One of the most important aspects determining any business is the Return on Investment (ROI) it brings. ROI is something that is based on estimates and projections based on assessments made of unpredictable future situations. When calculating the ROI, businesses have to factor in the input costs. So is the Important to estimate the calculation of the cost while considering the recommended solution.?
Return on Investment (ROI) is a ratio that can be computed. It is generally used when comparing various investments to determine which are more attractive. It is one of many financial ratios that can be computed and by itself does not give a complete picture.
ROI is to an investment, like Miles per gallon (kilometers per liter) is to a car. It can be used as an estimate when purchasing a new car or you can compute it based upon actual data once you drive the car for a while. Same with ROI.
Just as they tell you when looking at new cars, your mileage may vary. Same thing with a new business; since it is based upon estimates rather than actual results. Of course for an existing business one would want to look at actual numbers.
the answer is yes, it is important to estimate all variables, not just cost.
Actually for most businesses cost is not only important, it is all there is. Because at the end your sales price is not necessarily your decision - no one buys from you if you are more expensive than the competition. So, all the profit is determined by how much costs you have and how cheap you buy (cost again).
This is different in some areas - I work in one where I have an 80% margin post cost of deal for one of my businesses, and in another one my profit is not customer dependant at all and my fix costs relatively static. But 90% of the businesses are like that: * Price runs revenue (discounters get big, higher price needs a "brand" to be seen as value). * Cost determines profit.
Then, obviously, cost estimate is critical.