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Building The Business Case With Shark Roi
- 4. 1. EVALUATION - ECONOMIC BENEFITS © Shark Finesse Ltd 2001 - 2010 2. Press the GO buttons to perform the calculation 15,000,000 55 50 6 A typical evaluator: (see General ‘Suite’ in Shark) Ask the customer what they think is the likely improvement due to the solution e.g. 5 day improvement in their debtor days (DSO: days sales outstanding) 1. Enter the known information and the agreed improvement 2,260,274 205,479 1,027
Editor's Notes
- Slide Notes for Facilitators : Personal welcome from course leader Explain the facilities at the training venue – toilet location, break times etc Actions for Facilitators : No details of date and presenter names are included to keep content generic Facilitator's Personal Notes : © Shark Finesse Ltd 2001 - 2010 SHARK BUSINESS CASE TRAINING
- Slide notes for Facilitators : The next section of the program is all about understanding the workings of the Shark ROI tools. The slides that follow explain the reasoning behind the design of the ROI tools and explains what each element is about. The names on the slides match the process steps in the toolset. The first section is all about evaluation …the method by which the vendors and the customers talk about the solution and attempt to discover the improvements that the solution delivers and the financial consequences arising as a result of deployment. The arguments contained within the ROI software match the typical economic arguments that the vendor solutions provide to the customer. This Evaluation section will be followed by the ROI calculations and then by the Business Case (Board Report) – the output that is given to the customer. Actions for facilitators : At all times ensure that the users are looking at the relevant section of the software whilst the slides explain the purpose behind it. Full education and help about what the tool does and further information on the steps are contained within the help section of the ROI tool itself. The instruction to load your ROI software may bring out issues – which can be addressed by the advice section of the facilitator notes. During section 2 the presenter slide deck will build every single step of a full business case so there is no emphasis on the trainer to run a “special” build themselves. The course design that follows will ensure that the majority of the functionality is covered and a full case achieved for future reference. This section is for “user orientation” around the process, not the build itself. Facilitator's Personal Notes : © Shark Finesse Ltd 2001 - 2010 SHARK BUSINESS CASE TRAINING
- Slide notes for Facilitators : The 3 stages to building the business case are outlined in the slide. Facilitators will note that there is no initial or ongoing cost mentioned here…some business cases are simply built upon an evaluation of the benefits and what it’s worth to the customer. When initial and recurring costs are required then they can be included in the business case at any suitable time via the customer deal bar at the foot of every software screen. Evaluation = identification of the benefits with the customer, and assessment of the potential improvement in the financial performance of the client business once the recommended solution has been deployed. These may be pessimistic or optimistic benefits depending upon the opinion and feedback from the customer. In all cases the customer must sponsor the approach and possible benefits identification if the business case is to carry value inside their own organization to justify the spend. ROI – sales teams are not employed as mathematicians. This section automates the calculation of all the key benefits identified with the customer to produce Net Present Value, Internal Rate of Return and Payback measures. Sometimes the term EVA, “Economic Value Add”, is used as alternatives for NPV and IRR. These alternatives are clearly marked in the software and the later training slides. Business Case (Board Report) – automatically produces documentation suitable for submission to the decision makers covering the key language, measures, and calculations needed for sign off. All elements of the report help both the customer and the vendor to understand the basis of preparation and audit the output. This is also designed to save significant time for all skill levels of sales and ensure that calculations and language do not slow or stop the clients decision from an economic perspective. Actions for facilitators : Ask them to examine the process bar at the top of the screen. Evaluation is clearly marked. The ROI calculations are shown as NPV / IRR / Payback and Summary. The Board report is an option clearly marked within the business case section. This last section also has options to show a graphical demonstrations together with the financial pain associated with “do nothing” “delay the decision” or “open tender (competitive bid)” situations. Facilitator's Personal Notes : © Shark Finesse Ltd 2001 - 2010 SHARK BUSINESS CASE TRAINING
- Slide notes for Facilitators : This slide shows how each of the evaluators is used to engage the customer to calculate an economic benefit for inclusion in the business case. To stimulate the discussion the vendor would identify all the elements of the proposed solution that could deliver this benefit. If it’s all about cash collection improvement, then this could be delivered from electronic invoicing, automated daily invoice runs, faster payment by direct posting to the client ledger etc. The impact upon the client would be assessed and an improvement in the speed of collection agreed. This may be much less than is actually achieved, but it is necessary to assume something for the basic business case proof. Upon agreement of these benefits the economic impact is automatically calculated and included in the evaluator / ROI tool process. Actions for facilitators : Ask the delegates to find the Improve Cash Collection Evaluator and replicate the calculation shown in the slide. Improve Cash Collection is a popular economic argument when constructing business cases and it should not be difficult for the delegates to find as it is on the following suites: General Commercial Manufacturing Consumer Products Distribution Financial / Professional Services Utilities Transportation / Travel Facilitator's Personal Notes : © Shark Finesse Ltd 2001 - 2010 SHARK BUSINESS CASE TRAINING
