Cost-Benefit Analysis Techniques

Are you measuring what matters in your organization? A comprehensive measure of organizational effectiveness includes much more than profit margins and growth rates. The market and media often celebrate companies that show rapid financial growth or high profitability, leading to a cultural bias towards these metrics as signs of success BUT the tide is slowly turning- more businesses are recognizing the long-term value of a holistic approach to effectiveness and success. Many more businesses are embracing the concept of the "Triple Bottom Line," which measures success not just by financial profit ("Profit"), but also by the company's impact on people ("People") and the planet ("Planet"). HOWEVER 🚨 There is more work to be done! The prioritization of non-financial elements of organizational success can get pushed aside when financial pressures hit or quick results are valued. You have probably heard the phrase "What gets measured gets managed". This is generally true. Quantifying and measuring non-financial aspects of effectiveness, such as employee well-being, social impact, and workplace culture, is hugely important but remains challenging. 💡 Here's some straightforward steps to move you towards a more holistic approach to measuring success: 𝐒𝐭𝐚𝐫𝐭 𝐰𝐢𝐭𝐡 𝐜𝐥𝐞𝐚𝐫 𝐠𝐨𝐚𝐥𝐬: Define what holistic success means for your organization. This could include specific targets related to employee well-being, social impact, and environmental sustainability. 𝐄𝐧𝐠𝐚𝐠𝐞 𝐬𝐭𝐚𝐤𝐞𝐡𝐨𝐥𝐝𝐞𝐫𝐬: Talk to employees, customers, and community members to understand what aspects of your business matter most to them. Their insights can help shape your holistic success framework. 𝐂𝐡𝐨𝐨𝐬𝐞 𝐫𝐞𝐥𝐞𝐯𝐚𝐧𝐭 𝐦𝐞𝐭𝐫𝐢𝐜𝐬: Based on your goals and stakeholder feedback, pick metrics that are meaningful and manageable. For example, employee satisfaction can be measured through regular surveys, while environmental impact can be tracked through energy consumption or waste reduction metrics. 𝐔𝐬𝐞 𝐞𝐱𝐢𝐬𝐭𝐢𝐧𝐠 𝐟𝐫𝐚𝐦𝐞𝐰𝐨𝐫𝐤𝐬: Look into established frameworks (like GRI or B Corp standards for sustainability; Gallups Q12 Engagement Survey for employee engagement or the Denison Organizational Culture Model to measure workplace culture). There are existing frameworks for most known elements of organizational effectiveness so it's just a matter of looking into them. 𝐈𝐧𝐭𝐞𝐠𝐫𝐚𝐭𝐞 𝐢𝐧𝐭𝐨 𝐝𝐞𝐜𝐢𝐬𝐢𝐨𝐧-𝐦𝐚𝐤𝐢𝐧𝐠: Ensure that these holistic metrics are part of regular business reviews and decision-making processes, not just side projects. 𝐑𝐞𝐩𝐨𝐫𝐭 𝐭𝐫𝐚𝐧𝐬𝐩𝐚𝐫𝐞𝐧𝐭𝐥𝐲: Share your progress openly, including both successes and areas for improvement. Transparency builds trust and credibility. 𝐂𝐨𝐧𝐭𝐢𝐧𝐮𝐨𝐮𝐬 𝐥𝐞𝐚𝐫𝐧𝐢𝐧𝐠: Be prepared to adapt and refine your approach as you learn what works and what doesn't. This is a journey, not a one-time task. #organizationaleffectiveness #measurewhatmatters #leaders

