What is a cost-benefit analysis?
Cost-benefit analysis (CBA) compares the total expected costs of an option with its total expected benefits. If benefits exceed costs — ideally after discounting future amounts to today's value (NPV) — the option is worth pursuing.
How to do a cost-benefit analysis
- Define the decision and the options (including “do nothing”).
- List direct, indirect and opportunity costs.
- List tangible and intangible benefits.
- Put a money value on each, with clear assumptions.
- Spread them over time and discount to present value.
- Compare options and test how sensitive the result is to key assumptions.
Common mistakes to avoid
- Ignoring the “do nothing” option.
- Over-valuing intangible benefits.
- Hiding assumptions — always write them down.
How DOOfy helps
Better assumptions make better CBAs. AIMOS One provides real figures — current costs, volumes, wastage, time spent — so the baseline in your analysis comes from data rather than estimates.
Frequently asked questions
What is NPV in a cost-benefit analysis?
Net Present Value — the total of future benefits minus costs, discounted to today's value to reflect the time value of money.
How do you value intangible benefits?
Use proxies such as time saved × hourly cost, reduced churn × customer value, or avoided risk × probability × impact.