During the budgeting process, you and your team will need to make decisions about possible investments in your Web site or in other Web initiatives. But many people find it difficult to understand the effect of Web initiatives on budgeting, such as how costs and benefits should be forecasted.

You can use the scenarios tool in Microsoft Office Excel 2003 to quickly analyze how potential changes in costs and benefits could affect your budget. This analysis will foster a richer dialogue with key managers, helping you to select the business scenario that expresses the most realistic situation for your organization.

Use the scenario manager tool in Excel to run various scenarios without having to save different versions of the same Excel file. This will save you time and spare you the hassle of having to work with many different files.

1. Open a worksheet in Excel that contains the financial data for your Web initiative.
2. On the Tools menu, click Scenarios, and then click Add.
3. Place the insertion point in the Changing cells box. In your worksheet, select the cells that you want to change in your scenario. On the sample worksheet below, if you want to evaluate changes to the values in Hardware, Software, and Development, select cells B13 through B15.
4. In the Comment box, enter a description of your scenario.
5. Depending on the type of protection you'd like for your worksheet, select the Prevent changes or Hide check box, and then click OK.

   

6. The Scenario Values dialog box appears, containing the values for each of the cells that you want to change. In each box, enter the revised values that you want to test for this scenario. Click OK.

   

7. In the Scenario Management dialog box, click Summary. In the Scenario Summary dialog box, make sure that Scenario summary is selected.
8. Place the insertion point in the Result cells box. In your spreadsheet, select the cells that provide the output to your scenario model. In the example used here, the output metrics are in cells B56 through B58. Click OK.

   

9. The Scenario Summary worksheet compares your original output values (Current values) with the output values of the scenario that you just created (Best Case).

   

10. Using Excel makes it easy for you to add more than one scenario to your model. For instance, you may want to evaluate a worst-case scenario that increases the costs of hardware, software, and development. Using the worksheet created in step 1, follow the previous steps to create a new Scenario Summary worksheet that provides a summary of your best-case and worst-case scenarios, along with the current values of your original model.

    

Use the scenarios tool in Excel to help you better understand the range of potential returns on investment for your company's Web site. You can also use the tool for general budgeting, planning, and decision support analyses. By understanding the range of possible returns on investment, you can make better decisions and develop a more accurate budget.