Don’t make these common mistakes in techno-economic assessments (and avoid misleading conclusions.) TEA is a powerful tool to assess the feasibility of emerging technologies. But even small mistakes can lead to misleading conclusions and poor decisions. Here are 5 key mistakes I’ve seen repeatedly—and how to fix them: 1. Overestimating Technology Performance Challenge: Assuming ideal or lab-scale performance when scaling up. Real-world conditions often bring inefficiencies. Fix: Use conservative assumptions, validate with experimental data, and conduct sensitivity analysis. 2. Ignoring Uncertainty Problem: Treating input values (e.g., costs, energy efficiency) as fixed leads to rigid, unreliable results. Fix: Perform sensitivity and scenario analyses to identify critical variables and explore best/worst cases. 3. Using Outdated or Poor-Quality Data The Problem: Relying on old data or inconsistent sources reduces the credibility of your TEA. Fix: Source data from updated literature, validated models, or credible industry benchmarks, and clearly document assumptions. If data is missing for new technologies, use proxy technologies and check uncertainties. 4. Oversimplifying Economic Analysis Problem: Focusing only on capital costs (CAPEX) while ignoring operating costs (OPEX), maintenance, or financing impacts. Or focusing on single metrics, like NPV. Fix: Include all cost components—CAPEX, OPEX, and life-cycle costs—and calculate key metrics like NPV, IRR, and payback period. 5. Neglecting Policy and Market Factors Problem: Ignoring factors like carbon pricing, subsidies, or fluctuating raw material costs can skew results. Fix: Integrate policy scenarios, market trends, and potential incentives to build a more realistic TEA. Techno-economic analysis is only as good as its assumptions and methods. Avoiding these mistakes will help you deliver insights that are credible, actionable, and valuable for decision-making. We’re going to discuss all these challenges with TEA and more during my workshop in Q1 2025. What challenges have you faced when conducting TEA? I’d love to hear your thoughts in the comments! #Research #ChemicalEngineering #Economics #Energy #PhD #Scientist #Professor

Choosing the Right Valuation Method: A Practical Guide This decision tree shows the core valuation methods in a single framework. Knowing when and how to apply each approach is critical for professionals in finance, investing, or corporate strategy. Across investment memos, pitch decks, and strategic planning discussions, three valuation techniques consistently stand out: 1. Discounted Cash Flow (DCF) DCF aims to capture a company’s intrinsic value. By projecting future cash flows and discounting them back to today at an appropriate rate, it provides a forward-looking view. This method is most effective for businesses with stable, predictable cash flows and when you have a clear perspective on risk and growth assumptions. 2. Comparable Company Analysis (Comps) This method benchmarks against similar publicly traded companies using multiples like EV/EBITDA or P/E. It’s quick, market-oriented, and often used to cross-check other approaches. Its usefulness, however, depends heavily on identifying truly comparable peers. 3. Precedent Transactions Looking at past M&A deals provides insight into what real acquirers have paid for similar businesses. It’s particularly valuable in deal-making but can be influenced by factors like timing, buyer synergies, and market cycles. How to Decide Which Valuation Method to Use That’s where the Valuation Decision Tree comes in—a structured guide to narrowing down the best method based on a company’s fundamentals: Will the business continue operating? Is it more than just an asset-holding entity? Does it create commercial goodwill? If the answer is “yes” across the board, you’ll typically be weighing Income-based (DCF) and Market-based (Comps, Precedents) methods—positioned at the bottom of the framework. This structured approach is an invaluable tool for financial analysts, corporate development teams, and anyone tasked with valuation-driven decisions. For a deeper dive, explore our courses at Corporate Finance Institute® (CFI).

