Project Management — Identification Phase: (2 of 4) — Cost Benefit Analysis

Learn how to perform a Cost Benefit Analysis (CBA). Estimate the total costs and possible profits to be derived from a project, through the adoption of different solutions.

What is Cost-Benefit Analysis?

Whether you know it as a cost-benefit analysis or a benefit-cost analysis, performing one is critical to any project. When you perform a cost-benefit analysis, you make a comparative assessment of all the benefits you anticipate from your project and all the costs to introduce the project, perform it, and support the changes resulting from it.

The main purposes of Cost-Benefit Analysis:

1. To determine if an investment/decision is sound (justification/feasibility) — verifying whether its benefits outweigh the costs, and by how much;
2. To provide a basis for comparing projects — which involves comparing the total expected cost of each option against its total expected benefits.

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