OPPORTUNITY STANDARD FINANCIAL ANALYSIS TOOL

Rapid Financial Business Case

Project Name Here

BACKGROUND
This modeling tool has been developed to help you generate a financial business case for a technology decision. It is designed to help you assess
the actual impact the project will have to the bottom line. Calculations such as return on investment (ROI), total cost of ownership (TCO),
payback period, and net present value (NPV) are calculated and may be used to either select the best solution or negotiate better terms for a
desired solution that may have the wrong cost structure.

Nucleus Research is a global provider of investigative, case-based technology research and advisory services that provide real-world insight into
maximizing technology value. For more information, visit NucleusResearch.com.

Nucleus Research is registered with the National Association of State Boards of Accountancy. Registration number: 108024

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BENEFITS
INCREASED EMPLOYEE PRODUCTIVITY
Increased worker productivity is the most common benefit realized from a technology investment.

IT productivity
How many IT employees will use the new solution? 3 IT employees
What is the average annual fully loaded cost of an IT employee? 2,000
What percentage of their time can they save with the new solution? 25.0%

Annual benefit from increased technologist productivity: 1,500

Manager productivity
How many managers will use the new solution? 3 managers
What is the average annual fully loaded cost of a manager? 2,100
What percentage of their time can they save with the new solution? 10.0%

Annual benefit from increased manager productivity: 630

Employee productivity
How many employees will use the new solution? 49 employees
What is the average annual fully loaded cost of an employee? 800
What percentage of their time can they save with the new solution? 10.0%

Annual benefit from increased employee productivity: 3,920

REDUCED CUSTOMER CHURN

Increasing customer satisfaction can have a direct impact by reducing customer churn, reducing the cost to acquire new customers.

How many customers do you have? 9,000 customers

How much does it cost to acquire a new customer? 20
What is your current annual churn rate? 50.0%
By what percentage can you decrease this churn rate using the new solution? 25%

Annual benefit from reduced customer churn: 22,500

REDUCED HARDWARE AND SOFTWARE COST

Many new technologies replace existing solutions, providing a benefit by eliminating the cost to maintain and upgrade an outdated solution or avoiding future purchases to support that
solution.

What is the annual maintenance cost on hardware you plan to eliminate? 10,000
What is your annual spend on new hardware for the solution you are eliminating? 0

Annual benefit from reduced hardware cost: 10,000

What is the annual maintenance cost on software you plan to eliminate? 0

What is your annual spend on new software for the solution you are eliminating? 0

Annual benefit from reduced software cost: 0

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BENEFITS
REDUCED ACCOUNTING AND AUDIT COSTS
Organizations using an outside firm or auditor to audit their books often find they are able to reduce audit costs when implementing technology to manage assets or automate processes.

What is your annual audit cost? 2,000

By what percentage can you reduce this cost? 4.0%

Annual benefit from reduced audit costs: 80

REDUCED INVENTORY
In many cases solutions such as ERP and CRM can streamline the tracking of purchase orders and link the supply process from inventory received through product shipped and billed.
Ultimately that solution can help reduce overall inventory and inventory carrying costs.

What is your average inventory value? 10,000,000

What is your cost of capital? 10.0%
By what percentage can you reduce your current inventory? 10.0%

Annual benefit from reduced inventory: 100,000

REDUCTION IN WORKING CAPITAL

Accelerating billings and reducing accounts receivable days outstanding are two ways that technology can help to reduce an organization’s overall working capital requirements.

What are your current working capital requirements? 300,000

What is your cost of capital? 10.0%
By what percentage can you reduce working capital? 10.0%

Annual benefit from reduced working capital: 3,000

INCREASED PROFITS
Many companies are able to increase profits by either increasing sales or identifying areas where automation can reduce the bottom line costs.

What are your total annual sales? 2,000,000

What is your profit margin? 20.0%
By what percentage can you increase sales using the solution? 15.0%

Annual benefit from increased profits: 60,000

OTHER BENEFITS
Other benefits could include improved partner management, improved visibility, and reduced administrative overhead.

Other annual direct or hard benefits not included above: 80

Other annual indirect or soft benefits not included above: 100,000

Total of all other benefits: 100,080

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COSTS
SOFTWARE
The software costs for a project include the initial license fees and the ongoing annual costs for a subscription license and maintenance fees. Other costs may include operating system,
support software, or other desktop upgrades and network software changes.

If you are purchasing the solution, what is the initial cost of software licenses? 0
✘ Check here if this is a capital expense (CAPEX) that should be depreciated. 1
For a cloud solution, what is the annual subscription cost? 100,000
How would you like to account for the cloud subscription payments?
● Allocate the payments at the beginning of the period (initial year, year 1, and year 2). 1
Allocate the payments within the period (year 1, year 2, and year 3).
What is the annual maintenance cost for the software? 20,000

HARDWARE
Hardware costs include servers purchased to support the application and any additional networking or security hardware required as part of the deployment. Additional hardware may be
required to support networking, integration, and wireless and mobile devices.