Most startups play defense when discussing pricing with customers. They dance between asking for too little, leaving money on the table, and asking for too much, only to lose the customer’s interest. The very best companies lead their customers in that dance. They use pricing as an offensive tool to reinforce their product’s value and underscore the company’s core marketing message. For many founding teams, pricing is one of the most difficult and complex decisions for the business. Startups operate in newer markets where pricing standards haven’t been set. In addition, these new markets evolve very quickly, and consequently, so must pricing. But throughout this turmoil, startups must adopt a process to craft a good pricing strategy, and re-evaluate prices periodically, at least once per year. The Three Core Pricing Strategies There are only three pricing strategies startups should pursue: Maximization, Penetration and Skimming. They prioritize revenue growth, market share and profit maximization differently. Maximization (Revenue Growth) - maximize revenue growth in the short term. Startups should pursue maximization when there are no clear differences in customer segments’ willingness to pay, and when the optimal short term and long term prices are equal. Many mid-market software companies price with the goal of revenue maximization, negotiating for the highest possible price in each sale. Penetration (Market Share) - price the product at a low price to win dominant market share. A bottoms-up strategy lends itself to penetration pricing. Price low to minimize adoption friction, grow quickly, and then move up-market after developing broad adoption. Penetration pricing leads to land-and-expand sales tactics. Expensify, Netsuite, New Relic, Slack follow this model. Penetration prioritizes market share. Skimming (Profit Maximization) - start with a high price and systematically broaden the product offering to address more of the customer base at lower prices. Skimming is widespread in consumer hardware. Apple sells the latest iPhones at the highest prices, and repackages older models at lower prices to address different customer segments. As Madhavan Ramanujam tells it, Steve Jobs was both a product genius and pricing genius. By pairing the two skills, he led Apple to record-breaking profits quarter after quarter. Skimming is less common in the software world because few startups develop a product at launch that will be accepted by the most sophisticated customers (and those willing to pay prices that generate the greatest margin). There are exceptions: Oracle’s database, Tanium’s security product, Workday’s human capital management software. Read the full post here : https://lnkd.in/g-mxQiV9

What is 𝐋𝐢𝐟𝐞 𝐂𝐲𝐜𝐥𝐞 𝐂𝐨𝐬𝐭𝐢𝐧𝐠 (LCC) and how is it done? When people think of LCC, most believe it is an exercise of expressing #LCA results in monetary terms, which is incorrect. That is still an LCA, simply using a different single-score results method. See Environmental Prices and Eco-Costs methods. Life-Cycle Costing aims to cost a product/service, or project over its Life Cycle, aiming to maximize the return over its total life while minimizing costs. LCC has its own methodology, which has three ramifications, depending on the study's goal. To avoid difficulties in LCC, there is the option of performing what is called simplified LCC: 𝘔𝘢𝘳𝘬𝘦𝘵 𝘗𝘳𝘪𝘤𝘦 + 𝘞𝘢𝘴𝘵𝘦 𝘋𝘪𝘴𝘱𝘰𝘴𝘢𝘭 = 𝘓𝘪𝘧𝘦 𝘊𝘺𝘤𝘭𝘦 𝘊𝘰𝘴𝘵 However, a comprehensive LCC can be presented in many forms, depending on the type, cut-off criteria, cost categories, perspective, and ultimately, the study's goal. It usually consists of the following costs: research and development, raw materials, production, packaging, transport, use and maintenance, and waste disposal/treatment. The 3 LCC approaches: Conventional-LCC: typically focuses on costs borne by the primary producer or product user, often excluding EoL scenarios and other life cycle stages, thus limiting its compatibility with comprehensive environmental appraisal methodologies like LCA. E-LCC: the closest to environmental LCA. It follows the exact system boundaries and approach as LCA. Instead of using datasets in an LCA database, it simply uses the costs associated with the flows within the studied system (materials, energy services, waste production, etc.). The ideal option is to present together with LCA results to identify environmental and cost hotspots in the life cycle of a product, organisation, or service. Societal-LCC: as developed for cost–benefit analysis (CBA), uses an expanded macroeconomic system and includes a larger set of costs, including those that will be, or could be, relevant in the long term for all stakeholders directly affected and for all indirectly affected through externalities (direct and indirect cost covered by society). S-LCC includes the (not necessarily) monetized environmental effects of the investigated product, as may be based on a complementary LCA. The same case considerations regarding the C-LCC apply to S-LCC; however, the additional damage cost is included in the evaluation of overall cash flows, due to the assumption of “willing to pay” for the social impact. For example, as part of its #CSR, a company decides to absorb (internalise) the damage costs (different from abatement costs) calculated from its carbon emissions. In other words, governments try to do this with carbon taxes. To summarise, LCC is a perfect complement to LCA, especially at the early stage, in supporting investment decisions as part of TEA.

