Article in brief

Proposing investment in new laboratory instruments is a challenging task for even the most experienced managers. This guide is a must-read for anyone looking to navigate the complexities of capital investment proposals with confidence. It explores the importance of understanding your company’s approval process and explains how to quantify the financial benefits of your investment, craft a concise business case using the NABC framework, and prepare for potential risks. By following these steps, you can improve your chances of getting your proposal approved and showcase your credibility within the company. 

Four Keys to Delivering a Winning Capital Investment Proposal

Running a laboratory is hard work. Coaching and coordinating all the unique techs in the lab, delivering accurate results, and meeting demanding production requirements is hard enough when your equipment is working well. And maintaining this level of performance means investing in new instruments, software, services or all the above.

Preparing a capital request for amounts that can rival our own home mortgages can be a daunting task. Experienced managers know the number of approvals and long timelines that can come with these requests. For less experienced team members, uncertainty about the process and fear of rejection can be major barriers to even taking the first steps. Fortunately, there are established best practices that can reduce your anxiety and increase your probability of winning your share of the company capital budget.

Understand your company’s processes

Your company mostly likely has a process in place for reviewing and approving capital investment proposals. For some companies, that might mean that you knock on the CEO’s door and have a chat. For others, it could require 20 approvals in an electronic system, a dozen forms, and three PowerPoint pitch decks. In any case, there is a process, and the better you understand it, the more likely you are to be prepared for every step. Even if you are an experienced manager in your company, you should check to see if anything has changed if it has been a while since you last made a purchase. 

Here are a few questions to guide your process research:

• Budget vs. Funding: Do different processes exist for budgeting and funding? A business might allow for hundreds of requests during the annual budgeting process, but then follow a rigorous and competitive funding process before officially approving a select few.
• Deadlines: When does your business set budgets? What is required for your investment to even be considered for funding? Many businesses review proposals three to six months before the end of the fiscal year and release funds the following year. Understanding which documents are required well in advance of this process will make it easier to plan ahead and be prepared.
• Approvers: Who will need to approve the budget and funding? What are their primary interests, responsibilities and concerns? Who is most likely to object or ask for more information?
• Paper Process: What is the actual submission process? Is it electronic or paper? What types of analysis or supporting documentation is required? Are there large contracts mandated for your type of purchase? Submitting approvals correctly the first time can significantly improve your chances of getting approvals the first time.

Answering these questions above goes a long way to planning out the tasks and timelines ahead to get your project underway.

Quantify the benefits of your laboratory investment

When it comes to investments, business leaders speak the language of money. This is where many of us get hung up if we are not as financially fluent. Thankfully, you do not need to be an expert to turn your problem or opportunity into a return on investment (ROI) calculation that resonates with your company’s accountants and managers. In fact, presenting any type of ROI calculations will likely put you ahead of your peers in competition for precious company resources.

Follow the steps below to convert your proposed capital spend into a business investment with a healthy return that your approvers can understand.

Determine the type of value

Figure out if your solution will reduce cost, help your company sell more products, reduce risks or help them to earn money more quickly (i.e. by developing products faster). These are the primary factors that drive profits in a business. Knowing which of these categories your solution falls into will help you determine where to spend your time when quantifying your value.

Show your logic

Once you know the value category, spell out the logic for achieving the value. Imagine you are proposing a project to reduce the risk of production downtime caused by a critical lab instrument breakdown. You may start by estimating the possible hours of production downtime and multiply that number by the production cost per hour to obtain a total downtime cost.  Regardless of the exact methods, just be clear about how you arrived at the value to the business.

Another option is to calculate the cost of a potential loss based on the risk of a potential breakdown. If investing in a new piece of equipment reduces the risk of losing a customer from 30% to 5%, then the cost of losing a $1,000,000 customer goes from $300,000 to just $50,000. Comparing these numbers to the cost of the investment gives leaders the data they need to make a decision.

Ask for help

Process engineers and accountants are excellent internal resources as you build out your logic. They often love this type of problem-solving challenge. Offer to buy lunch for them while you walk through your business case. You can also seek advice from a colleague who has recently completed a successful capital project to learn their secrets to success.

Reputable suppliers can also be great resources and may even have special tools available to help you to quantify the problems that their products solve. A good salesperson will be eager to support your quantification of value. 

Build a concise business case

Executives are busy people. With so many critical operations demanding their time and attention, they often don’t know all the operational details impacted by a given investment request. They need clear, concise communication when they need to make a decision, especially when money is involved. Some CFOs will immediately dismiss a proposal that is poorly written, confusing, or lacking a clear ROI—and judge it more harshly if it is resubmitted at a later date.

Summarizing a complicated case for a complex scientific instrument can be challenging, especially if the person or people reviewing it don’t have a technical background. Fortunately, there is a simple framework for building what marketing personals call your “value proposition” to convey how a purchase will solve a problem. Stanford Research Institute has popularized a framework called NABC:Needs, Approach, Benefits and Competing Alternatives. 

Considering some of the questions below is key to a strong NABC statement.

Needs

Concisely outline the problem you are setting out to solve. Is this a disruption to your current processes or an obstacle to achieving an objective? What does it look like? Who is experiencing it? What business challenges does it cause? How do you describe the deviation from the expected or ideal state?

Approach

Describe the whole solution you are recommending. How does this solution address the needs above? Are there supporting hardware or software components needed for the solution to work? Are services like installation, onboarding and training required? What are the ongoing maintenance requirements? What internal or external resources could be required?

Benefits

How will the business benefit from solving the problem? From your quantitative analysis (see above), how does the financial benefit to the company compare to the costs of the approach you recommend? Does the problem you are solving have strategic value for the business, your boss, or your boss’s boss?

Competing alternatives

What alternative approaches did you consider and ultimately reject? Did you consider different approaches or variations on the same solutions? If not, why? If so, why is the recommended one better? Did you consider multiple suppliers of the same solution? If so, why is one better than the other? Did you prepare a comparative technical specification to compare them? Thinking through the alternatives shows you did your homework and found the truly superior solution, one that aligns with the company’s resources and priorities.

When crafting your NABC statement, consider asking a salesperson for input. They can often provide supplemental materials to help you build your case and may be able to co-present your proposal to an approvals team.

By following the NABC framework, you can build a business case that could be explained in five minutes and could even be attached to your company’s standard capital proposal request. 

Prepare for Risks

Managers appreciate when their team members consider what can go wrong. They love it even more when you develop a proactive plan to solve a problem before it happens. Consider these common risks for laboratory capital investments and develop a plan to address them.

Implementation risks

Can our team install the solution, or will help be required? Can our existing resources use the solution, or will training be required? If training is needed, how is that delivered now and in the future?

Integration risks

Will the solution fit with our existing systems? Will it connect to our hardware and software solutions? If not, how will we address that ahead of time? What are the possible costs of additional integration resources?

Solution risks

What if the solution does not deliver the value promised? Does the supplier have a history of delivering solutions for your company in the past? Is there a warranty? Does the supplier have reputable references for their solution? Does the supplier offer a product demo?

Support risks

If help or onsite support is needed in the future, how prepared is your supplier to deliver this support? If a service call takes 3 to 4 weeks, how will you manage that downtime? Does the supplier offer phone or web support around the clock?

Making investments in your lab to ensure uptime, efficiency and accuracy is a challenging, complex, and ongoing task. Following the guidelines above won’t guarantee that your company will support your investment, but it will certainly improve your chances of success. This level of preparation will also build your credibility as a serious player in your business.

Reach out to your local Alpha Technologies sales manager for support preparing your next capital proposal.