The paper "Investment Approach for Certona" is a perfect example of a case study on finance and accounting. Recently a proposed software development has been brought to my attention. Certona, a personalization, and recommendation SaaS could potentially carry with it a significant financial benefit for the organization. In considering the investment approach for this product the most overarching concerns are those related to the financial figures. The software license costs $2000 per month and requires a 1-year commitment. The total margin is 35% and the organization’ s AOV is $92.
Certona guarantees 68 additional sales per month. After conducting the financial breakdown the figures support that a net profit would be gained from the purchase of the product. These figures were obtained through first calculating the profit margin, as a percentage of the AOV. In this regard, 35% of $92 resulted in a figure of $32.2. The Certona product guarantees 68 sales per month. This would result in an extra monthly net profit of $2176. The product itself costs $2000 per month with a yearlong commitment. It follows that while the product requires a steep investment, the profit gained is ultimately worth the cost. Still, there are a number of possible drawbacks.
One consideration is the extent that the 68 sales per month are guaranteed. If this is just an estimate the high cost of the product may be too high to risk. Another consideration is the extent that the business model will stay the same over the upcoming year. If organizationally the intentions are to transition into a different business model or mode of sale where the potential mechanisms that the technology would work would become obsolete, then it’ s clear that it would be superfluous and overly risky to purchase the technology.
Ultimately, the investment decision is one of semantics. If Certona truly guarantees 68 sales per month then it is worth purchasing this technology package, as long as the organization intends on retaining the same upcoming strategy. Conversely, if the 68 sales per month are only an estimate then it seems that purchasing this product would ultimately be too risky, as the mitigating factors of potential slowing sales could potentially bankrupt the organization.