What is the total initial cost of hardware purchased for the project? 0
Check here if this is a capital expense (CAPEX) that should be depreciated. 0
What is the maintenance cost for this hardware? 0
What is the average cost for power and cooling per year for these devices? 0

INTERNAL STAFF
The personnel costs for a project include the initial time devoted to the management and deployment of the solution. On an ongoing basis, the time devoted to managing the solution
should be included in the project costs.

Initial deployment
How many total hours will internal technology staff spend on the initial deployment? 1000 hours
What is the average fully loaded annual cost of an IT person? 600

How many total hours will management spend on the initial deployment? 0 hours
What is the average fully loaded annual cost of a manager? 0

Ongoing Support
How many technology staff will be assigned to ongoing system maintenance? 0.0 employees

EXTERNAL CONSULTING AND PROFESSIONAL SERVICES

Consulting and professional services are typically used for initial deployment, custom development, integration, and training.

What is the total initial cost of consulting and professional services for the project? 0

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FINANCIAL ANALYSIS
FINANCIAL RESULTS

Payback Period 0.6 years CUMULATIVE NET BENEFIT

Annual ROI 214%

Net Present Value 252,013

Internal Rate of Return (IRR) 181%
Average Annual Net Benefit 181,614

TYPES OF BENEFITS

Direct 38% 62% Indirect

Cost : Benefit
Ratio
1 : 2.5
SUMMARY DATA
NET CASH FLOWS
Total Benefits Pre-start Year 1 Year 2 Year 3
Direct 339,480 0 113,160 113,160 113,160
Indirect 565,650 0 188,550 188,550 188,550

Total Costs Pre-start Year 1 Year 2 Year 3

544,842
CAPEX 0 0 0 0 0
OPEX 360,288 100,288 120,000 120,000 20,000

Net Cash Flows (100,288) 181,710 181,710 281,710

Cumulative Net Benefit 81,422 263,132 544,842
263,132

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 263,132

81,422

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 81,422

RELATED RESEARCH Year 1 Year 2 Year 3

281,710

181,710 181,710
BUSINESS CASE DEVELOPMENT

Infographic: Building the financial business case

Maximizing the potential return on investment

NucleusResearch.com
(100,288)
Initial Year 1 Year 2 Year 3
Nucleus Research is the leading provider of investigative technology
Indirect benefits: The invisible ROI drivers research and is registered with the National Association of State Boards
of Accountancy. NASBA registration number: 108024

Quantifying the value of increased productivity

Understanding the metrics: NPV versus ROI

Nucleus Research Inc.

100 State Street
The strengths and weaknesses of TCO Boston MA 02109
1-617-720-2000

Copyright © 2017 Nucleus Research Inc.

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FINANCIAL ASSUMPTIONS

Tax rate: 45%

Depreciation method: 5-year straight-line
Cost of capital: 7.0%
Delay benefit realization by: 0 months 0%

Cost Calculations
SOFTWARE - EXPENSED Pre-start Year 1 Year 2 Year 3 Totals
Product license charges 0 0 0 0 0
Subscription cost 100,000 100,000 100,000 0 300,000
Other 0 0 0 0 0
Other 0 0 0 0 0
Other 0 0 0 0 0
Maintenance fees 0 20,000 20,000 20,000 60,000
TOTAL SOFTWARE - EXPENSED 100,000 120,000 120,000 20,000 360,000

SOFTWARE - CAPITALIZED Pre-start Year 1 Year 2 Year 3 Book

Product license 0 0 0 0 0
Capital purchases - Initial year 0 0 0 0 0
Capital purchases - First year 0 0 0 0
Capital purchases - Second year 0 0 0
Capital purchases - Third year 0 0
TOTAL SOFTWARE - DEPRECIATED 0 0 0 0 0

HARDWARE - EXPENSED Pre-start Year 1 Year 2 Year 3 Totals

Server hardware costs 0 0 0 0 0
Power and cooling costs 0 0 0 0 0
Other 0 0 0 0 0
Other 0 0 0 0 0
Maintenance fees 0 0 0 0 0
TOTAL HARDWARE - EXPENSED 0 0 0 0 0

HARDWARE - CAPITALIZED Pre-start Year 1 Year 2 Year 3 Book

Capital purchases - from above 0 0 0 0 0
Capital purchases - Initial year 0 0 0 0 0
Capital purchases - First year 0 0 0 0
Capital purchases - Second year 0 0 0
Capital purchases - Third year 0 0
TOTAL HARDWARE - DEPRECIATED 0 0 0 0 0

CONSULTING - EXPENSED Pre-start Year 1 Year 2 Year 3 Totals

Third-party consulting 0 0 0 0 0
Deployment and upgrade consulting 0 0 0 0 0
Integration 0 0 0 0 0

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Future project based 0 0 0 0 0
Other 0 0 0 0 0
TOTAL CONSULTING 0 0 0 0 0

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CONSULTING - CAPITALIZED Pre-start Year 1 Year 2 Year 3 Book
Capital cost - Initial year 0 0 0 0 0
Capital cost - First year 0 0 0 0
Capital cost - Second year 0 0 0
Capital cost - Third year 0 0
TOTAL CONSULTING - DEPRECIATED 0 0 0 0 0

