Resources / Practical guide
How do I calculate Cost of Delay?
Start with a business change you can describe. Put a range around its value. Then show what waiting does to it.
You need a useful estimate, not a perfect forecast. Make the assumptions visible so someone else can check them.
New to the idea? Read the Cost of Delay introduction.
Describe the outcome
What changes when this is available?
Name the people or process affected, the quantity that changes and why that matters. Black Swan Farming suggests four useful benefit categories.
Increase revenue
Additional sales or customers. Use the contribution left after the extra cost of serving them, not sales revenue alone.
Protect revenue
Existing contribution you expect to retain, such as a reduction in customer churn. Count only the change attributable to this work.
Reduce costs
Spending you can stop, such as a supplier bill, overtime or infrastructure usage.
Avoid costs
Future spending or losses you can prevent, adjusted for how likely they are.
What quantities can I use?
- Extra customers per week × contribution per customer over a consistent, stated horizon.
- Hours of paid work removed per week × the hourly amount you will no longer pay.
- Expected weekly incidents avoided × average loss per incident.
- A supplier or infrastructure bill that falls by a known amount per week.
Check attribution and avoid double-counting the same benefit in several categories. If using lifetime customer value, do not also add those customers' future revenue as a separate benefit.
Time released from salaried staff is not automatically cash savings. Describe the useful work that capacity enables, or report the hours separately.
Check the effect of time
What happens if it arrives later?
Steady opportunity
The benefit lasts a long time and the eventual level is unchanged. A weekly net-benefit estimate can be a useful approximation.
A deadline or shrinking window
A launch date, seasonal demand or competitor may change the opportunity. Compare earlier and later outcomes over the same period instead.
Try the visual Cost of Delay calculator → Shape expected total value by delivery date, then compare two dates. For weekly benefits, use the worked example below instead.
Once you have estimates for several features, compare their delivery order in the feature sequencing simulator →
Count time until people can use the change and get the benefit, including rollout and adoption. For deadlines, work backwards through delivery lead time and uncertainty to find the latest sensible start.
When the simple formula does not fit
If delay permanently reduces adoption, loses a contract or misses an event, the loss can extend well beyond the weeks of waiting. Estimate the net benefits in an earlier-delivery scenario and a later-delivery scenario over the same relevant horizon. The difference is the total delay cost.
Include ramp-up and any later recovery of deferred benefits. Use period-by-period estimates when losses vary. Do not spread a one-off penalty across every week, or treat a temporarily deferred payment as permanently lost revenue.
Estimate the weekly benefit
Show the quantities, not just the answer.
Illustrative example · All amounts in AUD
Automate part of invoice processing.
A supplier bills for processing time. The change removes three billed minutes per invoice, and the supplier bill really falls. This is not a client case study.
- Weekly workload
- 400 invoices
- Time removed per invoice
- 3 minutes
- Weekly time removed
- 400 × 3 ÷ 60 = 20 hours
- Supplier rate
- AUD 60 per hour
- Gross weekly saving
- 20 × AUD 60 = AUD 1,200
- New running cost
- AUD 200 per week
Assumptions: the weekly volume is stable, the time saving is achievable, adoption is immediate and the benefit continues. Upfront implementation cost is assessed separately when deciding whether the work is worthwhile.
Combine benefit and urgency
What would four weeks of waiting cost?
For this steady, long-lived opportunity, each week of later availability loses about AUD 1,000 of net benefit.
The team's salary bill is not this calculation. Cost of Delay describes the outcome forgone, not simply the money spent while people work.
Give the estimate a range.
Suppose the time saved is uncertain. Keep the other inputs unchanged and test two, three and four minutes per invoice.
Lower estimate
2 minutes saved per invoice
- Net benefit per week
- AUD 600
- Four weeks of delay
- AUD 2,400
Base estimate
3 minutes saved per invoice
- Net benefit per week
- AUD 1,000
- Four weeks of delay
- AUD 4,000
Higher estimate
4 minutes saved per invoice
- Net benefit per week
- AUD 1,400
- Four weeks of delay
- AUD 5,600
These are scenarios, not a statistical confidence interval. If the decision changes across the range, investigate the uncertain input before making a large commitment. A small sample of invoices could test the time-saving assumption.
Where the value is mainly learning, safety or a future option, state that explicitly. Do not invent revenue just to fill a box. A qualitative comparison can be a starting point, but it is not a dollar estimate.
Your estimate, on one page.
Use these prompts with the people who understand the work, its users and the finances.
- Outcome
- What changes, for whom, and how much?
- Evidence
- Which records, measurements or people support the inputs?
- Value
- What is the net benefit per week? Show the units, ongoing costs and any overlap.
- Urgency
- Does waiting shift, shrink or remove the benefit? Is there a deadline?
- Range
- What are the lower, base and higher estimates? Which assumption matters most?
- Delay
- Which earlier and later usable dates are you comparing? What is the total loss?
- Decision
- What would this change: priority, release timing, scope or spending?
- Review
- Who owns the estimate, when will you revisit it, and how will you check the realised benefit?
Keep safety and legal obligations explicit. The estimate helps compare choices; it does not decide which obligations you can ignore.
Sources and further reading
The approach follows Black Swan Farming's benefit, urgency, estimate and calculation sequence. The invoice example and worksheet are original illustrations.
- Four steps to quantifying Cost of DelayThe source guide and its distinction between a rate and accumulated delay cost.
- Understanding valueThe four benefit categories.
- Urgency profilesHow deadlines and the life of an opportunity affect the estimate.
- Estimating valueWays to find numbers and make assumptions visible.