Investment appraisal highlights the key financial and non-financial factors you should take into account when considering an investment. The method described here provides a summary of the investment appraisal and assumes the user has undertaken appropriate financial analysis to support the appraisal.

Uses of the method

  • Assist in the decision to invest, divest or not invest in a venture, product or service
  • Key method in Merger & Acquisition analysis


  • Brings confidence to the investment decision
  • Highlights areas of future risk and potentially how to overcome them
  • Identify different future possibilities and alternate long-term strategies
  • Helps with portfolio management


  • May be incomplete if not used with other methods or iterations do not go deep enough.
  • May be costly and time consuming
  • Requires strong expertise and sound knowledge of investment appraisal

Steps to complete

The main stages are:

  • Appraise the investment
  • Compare with other potential investments if applicable
  • Make the expenditure
  • Monitor the investment

We deal only with appraising the investment here:

  • Rationale: describe who is proposing this investment, their reasons for doing so, the history of them and the proposal, their competence, stated strengths and weaknesses and indicate their desired % of ownership, key financial indicators, numbers of staff etc. and any other factors key to knowing their motivations.
  • Strategy: describe the investment, its vision, goals, measurable objectives, culture, processes, leadership style and unique selling points. Talk to what has to be developed to make the strategy successful and the quality of the strategy presented e.g. what's exciting? and/or new? about the proposal. And, what's missing? | what is incomplete? | what are the roadblocks? | and how does the proponent seek to overcome them.
  • Market opportunity: describe consumer wants and desires, size of the market and expected share by year, likely pricing, competitor actions and marketing and advertising strategy etc.
  • Review: the quality of the proposal, particularly the evidence submitted, its style, undetected deceptions, external forces unreliable sources, information absence, contradictory evidence etc. (use the peer review here to undertake this analysis). Comment on who prepared this proposal and whether it has been widely shared among the proposer's management team and agreement reached.
  • Time Horizon; describe the proposed time horizon for the investment and how the investment can be protected and realized in the future.
  • Technical: describe the technical challenges and opportunities and note whether the proposer has a history of commercializing investments and whether the plan has a robust project GANNT chart or equivalent. Note any IP issues or needed protections.
  • Sector: describe the sector(s) in which the investment needs to succeed and evaluate it against other alternative offers already out there or with a promise to compete against this investment. Then describe the investment's innovative potential, its originality, and unique IP and how this might be protected.
  • Benchmarks; compare this investment qualitatively against other similar investments highlighting key strengths, weaknesses, opportunities, threats and historical learning.
  • Management: describe the proposer's previous ability to successfully manage projects of this magnitude, think strategically and deliver agreed results on time and their ability to field a strong team focused on this investment at the right time.
  • Track record: evaluate their past performance including taking references and summarize your findings.
  • Staff: list the key people who will ensure the success of this investment together with their roles, contributions, experience, key referees and your assessment of their abilities to deliver.
  • Culture: describe the proposer's culture especially in terms of their ethics and ability to deliver customer service.
  • Competencies: describe the required skill set for making this investment successful; identify any gaps and how these will be closed.
  • Financials: describe the key financials from your detailed analysis highlighting sales growth, discounted cash flow, earnings, costs, profits, return on investment etc. and quantitatively benchmarking against other investments. Use only recent financial analysis for any projections from past data and comment on the quality and thinking behind submitted budgets.
  • Investment: describe the proposer's planned financing for this investment and note how much has been committed and by whom and how much has been spent thus far and on what. Evaluate whether forward funding plans are robust.
  • Entry price; note the entry price and describe how much this compares to your overall investment funds.
  • Opportunities: reflect on the possibilities from this investment and list areas where the investment potentially understates exploitable opportunities (use the Reflect method here to brainstorm possibilities on what you now know about this investment and the market).
  • Spin offs: describe how this investment may yield other marketplace spin offs and or benefits to your organization in terms of capacity building and competitiveness.
  • Risks: assess the resilience of the investment to future shocks in terms of risk management, continuity, compliance, security, knowledge, financial and infrastructure loss, flawed strategy and human and facilities issues. (use the Resilience indicator rating here to perform this analysis)
  • Expert opinions: summarize the opinion you have gathered on this investment from desk research and peer review by experts. 
  • Contracts: make a list of terms you would want to see in the investment contract including your assessment of the investment level you would be prepared to offer. 
  • Roadblocks: list all the strategic hurdles to overcome that you have discovered from the above analyzes and where possible offer solutions to their resolution.
  • Capture your most exciting idea and biggest fear.
  • Unique insight: Give a high-level summary of why this investment makes sense or not, where the issues are and your assessment of their criticality to ensuring success. Rate this project using our Investment rating analysis and put state the result of your rating here.
  • Conclusions: make your recommendation which should be in the form of an approval. If you wouldn't approve it don't submit it to others with just a recommendation and hide behind them. Make a decision. Approve or Decline!

This method and your response can be shared with other members or kept private using the 'Privacy' field and through the 'Tag', 'Report' and 'Forum' functionalities. Use 'Tag' and/or 'Report' to aggregate your analyzes, or add a 'Forum' to ask others where they agree/disagree and encourage them to make their own analysis from their unique vantage point.

Click the 'Invite tab to send invitations to other members or non-members (colleagues, external experts etc.) to ask for their input. You can whether or not you want anonymous responses.  These can be viewed and exported within the Responses tab.

Further reference

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