When I look at the impact metrics being reported across our industry, I know we are looking at an unrealistically rosy picture - as most impact funds (like us) claim 100% of their portfolio companies impact with obviously leads to double counting. This issue led to us to research this topic & to figure out how we can be more precise and transparent about our real impact attribution. By attribution, we mean how much impact we can genuinely claim through our role as investors. And this is tricky, as in reality, impact is rarely the result of a single actor—and always a collective effort shaped by entrepreneurs, partners, investors, ea stakeholders. So we looked into different methods of attribution. We spoke to impact funds and industry experts, and we found strong opinions pro and con reporting on attribution. Despite its potential, attribution remains super difficult to implement. The challenges include methodological complexity, data limitations, a lack of robust models, and overlapping contributions from multiple actors. Our research also revealed a glaring gap: existing models fail to account for the non-financial contributions that are often crucial to a venture’s success. As early-stage investors, our impact extends beyond providing capital. We take on significant risks during unproven phases, act as catalysts for follow-on funding, and provide crucial support like strategic guidance, capacity building, and access to networks. These contributions frequently contribute to a company’s ability to scale and thrive. Accepting all complexity & limitations we did decide to start to report on attribution: using the "prorating on equity" model as we feel it is as transparent as we can be today. So in our latest Rubio Impact Ventures Impact Report 2024 (released last week, see link in comments👇) we also report on our attribution based on our equity stake. I dont think this approach captures what we would like to show but it's a starting point which and its possible to implement today. My conclusion is mostly that the impact investing field needs better ways to measure and account for attribution including non-financial contributions!   You can find more of our findings in the article below for Impact-Investor.com published today & co-authored with Lisa Hehenberger (professor at the Esade Centre for Social Impact & great member of the impact board at Rubio).  Special shout out to Christine van Tuyll van Serooskerken whose great research skills were invaluable for this project. And thanks to all that supported us with their knowledge and insights always wonderfull to see how well the impact community collaborates! #united4impact #impact #attribution #transparency #impactinvesting https://lnkd.in/dcSZpuNF

𝐏𝐫𝐢𝐜𝐞 𝐚𝐧𝐝 𝐂𝐨𝐬𝐭 𝐀𝐧𝐚𝐥𝐲𝐬𝐢𝐬 𝐢𝐧 𝐏𝐫𝐨𝐜𝐮𝐫𝐞𝐦𝐞𝐧𝐭 In procurement, cost analysis and price analysis are two distinct evaluation methods used to assess the value of a product or service. Here's a breakdown of each: 𝐂𝐨𝐬𝐭 𝐀𝐧𝐚𝐥𝐲𝐬𝐢𝐬 1. It evaluates the total cost of ownership, including:  a) Acquisition cost  b) Operating costs  c) Maintenance costs  d) Replacement costs  e) Life-cycle costs 2. Considers both tangible and intangible costs 3. Helps determine the overall value for money 𝐏𝐫𝐢𝐜𝐞 𝐀𝐧𝐚𝐥𝐲𝐬𝐢𝐬 1. Focuses solely on the purchase price or bid price 2. Compares prices from different suppliers or bids 3. Evaluates the reasonableness of the price of the market 4. Does not consider other costs beyond the purchase price 𝐓𝐡𝐞 𝐤𝐞𝐲 𝐝𝐢𝐟𝐟𝐞𝐫𝐞𝐧𝐜𝐞 1. Cost analysis looks at the broader picture, considering all costs associated with the product or service over its life cycle. 2. Price analysis is a narrower evaluation, focusing only on the upfront cost. 𝐂𝐨𝐧𝐜𝐥𝐮𝐬𝐢𝐨𝐧: - By conducting both cost and price analyses, procurement professionals can make informed decisions that balance cost-effectiveness with overall value.

