measure to compare theefficiency of different investments.

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What is ROI Analysis? (cont.)

ROI is a traditional financial measure to

determine benefit to the business

Benefit of trainingBenefit of asset purchase decisions (computer

systems or a fleet of vehicles)

Marketing, recruiting programs

Example: Floridas DOE is evaluatingmeasures of performance in light of resourcesallocated to individual schools and districts

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What is ROI Analysis? (cont.)

ROI is a metric that yields some

insights into how to improve

business results in the future (L.

Dombrowski)

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Simple ROI vs. ROI

The benefit (return) of an investment isdivided by the cost of the investments; theresult is expressed as a percentage or a ratio.This is referred to as simple ROI.

ROI= Gains from investmentCost of investment

Cost of Investment

$700,000 - $500,000 = 40%

$500,000

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Simple ROI Investment Example

ROI is used to compare returns on

investment where the money gained or

lostor the money investedare not easilycompared using monetary values. For

example, a $1,000 investment that earns

$50 in interest obviously generates more

cash than a $100 investment that earns $20

interest, but the $100 investment earns a

higher return. So.

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Simple ROI Investment Example

$50/$1,000

$1050 - $1000 = 50 = 5% ROI

$1000 $1000

$20/$100

$120-100 = 20 = 20% ROI

$100 $100

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ROI (or Complex ROI)

In complex business settings, it is not

always easy to match specific returns with

specific costs (Solution Matrix) New formulas involve calculating:

Total BenefitTotal Costs = ---- x 100 =ROI

Total Costs

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Considerations for Using ROI

Locate software programs designed to helpmanagers identify total benefits and total costs

Establish measures and state them publicly before

calculating ROI

Determine time periods and state them carefully.

Determine appropriate calculations to be made.

Be aware that shorter or longer time periods may

produce quite different ROIs.

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Next Steps for ATK Related to ROI

Review electronic management software including RADDIE, SolutionMatrix, and others

Determine Internal and External benefits and costs Staff/labor costs

Storage

Transportation/delivery costs

Repair costs

Supplies

Marketing and outreach

Training

Volunteer time and associated costs Overhead

State ROI measures before starting

Compare trial software programs

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Questions?

For more information contact: Sara

Sack, University of Kansas, 620-421-8367 or ssack@ku.edu