- Slide notes for Facilitators : Remind the delegates that ROI is a family name…don’t be tempted to say “it’s a good ROI”…remind them of the finance exercise earlier this morning…we must be more quantitative. Three measures represent the three different ways of reviewing a decision to spend money on supplier solutions…there aren’t any others. Some delegates may ask “which is best?” And that depends upon the circumstances of the customer. Generally it is found that NPV is the most widely used (40-50% of occasions, closely followed by IRR (30-40% of occasions) and lastly Payback (10-20% of occasions). Payback is a good measure for clients that have no money or limited funds…if you are a student then you don’t have the luxury of structured financial decisions…it’s just about getting your money back quickly. IRR is good for companies that measure which projects deliver the highest % returns…they may have hundreds to choose from and can’t do them all. IRR is also sponsored by private companies with positive bank balances who always have an alternative to leave the money in the bank and generate interest! NPV is good for public / listed companies with access to extensive funds but wish to ensure that the minimum return requirements of the funds providers are more than covered by the benefits from the project. If it delivers shareholder value then that’s all that matters…the providers of the funds are happy. Actions for facilitators : We are now moving out of the mathematical ROI section. Facilitator's Personal Notes : © Shark Finesse Ltd 2001 - 2010 SHARK BUSINESS CASE TRAINING
- Slide notes for Facilitators : The software provides board-ready outputs in many formats including: .doc .pdf .rtf .ppt In addition to the .ppt output there is an interactive presentation mode which allows the user to zoom into benefits. Actions for facilitators : Show the presentation mode and mention the above formats. Remember to point out that the reports are generated to the user’s desktop by default. Facilitator's Personal Notes : © Shark Finesse Ltd 2001 - 2010
- Slide notes for Facilitators : (Minimum returns % 1 of 4) The ROI software asks for a “minimum return %” and it is this percentage that is used to convert future costs and benefits into a today value. Companies have to take decisions whether to invest or not, and they must achieve a minimum rate of return in order to justify doing it in the first place. The return rate is expressed as an annual percentage called the discount rate and can often be found in the company’s annual report if they are a public company. Obtain a copy of a typical annual report (e.g. download it from the company’s website) and search for “discount rate”. Be careful not to confuse this with the discount rate that may be associated with the company’s pension scheme. It will be obvious if you have chosen the wrong number, it will be quite low - usually <5%, and the wording will mention “company scheme” or “entitlement”. Actions for facilitators : Consider looking for a suitable company that the delegates may be interested in and locate the discount rate in the pdf copy of its annual report. This can be used as a demonstration of how to find the discount rate. Facilitator's Personal Notes : © Shark Finesse Ltd 2001 - 2007 SHARK BUSINESS CASE TRAINING
- Slide notes for Facilitators : (Minimum returns % 2 of 4) This slide builds. Make sure you point out that not all companies will have a quoted discount rate. Private companies will almost certainly not publish one. Hence, the delegates will have to ask and in certain instances, suggest a number that matches the company’s profile. This could be influenced by the business sector it is in but also the prevailing interest rates / cost of money in the company’s location and the level of risk in the business (the higher the risk, the higher the hurdle/discount/return rate). Actions for facilitators : If an actual annual report has been downloaded (see next slide) use it as an example of how to find the discount rate from publicly available information. Facilitator's Personal Notes : © Shark Finesse Ltd 2001 - 2007 SHARK BUSINESS CASE TRAINING
- Slide notes for Facilitators : (Minimum returns % 4 of 4) This slide summarises the minimum rates of return used in real business cases which have been built in Shark. These values are the minimum returns that clients need to achieve before any net value is created from an investment proposal. These rates are used to revalue future cash flows into today’s terms and underpin the NPV calculation. These rates are often quoted in the annual report of a customer but the customer may also insist upon a higher rate of return for this exercise to reflect increased risk etc. Actions for facilitators Facilitator's Personal Notes : © Shark Finesse Ltd 2001 - 2010 SHARK BUSINESS CASE TRAINING
- Slide notes for Facilitators : This is quick summary: 1) Evaluate the Benefits 2) Calculate the ROI 3) Then your report is ready! Actions for facilitators : Facilitator's Personal Notes : © Shark Finesse Ltd 2001 - 2007
- Slide notes for Facilitators : This section is where the trainer and the class prepare the first business case together. This is a full end to end software build starting with the costs of the solution and then following it up with the benefits and resulting business case. IMPORTANT – early sales cycle engagement may start with the benefits first...and not mentioning the costs until later. This is understood...but feedback from the Shark user community on previous courses demanded an end-to-end business case build to establish base level capability rather than jumping into the refinements of usage for individual client situations. . At this stage it is about usage and familiarity. The refinements follow in sections 3 and 4. Actions for facilitators : Facilitator's Personal Notes : © Shark Finesse Ltd 2001 - 2010 SHARK BUSINESS CASE TRAINING
- Slide notes for Facilitators : Set the scene for the business case. We know all of the costs and benefits for this example. This example is all about an end-to-end business case build. The values for each of these slides are shown on a summary slide and the business case document is contained in the attendee pack marked “First Business Case”. Actions for facilitators : Remind them – no business case = no spend with you ! Facilitator's Personal Notes : © Shark Finesse Ltd 2001 - 2007
- Slide notes for Facilitators : This slide build explains exactly what process is going to be followed, so before they start the exercise they can all visualise the steps needed and realise that this is achievable. Actions for facilitators : Key through slide slowly and explain the steps involved, we will all be building this together. Take time to build this slide as each piece of text is matched by the appropriate image of the appropriate section within the software. Facilitator's Personal Notes : © Shark Finesse Ltd 2001 - 2007
- Slide notes for Facilitators : This slide shows the initial costs, on-going annual costs and hard economic benefits for the first business case example. delegates should refer to these values, available as part of their delegates’ pack, for the completion of the exercise. Each slide that follows will explain exactly how to include this information in the Shark tool. delegates simply need to follow the slide build but build the example in Shark. The facilitator does not need to build this example themselves, the slide deck does that for you. Actions for facilitators : A ‘credit note’ is a customer concession. Some countries have different names for this. Facilitator's Personal Notes : © Shark Finesse Ltd 2001 - 2007
- Copyright notice – end of Module 2 © Shark Finesse Ltd 2001 - 2007 SHARK BUSINESS CASE TRAINING
![ROI TOOL - familiarization ,[object Object],© Shark Finesse Ltd 2001 - 2010](data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7)