PERSONNEL Pre-start Year 1 Year 2 Year 3 Totals

Initial
Management 0 0 0 0 0
Information technology 288 0 0 0 288
Other staff 0 0 0 0 0
Ongoing
Management 0 0 0 0 0
Administrators 0 0 0 0 0
Information technology 0 0 0 0 0
Other 0 0 0 0 0
TOTAL PERSONNEL 288 0 0 0 288

PERSONNEL - CAPITALIZED Pre-start Year 1 Year 2 Year 3 Book

Capital cost - Initial year 0 0 0 0 0
Capital cost - First year 0 0 0 0
Capital cost - Second year 0 0 0
Capital cost - Third year 0 0
TOTAL PERSONNEL - DEPRECIATED 0 0 0 0 0

TRAINING Pre-start Year 1 Year 2 Year 3 Totals

Employee time 0 0 0 0 0
Trainer cost 0 0 0 0 0
Outside location costs 0 0 0 0 0
Other 0 0 0 0 0
TOTAL TRAINING 0 0 0 0 0

OTHER Pre-start Year 1 Year 2 Year 3 Totals

Telemarketing 0 0 0 0 0
Direct mail and Webcast 0 0 0 0 0
Airfare 0 0 0 0 0
Other 0 0 0 0 0
OTHER 0 0 0 0 0

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Benefit Calculations

DIRECT Pre-start Year 1 Year 2 Year 3 Totals

REDUCED HARDWARE AND SOFTWARE COST 0 10,000 10,000 10,000 30,000
REDUCED ACCOUNTING AND AUDIT COSTS 0 80 80 80 240
REDUCED INVENTORY 0 100,000 100,000 100,000 300,000
REDUCTION IN WORKING CAPITAL 0 3,000 3,000 3,000 9,000
OTHER BENEFITS 0 80 80 80 240
0 0 0 0 0
Other 0 0 0 0 0
Other 0 0 0 0 0
Total annual - direct 0 113,160 113,160 113,160 339,480
TOTAL - DIRECT (with realization delay) 0 113,160 113,160 113,160 339,480

INDIRECT Pre-start Year 1 Year 2 Year 3 Totals

IT productivity 0 1,500 1,500 1,500 4,500
Manager productivity 0 630 630 630 1,890
Employee productivity 0 3,920 3,920 3,920 11,760
REDUCED CUSTOMER CHURN 0 22,500 22,500 22,500 67,500
INCREASED PROFITS 0 60,000 60,000 60,000 180,000
OTHER BENEFITS 0 100,000 100,000 100,000 300,000

Other 0 0 0 0 0
Other 0 0 0 0 0
Total annual - indirect 0 188,550 188,550 188,550 565,650
TOTAL - INDIRECT (with realization delay) 0 188,550 188,550 188,550 565,650

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FINANCIAL ANALYSIS
Project Name Here

Annual ROI: 214%

Payback period: 0.6 years

BENEFITS Pre-start Year 1 Year 2 Year 3

Direct 0 113,160 113,160 113,160
Indirect 0 188,550 188,550 188,550
Total per period 0 301,710 301,710 301,710

COSTS - CAPITALIZED ASSETS Pre-start Year 1 Year 2 Year 3

Software 0 0 0 0
Hardware 0 0 0 0
Project consulting and personnel 0 0 0 0
Total per period 0 0 0 0

COSTS - DEPRECIATION SCHEDULE Pre-start Year 1 Year 2 Year 3

Software 0 0 0 0
Hardware 0 0 0 0
Project consulting and personnel 0 0 0 0
Total per period 0 0 0 0

COSTS - EXPENSED Pre-start Year 1 Year 2 Year 3

Software 100,000 120,000 120,000 20,000
Hardware 0 0 0 0
Consulting 0 0 0 0
Personnel 288 0 0 0
Training 0 0 0 0
Other 0 0 0 0
Total per period 100,288 120,000 120,000 20,000

FINANCIAL ANALYSIS Results Year 1 Year 2 Year 3

All government taxes 45%
Cost of capital 7.0%
Net cash flow before taxes (100,288) 181,710 181,710 281,710
Net cash flow after taxes (55,159) 99,941 99,941 154,941
Annual ROI - direct and indirect benefits 181% 181% 214%
Annual ROI - direct benefits only -7% -7% 26%
Net Present Value (NPV) (55,159) 38,244 125,536 252,013
Payback period 0.6 years
Average Annual Cost of Ownership 100,288 220,288 170,144 120,096
3-Year IRR 181% 181%
All calculations are based on Nucleus Research's independent analysis of the expected costs and benefits associated with the solution.

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without written permission is prohibited.
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SNAPSHOT RESULTS
Vendor Name Here
Project Name Here

FINANCIAL RESULTS CUMULATIVE NET BENEFIT

Payback Period 0.6 years 544,842

Annual ROI 214%
Average Annual Benefit 301,710

263,132

TYPES OF BENEFITS 81,422

Year 1 Year 2 Year 3

Direct 38% 62% Indirect

Cost : Benefit
Ratio
1 : 2.5
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Nucleus Research is the leading provider of investigative technology research.

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 Conclusions and analysis of the results
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sults