JUSTIFYING THE PURCHASE

Return On Investment & Breakeven Analysis

How to justify the cost of your product or service to the person who has the decision to release funds?

Is the prospect saving money by purchasing from you?

Given that the final decision maker makes decisions based on results, and usually has a Return On Investment (ROI) mentality, this is crucial for justifying the purchasing of the product or service.

For example; you are selling a product which will save 50 employees 30 minutes per day. The average salary of the employee is $30,000 and the product you are selling costs $100,000. The calculation for Return on Investment (ROI) and Breakeven are below;

A Number of Employees Who Will Save Time 50
B Minutes Saved Per Employee Per Day 30
C Number Of Working Days Per Year 230
D Total Minutes Saved Per Year (AxBxC) 345000
E Number Of Hours Saved Per Year (C/60) 5750
F Number Of Days Saved Per Year (E/8) 719
G Average Salary of Employee £30,000
H   £130
I Amount Saved Per Year (FxH) £93,750
J Product Cost £200,000
K Return on Investment (I/J) 47%
L Breakeven in Years (J/I) 2.13y