You'll need to understand a little about ROI and payback period, but don't worry: you don't need to be a finance expert. In fact, the Nucleus financial modeling tools automatically calculate both ROI and payback period along with net present value (NPV) and internal rate of return (IRR), so you can put the calculator away.

Return on investment is the average of the net benefits divided by the initial cost of the project, times 100. For instance, if a project cost $50 and returned $100 in the first year, the ROI in the first year would be 100/50, or 200%.

Unfortunately, technology rarely covers its costs in the first year, so a more accurate calculation uses a 3-year horizon. All Nucleus workbooks use a 3-year horizon.

With a 3-year horizon, the ROI calculation is now the average net benefit (benefit less any additional cost) per year divided by three then divided by the initial cost, times 100, or:

ROI = ((net year 1 + net year 2 + net year 3) / 3 / initial cost) X 100

Why use an average annual number rather than add the cumulative benefits from all three years then divide by the initial cost? Using an average ROI calculation yields numbers that are directly comparable to those you would find with other corporate investments, the cost of capital, or a simple bank certificate of deposit.