Business case
A Return Map is a dynamic model that defines the flows of capital the project is expected to generate. Sometimes the model is called the Innovation Life Cycle. Usually, time is along the x-axis and cash flow along the y-axis. We recommend that costs are depicted under the y-axis because it makes the figure more easily interpreted and intuitive. For example, then Break-Even-Time appears at the point where the accumulated revenue surplus cuts the y-axis.
It is possible to work with different scales on the positive and negative sides of the y-axis respectively, which is sometimes necessary if differences in size are great.
Many different measurements can be illustrated in a return map:
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tO - Commercial Window Opens
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TTF - Time to Feasibility Study
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TTP - Time to Project Start
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TTM - Time to Market
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BET - Break-Even Time
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TT50 - Time to 50% Sales
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MFR - Maximum Financial Risk
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AS - Accumulated Surplus
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tF - Commercial Window Closes
The weakest link in all return map models is often the estimation made of future revenue, i.e., volumes and prices over a period of time. Therefore, efforts must be aimed at analyzing and discussing different conceivable scenarios on the market.
Three basic principles for your Return Map:
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Use simple back of the envelop calculations. No incomprehensible spreadsheets should be used.
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Provide simple metrics that support decision-making. For example, the cost of delaying the project one week?
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Make multiple scenarios – what happens if?
• project cost increase with 25%
• product cost increase/decrease with 10%
• sales price increase/decrease with 5%
• etc.
Preferably you can use our Excel template for making your Return Map. It can be downloaded on the link below:
Export the Return map and place in the Project Definition Board