The Investment Decision
Some of you will be financial top guns and need no help in making your investment case. Others of you may benefit from having a format you can use to integrate the output from Oceanic®, with other financial data, and this topic is aimed at such users.
The model that we are proposing is very flexible and can be used either to help you justify a new investment in a call center, or more specifically for upgrade analysis, as discussed throughout this section.
The feedback we have had suggests that the investment technique most of you will want to use is a cashflow analysis, leading to a breakeven point. The outline below can be used as a checklist as to what needs to be included in such a model. It is not exhaustive, and you may want to add additional cost items.
A copy of a full spreadsheet model that we developed in Excel can be obtained by contacting Sytel (see the bottom of this page).
The model
| Cashflow Item | Reference |
|---|---|
| Incremental Revenue | |
| Current: | |
| Campaign 1 | A1 |
| Campaign 2 etc | A2 |
| Upgrade: | |
| Campaign 1 | A3 |
| Campaign 2 etc | A4 |
| Total Incremental Revenue | A5 = (A3+A4-A1-A2) |
| Incremental Costs | |
| Agent Costs | |
| Current: | |
| Campaign 1 | B1 |
| Campaign 2 etc | B2 |
| Upgrade: | |
| Campaign 1 | B3 |
| Campaign 2 etc | B4 |
| Total Agent Costs | B5 = (B3+B4-B1-B2) |
| Hardware Costs | |
| Dialer equip. | C1 |
| Server equip. | C2 |
| PCs | C3 |
| Networking | C4 |
| Wiring | C5 |
| Less disposals | C6 |
| Total Fixed Costs | C7 = (sum(C1..C6)) |
| Other Costs | |
| Phone charges | D1 |
| Software costs | D2 |
| Implementation | D3 |
| Ongoing support | D4 |
| Training | D5 |
| Hiring costs | D6 |
| Extra fulfillment costs | D7 |
| Consultancy | D8 |
| Reference visits | D9 |
| Tax/interest adjustments | D10 |
| Legal | D11 |
| Less disposals | D12 |
| Other categories | D13 |
| Total Other Costs | D14 = (sum(D1..D13)) |
| Total Incremental Costs | E1 = (B5+C7+D14) |
| Total Cashflow | F1 = A5 - E1 |
| Discount factor | |
| Total Discounted Cashflow | |
| By month | G1 |
| Cumulative | G2 |
Notes on the model
1) General
The entries in the Reference column are the active cells in the model. Think of one column of these being a time period, probably a month or a quarter. And you can replicate as many of them as you like across a spreadsheet. Most of you though will be looking for a breakeven within two to three years at most, and many of you a lot earlier.
2) Line Entries
i) Revenue
Current and upgrade campaigns will generate revenue streams in the Forecast by Cycle and Work Scheduler, and you can put this data directly into the model. And you can do it for as many campaigns as you like, as far ahead as you like. In most cases, you should be able to describe the typical impact of an upgrade in a few campaigns only.
You can then calculate the incremental revenue forecast to accrue from the upgrade.
If you are a service bureau, some of your campaigns may run for weeks only. How do you reconcile this with constructing an investment model where the breakeven point may be many months away? The simple answer is that you will need to project future business, yet to be secured. And the best way of doing this may be to keep replicating the outputs from your current and upgrade campaigns, until you have reached a breakeven point.
Even if you are a financial top gun, heed our advice in Upgrading Your System to verify the assumptions you make about productivity improvements e.g. getting more results per hour. See also Predictive dialing results in the stratosphere in Comparing Dialing Methods
ii) Agent Costs
You can choose to load agent costs, not just with direct staffing costs, but also with an allowance for overheads and other costs. For this exercise we suggest that you stick to direct agent costs only in the Oceanic® reports (Forecast by Cycle and the Work Scheduler), and treat other costs separately, as shown in the model.
Then, as for Revenue, you can work out the incremental costs, by taking the difference between current and upgrade.
iii) Hardware and Other Costs
You may be replacing and/ or adding to your existing facilities. If you are replacing, don't forget to allow for spends not required in an upgrade, such as software and support licenses for the current system. You can do this by using line entries to measure additional spend only in the relevant category, or you can group the redundant spends in the disposal rows, C6 and D12.
If your decision turns out to be finely balanced, then you might want to allow for tax and interest changes as well in D10.
More business means more downstream processing cost, shown here as fulfillment cost, and including all back office handling.
3) Total Cashflow
You can now compute your differential cashflow in F1. If the outcome is clearly excellent, then you are in business.
Otherwise you may want to refine your analysis by applying a discount factor to get a discounted stream of values in G1. You can them accumulate these in G2 to spot your breakeven point, i.e. the point in the row, where the cumulative figures go positive.
If you are trying to justify an outbound investment, and the discipline of the model described above is too much for you, then a rough, but sometimes effective, way of considering your investment is described in Investment Shortcut.