How to Present and Justify Project Benefits to Sponsors
By: Jimmy Soh
Tags: Strategy, Innovation, Digital Transformation, Technology, Startup

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

Specific : Key activities, deliverables and targets

: Key activities, deliverables and targets Measurable : Key performance metrics

: 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:

Top-down approach: showcase the increase in revenue by benchmarking against industry peers who have succeeded 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.