deal-value-calc

Deal Value Calculator

Build a quantified business case for one deal - the arithmetic and the narrative together. The organising rule: "It's your job to build the math equation. It's their job to give you the assumptions." (Armand Farrokh, 30MPC). This skill owns the structure, formulas, and benchmark scaffolding; the buyer owns every company-specific input.

The documented failure it exists to prevent: "most business cases created by sellers are absolute BS" (30MPC) - inflated numbers the champion never validated, which burn the champion's internal credibility the moment finance pokes a hole.

Second rule: "An ROI model on its own isn't a business case. It's a future maybe, without context. Narratives bring meaning to your numbers." (30MPC). Always deliver both the visible math and the narrative document - never a bare ROI number. The real test of the output: it survives being forwarded to a CFO without the rep in the room.

Never invent a number

• Refuse to fabricate any input. When the user lacks a figure, ask for it, or insert a clearly labelled placeholder they must replace (e.g. [NEEDED: fully loaded hourly cost - ask the buyer]) - never a plausible-looking invented value.
• Label every input by who supplied it:
  • buyer-supplied - a number the buyer stated or documented (their payroll, invoices, ops reports, public filings).
  • benchmark - an external or market figure the rep brought, with its source named. "Companies like yours typically see 15%" with no named source does not qualify - it becomes rep-assumed.
  • rep-assumed - the rep's own estimate, not confirmed by the buyer.
• Hard rule: a business case whose headline number rests materially on rep-assumed inputs must say so on its face - a visible line in the document, not a footnote.
• The cost side is the one exception: the rep's own pricing and fees are rep-owned by definition - document them with the written quote. Every value-side input takes one of the three labels.
• The strongest inputs come from the buyer's own records: invoices, payroll, production data, a public annual filing. Get the champion to state the numbers; finance checks the baseline before it opens the vendor proposal practice).

Interview

Ask one question per message; offer multiple-choice options wherever possible; skip anything the deal description already answers.

1. B2B, or considered high-ticket B2C (solar, home improvement, real estate, private education, financial advisory)?

2. Deal segment: transactional (single decider, low price), mid-market, or enterprise (buying committee, procurement/security in the path)? This sets the artifact size.

3. What date must the result land by? A hard near date promotes the drivers computable from documents the buyer already holds - retired contracts, the hiring plan - and deletes any driver needing a time study or a cohort analysis.

4. One-off win, or a compounding asset the buyer reuses as a renewal or QBR baseline?

   • Compounding promotes error/rework and downtime avoided, whose measured baselines outlive the deal.
   • One-off keeps the artifact at its lightest rung.

5. Effort ceiling: how many hours can the champion spend, and can they reach finance data at all? A low ceiling deletes error/rework, churn and revenue lift outright rather than ranking them last, and caps the artifact at a payback estimate.

6. Which value drivers are in play? Offer the taxonomy list below in its efficiency order as choices, re-ranked against the answers to 3-5.

7. For each driver: the raw inputs (volumes, rates, hours, costs) - and for each input, who supplied it: buyer, a named benchmark, or your own estimate?

8. The investment side:

   • Subscription/licence price
   • Implementation and integration cost
   • Internal effort (hours and whose)
   • Training
   • Ongoing administration

   Contract length?

9. Time horizon for the case: 1 year, 3 years (the enterprise-software standard), or the contract term?

10. Who is the document ultimately for - who will the champion forward it to (economic buyer, CFO, a committee, a spouse or co-signer in B2C)?

11. Will the buyer's finance function (or lender, in B2C) review it? If yes, the finance-reviewer additions in the workflow apply.

Right-size the artifact

Not every deal gets a full model deal-type guidance; the trigger for the full treatment is complexity - roughly 6+ stakeholders, procurement or security in the path, strategic rather than tactical spend - not a fixed dollar threshold):

• efficiency: payback estimate > one-page summary + light model > full model
• effort: full model > one-page summary + light model > payback estimate
• value: payback estimate == one-page summary == full model below the complexity trigger, then full model > one-page summary > payback estimate above it

Default to the lightest artifact the deal's complexity permits; each complexity trigger crossed moves the artifact up exactly one rung. The value axis ties below the trigger because extra depth genuinely buys nothing there - a formal case is overkill for a single decider - and it inverts above the trigger, where a payback estimate simply does not survive procurement.

Segment	Artifact	Depth
Transactional / SMB	A short payback estimate: one or two drivers, the investment, payback in months	No formal document; the payback line is the whole artifact
Mid-market	One-page value summary plus a light model: input ledger, 3-4 drivers, three scenarios	Rep-built; sensitivity on the one or two inputs the result hinges on
Enterprise	Full model: economic-buyer summary and a separate finance/procurement version with an assumption appendix, documented sources for every input, sensitivity analysis	Engage a value engineer or business-value consultant if the org has one

Value drivers and per-driver formulas

Decompose the deal's value into drivers and compute each separately; 3-4 quantified drivers is the documented practitioner shape for the problem/solution section (30MPC). Rank them by case strength bought per hour of the buyer's time - never by headline size, and never by whichever number is easiest to produce. Effort here is not what the driver is worth: it is how hard the input is to source from the buyer, how much of the buyer's time that costs, and how long the resulting number stays arguable in a finance review.

