Numbers form the backbone of project proposals to obtain funding from sponsors.

The benefits have to be packaged in a way that’s easily understood by the stakeholders for them to capture the value of your project and make an investment. However, you must also be able to justify the numbers when required.

This article covers a six-step approach to package benefits to potential sponsors:

1. Establish and communicate the benefits
2. Plan and set targets to achieve the benefits
3. Estimate and quantify the overall financial benefits
4. Project and quantify the benefits for the individual value sources
5. Put things together and ask for the investment commitment
6. Address and avoid potential pitfalls early

I’ll be showing some samples along the way which can be used as guidelines to customise your own methods to deliver your proposal in a way that’s suited for your business.

#1: Establish and communicate the benefits and business value

Sponsors want to understand specifically how your product can deliver value to the business. Business values are commonly communicated via:

1. Increase revenue
2. Reduce costs

There could also be other business objectives such as employee retention, sustainability, and increase insights, etc. depending on the business strategy at the point in time of your proposal.

Based on the business objectives, the value of your proposal/product can be communicated effectively by following these four steps:

1. Understand and list the business objectives
2. Establish proxies that contribute to the business objectives
3. Link your product features to the proxies
4. Associate a metric with the product feature to be tracked and measured

An example of the output is illustrated below using a simple logic tree diagram below.

The diagram illustrates at a high level the various quantifiable value streams that contribute to the business objectives and eventually generating value for the business.

When required, you can even go a step further to include an extension of a short summary to drive the point across as shown below.

After completing the above exercise, you’ll have clarity on the benefits and metrics that are expected from your proposal – which will form the foundation and north-star for the project solution design.

#2: Plan and set targets to achieve the benefits

The next step after establishing the value sources is to create a master plan to include the details on what and when. Having a clear plan provides the sponsors with a glimpse of the future benefits and adds credibility to your proposal.

An effective way to communicate the master plan is through a modified Gantt chart. I have customised the Gantt chart to include and specify targets that adhere to the SMART goals principle:

The diagram above addressed the three components of the SMART principle:

• Specific: Key activities, deliverables and targets
• Measurable: Key performance metrics
• Timely: Key milestones and timeline

In the next section, I will address how to quantify the values – which fulfils the achievable and realistic principles.

#3: Estimate and quantify the overall financial benefits

Investors and sponsors often have a set of projects to sponsor, and financial benefits are one of the primary factors that affect their prioritisation on which are the projects to sponsor.

You’ll want to ensure that your financial numbers are not only appealing but also achievable and realistic — by being able to justify and rationalize the numbers logically such that they are not plucked out of thin air (POOTA).

The pre-requisite is to have some form of clarity on the deliverables of your project. Details can include the key epics and features to be delivered at each phase. Knowing what you plan to deliver allows you to better compare the features of your product against others to obtain a reasonable estimate.

The approaches

There are two common ways to establish the estimates:

1. Top-down approach: showcase the increase in revenue by benchmarking against industry peers who have succeeded
2. Bottom-up approach: showcase the reduction in costs by diving into the process/feature details and aggregating the values

Do note that these two approaches can also be used interchangeably, but for simplicity’s sake, I’ll only be providing an example of each approach.

Top-down approach (increase revenue)

The top-down approach involves conducting market research on industry peers who have already succeeded in implementing a solution of similar nature (based on feature comparison, etc.) and use the data as a benchmark or reference.

To obtain the project cost:

IT project delivery costs are often charged based on either 1) time-bound or 2) deliverables. Other components include infrastructure hosting costs (AWS/Azure/GCP), development tools (e.g. Atlassian suite), etc. The best case is having a reference project that would provide you with a benchmark of the cost of resources, epics/deliverables, and workstreams.

Alternatively, you can consider consulting an IT project manager or delivery consultant to advise on the costing. You can also try to do it yourself if you’re clear on the deliverables and have some project management experience.

Ample buffers and assumptions would often have to be factored into the cost estimates to manage the expectations of the sponsors.

To estimate the returns on investment:

The best case is having industry peers who have successfully implemented a similar solution and have resulted in an increase in revenue/productivity by X%. These data are typically available at the websites of consulting and product companies, e.g. McKinsey/Accenture, and Salesforce/Microsoft, etc.

If your project is a fairly new venture and there aren’t much data available to benchmark against, you can consider an alternate approach e.g. solving a Fermi problem.

Presenting investment/revenue returns

When it comes to presenting the important data of concern to sponsors, knowing what to omit/include is essential.

Once you’ve managed to obtain a benchmark revenue increment e.g. 30%, you can use that amount and work backwards to project the increment over X years and plot it out against a chart similar to the one below.

