Cost-Benefit Analysis
Compare options by making costs and benefits explicit—even as ranges. The baseline (“compared to what?”) is part of the answer, not an afterthought.
When to Use
- Budget or roadmap choices where money, time, and quality pull in different directions.
- Debates stay rhetorical until someone names what is gained and what is paid.
Workflow
- Define baseline: status quo or next-best alternative; restate the decision boundary.
- Costs—direct & indirect: build, buy, run, support, compliance, and failure costs.
- Opportunity costs: best forgone use of the same resources; say it in one line each option.
- Benefits—tangible & intangible: revenue, risk reduction, speed, morale, trust; note who captures each benefit.
- Estimate magnitudes: ranges and assumptions beat false precision; label confidence.
- Discounting (if horizons differ): shorter payback vs long-run value—state the discount rationale simply.
- Hidden cost checklist: maintenance burden, switching costs, cognitive load, training, org friction, vendor lock-in.
- Net assessment: summarize net value vs baseline; list sensitivities that would flip the call.
Examples
Example 1: Build vs buy: include 3-year ops, on-call, and upgrade tax—not just license vs engineering hours.
Example 2: “Quick” automation: add review overhead and exception handling; compare to manual baseline under real error rates.
1---2name: cost-benefit-analysis3description: Cost-Benefit Analysis4---5# Cost-Benefit Analysis67Compare options by making costs and benefits explicit—even as ranges. The baseline (“compared to what?”) is part of the answer, not an afterthought.89## When to Use10- Budget or roadmap choices where money, time, and quality pull in different directions.11- Debates stay rhetorical until someone names what is gained and what is paid.1213## Workflow141. **Define baseline**: status quo or next-best alternative; restate the decision boundary.152. **Costs—direct & indirect**: build, buy, run, support, compliance, and failure costs.163. **Opportunity costs**: best forgone use of the same resources; say it in one line each option.174. **Benefits—tangible & intangible**: revenue, risk reduction, speed, morale, trust; note who captures each benefit.185. **Estimate magnitudes**: ranges and assumptions beat false precision; label confidence.196. **Discounting** (if horizons differ): shorter payback vs long-run value—state the discount rationale simply.207. **Hidden cost checklist**: maintenance burden, switching costs, cognitive load, training, org friction, vendor lock-in.218. **Net assessment**: summarize net value vs baseline; list sensitivities that would flip the call.2223## Examples24**Example 1:** Build vs buy: include 3-year ops, on-call, and upgrade tax—not just license vs engineering hours.2526**Example 2:** “Quick” automation: add review overhead and exception handling; compare to manual baseline under real error rates.
sethdford