The two ways you need to calculate pitchbook costs
In meetings with clients, one thing we always talk about is how to evaluate the power of Pellucid.
As with any new tool or process, prior to implementation, there is the proverbial kicking of tires to see how it works and what it’s worth. Pellucid is no exception. But as Pellucid's purpose is to streamline content creation, the matter is a little more complicated. Most investment banking management teams don’t have a baseline from which to begin their evaluation process of Pellucid as they don't have a clear view of their current costs. They know pitchbook creation takes time, and time is money, but that’s about it. The data just isn’t usually available. As bankers, our day jobs may be analyzing data and providing robust advice to clients, but that doesn’t always transfer to applying the same analytical rigor to our own business and processes.
As I’ve been in the position of evaluating services and systems I want to share the conversations I have with clients about how to assess the value Pellucid can bring to teams and companies.
Often, I’ll ask the members of the management team how much is spent on pitchbook production. After looking at each other they’ll admit they don’t have a firm grip on the cost, but they know they want it to be lower. At Pellucid, we’ve done some work on this and put together a pitchbook calculator. This gives guidance on chart creation costs and can be used as a base to address the questions of absolute cost and relative cost.
Absolute cost
Similar to the calculator, this focuses on the average cost of a piece of content and places an average absolute dollar value on content produced using the Pellucid platform.
For example, say a client signs on for 100 users at $250 per month, per user and each user produces on average 52 pieces of content each month1:.
Using this we can calculate the average cost per content item to be $4.81. There’s not a lot you can buy with less than $5, so from a gut feel perspective, that sounds pretty good.
I then like to add a “relative cost” perspective to advance this message.
Relative cost
The relative cost is the breakeven time for content production. Specifically, how long does it take an analyst or associate to produce the content? And can Pellucid make it faster?
Below is a screenshot of the Pellucid pitchbook calculator showing the four inputs needed to determine an average cost per chart and our initial (conservative) assumptions (you can update these based on your data).
Screenshot of Pellucid Pitchbook Calculator
These figures can be used to calculate our human capital cost per hour:
Compensation grossed up by overhead = $262,500
Average hours worked per week multiplied by weeks worked per year = 3,456
And then divide the cost over time, which brings us to $76 per hour in human capital costs.
By taking our absolute cost of $4.81 and dividing this by human capital cost, and multiplying by 60 minutes we get 3 minutes and 48 seconds. We can be generous and round this up to four minutes.
So based on this example, if existing resources can produce the same content as Pellucid in under four minutes, then Pellucid is not for you. If it takes you longer than four minutes then email me for a consultation at adrian.s.crockett@gmail.com.
Usually the longer a client uses Pellucid, the greater the number of pieces created as users integrate it into their workflow, leverage the reorder function and explore the newly added content. ↩