Value Engineering Glossary

A financial metric that calculates the percentage return on an investment relative to its cost. Formula: ((Gain from Investment - Cost of Investment) / Cost of Investment) x 100.

The complete cost of acquiring, operating, and maintaining an asset or solution over its entire lifecycle, including hidden and indirect costs.

The difference between the present value of cash inflows and outflows over a period of time, used to analyze profitability of investments.

The time required to recover the cost of an investment through the returns or savings it generates.

The discount rate that makes the net present value of all cash flows equal to zero. Used to evaluate the attractiveness of an investment or project.

Earnings Before Interest, Taxes, Depreciation, and Amortization. A measure of a company's operating performance and profitability before non-operating expenses.

The point at which total revenue equals total costs, resulting in neither profit nor loss. Critical for understanding when an investment will start generating returns.

The net amount of cash moving into and out of a business. Positive cash flow indicates more money coming in than going out.

A valuation method that estimates the present value of an investment based on its expected future cash flows, adjusted for the time value of money.

Funds used by a company to acquire, upgrade, or maintain physical assets such as property, buildings, or equipment. Typically one-time or infrequent expenses.

Ongoing costs for running a product, business, or system. Includes rent, utilities, salaries, and subscription costs.

A systematic approach to estimating the strengths and weaknesses of alternatives by comparing the costs and benefits of each option.

The difference between revenue and cost of goods sold, expressed as a percentage of revenue. Indicates how much profit is made on each dollar of sales before operating expenses.

The percentage of revenue that remains as profit after all expenses are deducted. A key indicator of a company's financial health and efficiency.

A systematic method to improve the value of products or services by examining function and cost. In B2B sales, it refers to the practice of quantifying and communicating business value to support purchasing decisions.

A business factor or capability that creates measurable value, such as cost reduction, revenue increase, or risk mitigation.

A documented justification for undertaking a project or initiative, typically including financial analysis, risk assessment, and expected outcomes.

A clear statement that explains how a product or service solves customer problems, delivers benefits, and why customers should choose it over competitors.

The process of achieving and measuring the actual benefits and outcomes promised during the sales process after implementation.

The duration between when a customer purchases a solution and when they start experiencing its benefits. Shorter TTV increases customer satisfaction and reduces churn risk.

Actions taken to prevent future costs from occurring, such as avoiding the need for additional headcount or preventing system failures.

The reduction of existing costs through efficiency improvements, renegotiations, or process changes. Unlike cost avoidance, these are measurable reductions to current spending.

The process of assigning monetary values to the expected benefits of a solution, making abstract value concrete and comparable.

The quantified value of reducing business risks such as security breaches, compliance failures, or operational disruptions.

A comparison between current state and desired future state to identify the steps needed to achieve business objectives.

The current state measurement against which improvements and ROI are calculated. Essential for demonstrating value post-implementation.

A standard or point of reference against which performance can be measured, often derived from industry averages or best practices.

An assumption about the value a solution will deliver to a customer, which can be validated through discovery and analysis.

The decision-maker with budget authority who ultimately approves or rejects a purchase based on business value.

An internal advocate within the prospect's organization who believes in your solution and actively promotes it to other stakeholders.

A specific problem or challenge that a prospect is experiencing that your solution can address. Identifying pain points is crucial for value-based selling.

An initial sales conversation focused on understanding the prospect's challenges, goals, and current situation to identify opportunities for value creation.

The process of identifying and analyzing all individuals involved in or affected by a purchasing decision, including their roles, influence, and concerns.

The unique value or capabilities that distinguish your solution from competitors, providing compelling reasons for customers to choose you.

The percentage of sales opportunities that result in closed deals. A key metric for measuring sales effectiveness and forecasting.

The complete process from initial contact with a prospect to closing the deal. Understanding sales cycle length helps with forecasting and resource planning.

The speed at which opportunities move through the sales pipeline. Higher velocity typically indicates more efficient sales processes and stronger value propositions.

A prospect that has been evaluated and determined to have the need, budget, authority, and timeline to potentially become a customer.

The group of individuals within an organization who collectively participate in the purchasing decision, each with different roles and criteria.

A B2B sales qualification framework: Metrics, Economic Buyer, Decision Criteria, Decision Process, Identify Pain, Champion. Used to qualify opportunities and forecast accurately.

An extended version of MEDDIC that adds Competition to the framework, helping sales teams understand and address competitive threats.

A sales qualification framework: Budget, Authority, Need, Timeline. Helps determine if a prospect is ready and able to purchase.

A sales methodology focused on understanding customer problems first, then positioning products as solutions to those specific challenges.

A sales methodology where reps teach prospects something new about their business, tailor messaging to stakeholders, and take control of the sale.

A sales approach that prioritizes understanding customer needs through dialogue, positioning the salesperson as a trusted advisor rather than a product pusher.

A questioning framework: Situation, Problem, Implication, Need-payoff. Designed to uncover buyer needs and demonstrate value through strategic questioning.

A methodology that focuses on quantifying and communicating the business value of a solution rather than competing on features or price.

A concise overview of the business case highlighting key findings, recommendations, and expected outcomes for time-constrained decision-makers.

Specific, measurable indicators used to evaluate whether a project or initiative has achieved its intended outcomes and delivered expected value.

A measurable value that demonstrates how effectively an organization is achieving key business objectives. Essential for tracking ROI realization.

A detailed roadmap outlining the steps, timeline, resources, and responsibilities required to deploy a solution and achieve expected outcomes.

The systematic process of identifying, analyzing, and evaluating potential risks that could impact project success or ROI achievement.

A strategic planning framework examining Strengths, Weaknesses, Opportunities, and Threats to inform decision-making and business case development.

A small-scale trial or demonstration to verify that a solution can deliver the expected value and outcomes before full implementation.

A comprehensive view that combines TCO with the total benefits delivered, providing a complete picture of an investment's value over time.

A technique for testing how different values of input variables affect outcomes, helping stakeholders understand the range of potential ROI scenarios.

A structured financial framework that calculates expected returns by mapping solution capabilities to business outcomes and quantifying their impact.