� Cost Benefit Analysis
This analysis allows you to look at the expected costs of an item against its expected benefits , to determine the best and / or most profitable course of action . The best way to demonstrate this is through an example !
Example : A Cost Benefit Analysis for Purchasing a New Computer System for the Social Start Up
A new computer system will costthe following :
The benefitsof the new computer system will be :
� Equipment
� Training
� Time ( training , transfer from one system to another , adjustment to the new system , etc )
� Loss of marketing and sales focus while developing and transferring to the new system Total = Euro 10,000
� Improved customer service
� Ability to undertake internet based marketing and sales
� Improved sales management
� More effective web-based presence
� Increased efficiency
Total = Euro 18,000
10,000 / 18,000 = 0.555of the benefits
This means that it will take less than a year to recuperate the full cost of the new computer system if it is bought , as these costs make up 55 % of the benefits .
� Break Even Analysis
This allows you to identify the Break Even point when Sales / Membership = Costs . Therefore , it is an indication of the volume of sales and memberships you will need to achieve to cover the costs of the social start up .
To determine the Breakeven Point , you will need to have : 1 . all your fixed costs and , 2 . the variable cost of producing one item
Once you have these figures , you can calculate the Break Even point . The best way to demonstrate how you calculate the Break Even point is through an example !
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