• efficiency: direct cost > labour time > headcount avoidance > downtime avoided > error/rework > headcount reduction > capacity freed > revenue lift > churn > risk/compliance
• value (moves the headline and survives finance): labour time > direct cost > error/rework > headcount reduction > downtime avoided > revenue lift == churn > headcount avoidance > risk/compliance > capacity freed
• effort (buyer hours to source the input, plus how long the number stays contestable): headcount reduction > risk/compliance == churn > error/rework > revenue lift > labour time == downtime avoided > capacity freed > headcount avoidance == direct cost
• compliance cost: risk/compliance == headcount reduction > every other driver, which carries none

Every tie is a real equality, never a dodge:

• revenue lift == churn (value) - same margin arithmetic, and both die on the same attribution objection, so finance discounts them identically.
• risk/compliance == churn (effort) - neither number exists in the buyer's own systems; both cost a week of external or cohort analysis.
• labour time == downtime avoided (effort) - each hinges on one figure the buyer either already tracks (an hour) or has to measure (a week). Same fork, same price.
• headcount avoidance == direct cost (effort) - both read straight off a document the buyer already owns, the hiring plan and the contract list.
• risk/compliance == headcount reduction (compliance cost) - each needs a review outside the deal team before the number can be written down: legal or compliance sign-off on a stated regulatory exposure, HR (in some jurisdictions works-council) consultation on a stated role removal. Both are hard to walk back once in writing.

B2C adds a substantiation duty on top of that, on every driver - see B2B and B2C.

Default: lead with the top two hard drivers on the efficiency line that this deal actually has, since the case must clear the buyer's hurdle on hard value alone, then add soft drivers (headcount avoidance, capacity freed, risk/compliance) to close. Move up the value line when finance is the audience and the hard drivers are thin.

What this order starves. Error/rework reduction is the driver finance argues with least, and efficiency pushes it to fifth purely because a baseline cost per error is the one number most teams never track. Promote it to first when the buyer already tracks it, or when quality, compliance or an audit finding is the initiative named in the headline - there it is simultaneously the strongest and the cheapest driver in the case. Headcount reduction starves the same way on political rather than data effort; a stated reduction mandate promotes it.

Delete, do not demote. A driver the buyer cannot feed leaves the case entirely:

• No baseline cost per error deletes error/rework.
• Withheld gross margin deletes revenue lift and churn, rather than tempting a top-line model.
• No written agreement that a role leaves the budget deletes headcount reduction, rather than parking it as soft.

A ruled-out driver left at the bottom of the list comes back later as a number somebody invents.

Re-rank against the buyer in front of you. This order is a default, not a law - it shifts with the deal and with who builds the case, since a value engineer can afford a driver a solo rep cannot.

• A buyer who already instruments a metric moves that driver up several places at once.
• A procurement-led evaluation weights direct cost and TCO comparison hardest and gives soft drivers roughly nothing.
• A champion with no reach into finance data can supply no baseline at all, which deletes half the list before ranking even starts.

Formulas and cautions consolidate standard practitioner and finance practice per the source labels shown.

Driver	Formula	Buyer input and effort	Caution
Direct cost / tool consolidation	Retired licence, infrastructure, and service spend	Contract list and renewal amounts - near-zero: already in the buyer's payables, and finance can verify it in one query	Hard; confirm the old contracts actually terminate
Labour time saved	Hours saved per unit x units/year x fully loaded hourly cost	Volume and salary band, an hour. Per-unit touch time: an hour if the team tracks it, a week for a time study. Contested on realization, not on the arithmetic	Fully loaded = base wage plus benefits and taxes, typically 125-135% of base (practitioner range). Apply a realization haircut of 60-70% for adoption and learning curve
Headcount avoidance	Loaded cost of hires not made as volume grows	The approved hiring plan - an hour, and the champion usually has it open already	Soft (cost avoidance); more palatable to finance than reduction - no layoff required
Downtime avoided	Downtime hours avoided x cost per hour of downtime	Cost per hour of downtime: an hour if incident or SLA work already produced the figure, a quarter to derive one across functions	Cost per hour must be buyer-supplied
Error / rework reduction	(Baseline error rate - new rate) x volume x cost per error	Baseline rate and cost per error: a week to a quarter, since most teams track the rate and not the cost. Least contested of any driver once supplied	Needs a documented baseline cost per error, buyer-supplied
Headcount reduction	Fully loaded cost of roles removed from budget	The arithmetic is free; the effort is political - a standing job to get written agreement that the budget line actually goes	Hard only if the role genuinely leaves the budget
Capacity freed (soft)	Hours freed x loaded cost x utilisation factor

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