With the 30% increment spread over the years, you can then calculate the Compounded Annual Growth Rate (CAGR) using excel. CAGR is a good indicator of growth upon implementation of a solution. Internal Rate of Return (IRR) and payback period provide your sponsors with an idea on when they’ll be getting their returns on investment.

To present the table in an easy-to-see manner, you can consider using a bar chart that shows incremental revenue and CAGR similar to the one below.

An example to summarise the revenue projections above: total net cash flow of $105,000 over 5 years, with IRR of 33% p.a. and a payback period of 2.8 years; CAGR is estimated to increase from 3% to 5% p.a.

Bottom-up approach (cost savings)

Cost savings are often derived through process optimisation. You’ll first need to obtain data on existing processes via documentation (BPMN diagrams) and employee surveys, etc. to discover as-is processes to prioritise and optimise.

The idea behind this approach is to optimise low-value add processes and free up users’ time — which would allow the business to continue running with fewer employees, thereby saving costs.

In the following, I will show some examples to illustrate the optimisation of processes at a granular and bird’s eye level – to highlight the time and cost savings.

Presenting efficiency gains and cost savings

An example of a process diagram showing the reduction of the number of steps and efficiency gains through time reduction.

To aggregate the time freed for a variety of processes at a high level, you can use a waterfall chart showing the strategic reallocation of efforts and overall time freed.

After obtaining the time freed for each employee, you can then translate that time to cost savings via hiring fewer employees as shown below.

An example to summarise the cost reductions: total cost savings of $1.3 mil per year from hiring 13 fewer employees.

#4: Project and quantify the metrics for individual value sources

Now that you have the estimates for the increase in revenue and cost savings, the next step is to estimate/obtain the targets for the value streams (proxies) that contribute to the objectives.

As the metrics are highly variable based on the context of the business, I will attempt to provide a generic approach to obtain a realistic and achievable target for the value source. Metrics are generally presented via either number e.g. 200 users or percentage increases e.g. 20% increase inefficiency.

Here are some ways to obtain a reasonable estimate:

• Via features: Leverage on the milestones and epics that you derived earlier and sees if there are deliverables that can be used e.g. 10 new features/insights/charts
• Via surveys: Conduct surveys and benchmark satisfaction scores e.g. 50% CSAT, and assess how much improvement would your new solution provide to users compared to the existing solution
• Via processes: Obtain hours saved from the optimisation of processes and translate them to efficiency increases e.g. 20% increase in overall efficiency
• Via data and trends: Useful insights can be obtained from your existing database and sources e.g. average # of products per customer type, customer purchase behaviour over time, etc. These data can be used to project future trends and benchmarked against new targets

You may also find that some of the metrics may not exist at the moment such as click-through-rates, drop off rates, etc. In such cases, it’s paramount to have the system designed to capture these usage data for future comparison.

It’s important to obtain an as-is measurement/estimate of all the metrics (as much as possible) so that progress can be tracked and measured against the targets.

#5: Put things together and ask for the investment commitment

Once you have consolidated the data in a way that tells a conceivable story about your project venture and its benefits, there are several additional tips to take note of that could further increase your chances:

• Start small by adopting a prudent investment approach – consider adopting an agile delivery approach which suggests breaking down investments and deliverables into a bite-sized phase to qualify for subsequent funding based on results (cater to conservative investors)
• Consider various perspectives by reframing problems and questions – if there are questions that put you in a spot, reframe the problem and provide a response that you can fall back onto based on your research and data
• Keep everything simple, but be ready to justify the numbers – include an appendix in the form of excel spreadsheet calculations and research, etc. that provides the detailed breakdown and assumptions for each metric

Although having a clear plan and road map with deliverables can be somewhat contrary to the agile approach, sponsors often want a form of clarity and plan on the direction to visualise what they would be getting at each milestone – to see what they are actually funding for.
An agile approach without a clear vision, targets, and deliverables would lead to team burnout and eventual product failure. Therefore, it’s important to highlight and consider the different components and segments that will adopt agile.

#6: Address and avoid potential pitfalls

There are also several common pitfalls that are easily overlooked and can cause repercussions in the future. Here are some pitfalls which I have encountered and could have avoided:

• Failure to obtain an as-is measurement of KPIs/metrics to be benchmarked against future performance — should’ve obtained an initial snapshot
• Overpromise targets and under-delivering — should’ve done the reverse
• Planning fallacy — should’ve factored sufficient buffers to cater for unforeseen circumstances

Many problems could have been avoided if I had made some extra effort to address these pitfalls early — don’t make the same mistakes that I did.

Takeaways

Communicate the benefits of your project to your sponsors clearly by using visuals that logically associate the benefits with quantifiable metrics and targets to be achieved at every milestone. Be ready to justify your content using materials in the appendix, and take effort to avoid pitfalls and future repercussions.