I don’t get excited about independent evaluations. That’s what I used to think—until one conducted last year on our tropical forests reporting yielded some eye-opening findings. An independent evaluation recently reviewed our work on tropical forest reporting, interviewing 38 stakeholders and analyzing data from over 850 survey respondents. The results were compelling and reinforced the impact of our efforts. Some key takeaways: 👉 74% of respondents use our insights to guide their personal and professional choices. 👉 Among our contributors, 43% have a very favorable opinion of our organization, and 49% hold an extremely favorable view. 👉 73% of the articles funded by us would “probably” or “certainly” not have been written otherwise. The evaluation highlighted our niche in environmental journalism—consistent, in-depth reporting on issues that mainstream media often overlook. Our work has become indispensable to policymakers, scientists, and advocates who rely on credible information to make informed decisions. One respondent summed it up well: “If I’m honest, I wouldn’t be able to find a replacement.” Beyond informing decisions, our work has tangible outcomes: informing policy, amplifying Indigenous voices, and holding powerful entities accountable. Whether it’s exposing illegal deforestation or informing legislative action, our commitment to high-quality journalism continues to make an impact where it matters most. It’s encouraging to see this level of validation, and we remain committed to delivering reporting that drives meaningful change. For those who have followed our work—thank you. Your engagement–and the decisions you make after consuming our stories–fuels our mission.

Techno-Economic and Feasibility Study for the Optimization of the Ethanolamine Production Unit (Case Study: Qatar Petrochemical Company – 15,000 KTY) 💡 What’s this about? In this paper, I developed a full-process simulation of a large-scale ethanolamine production plant (MEA, DEA, TEA) based on one of the best licensors' industrial designs, using Aspen HYSYS V14 on a high-performance computing setup (i9 Gen 14th, 32 GB RAM). We analyzed, validated, and optimized the process technically and economically, delivering results that demonstrate both operational and financial viability. 📌 Key Achievements: ✅ 98.1% EO conversion ✅ 12.4% steam consumption reduction ✅ 9.1% cooling water savings ✅ MEA selectivity improved to 38% ✅ IRR: 21.5%, NPV: $72.4 million, Payback: 4.1 years 📎 Download the full paper here: 👉 https://lnkd.in/gtNgCQ88 #ProcessEngineering #AspenHYSYS #PetrochemicalDesign #TechnoEconomicAnalysis #Ethanolamine #QatarPetrochemical #ChemicalSimulation #MEA #DEA #TEA #SimulationOptimization #ResearchAndDevelopment #LinkedInResearch #EngineeringExcellence

Financial Materiality Assessment 🌍 The concept of financial materiality has moved from a technical discussion to a regulatory expectation. Under CSRD and ESRS, companies are required to examine how sustainability matters influence their financial outlook and enterprise value. Unlike impact materiality, which looks at effects on people and planet, financial materiality focuses on the financial consequences of ESG issues for the company itself. Both perspectives are complementary and together form the foundation of double materiality. This approach is also growing beyond Europe. ISSB/IFRS standards adopt a financial materiality lens to sustainability disclosures, signaling a convergence where companies will need to align reporting across multiple frameworks. Assessing financial materiality involves identifying risks and opportunities in the value chain, considering both past performance and future regulatory and market shifts. Industry peers and external stakeholders often provide useful benchmarks. Stakeholder engagement is a critical component. Functions such as strategy, finance, ERM, and sustainability bring different perspectives to the process, while investors, insurers, or regulators can add valuable external viewpoints. Companies can choose between aggregated or individual assessments of risks and opportunities, depending on maturity and resources. Both approaches have merits, and many organizations evolve from one to the other over time. Qualitative assessments rely on expert judgment and ranking, while quantitative approaches aim to model financial effects on metrics like EBITDA or revenue. Increasingly, companies are blending both. Time horizons are another dimension. Short, medium, and long-term assessments ensure that immediate risks are captured alongside structural shifts that may alter competitiveness. The results of these assessments are not an end in themselves. They are inputs into risk management, strategy, budgeting, and governance processes, where they can shape decisions and priorities. When integrated effectively, financial materiality assessments help organizations align sustainability with business planning and risk appetite, making ESG part of the operating model rather than a parallel exercise. Credibility comes from rigor, transparency, and consistency. Regulators, auditors, and investors will increasingly scrutinize these assessments, pushing companies to strengthen their methods. The value lies in turning ESG risks and opportunities into strategic insights. Done well, financial materiality assessment is not a compliance exercise but a mechanism to connect sustainability with resilience and long-term value creation. Diagram Source: Deloitte #sustainability #business #sustainable #esg