Calculating Your Equipment ROI

Equipment ROI – How to calculate and maximize return on investment for your equipment.

There comes a time for every business when a large purchase is needed. Regardless of the reason for your investment, you will need to know if the purchase will be worth it. Will the equipment save/generate enough money to replace what you spent on it? While this may sound simple, there are a slew of variables and questions you should consider. 

Know Your Needs

Consider the primary function your new equipment will perform. How often will it be operated? Is it only used for a single job or does it have multiple uses? How quickly can it produce results? Are production increases or new tasks expected? Every aspect of the equipment’s use should be considered to help determine if the investment will be worthwhile. 

Estimating Cost

While simple to calculate a Return on Investment, the numbers that go into the calculation can be a little more difficult to determine. First off, you’ll need to determine approximately how much revenue the new equipment will generate (via product manufactured and time saved on production). For expenses, there are many things to consider.

When calculating your expenses, be sure to include the cost of shipping the equipment (including duties or taxes where applicable), installation and training, labor to operate the equipment, inspections and maintenance, servicing costs, and operating costs (such as chemicals and utilities). The manufacturer should be able to help estimate the cost of electricity, supplies, and labor. And of course, as technology gets smaller, faster, and more versatile, this can translate to saving space and even more time. 

Calculating ROI

Return on Investment (ROI) is a benchmark used to evaluate the gain on investment compared to the initial investment cost. This calculation provides a percentage number that can express if the investment is worth making. 

ROI = Net Income / Cost of Investment 

For example, if Company A invests $50,000 into a new large-scale printer that ends up generating $75,000 in revenue, its ROI is 150%. 

ROI = $75,000 /  $50,000 = 150% 

Give us a Call

Making equipment decisions in the current market, with new technologies constantly emerging, it can be difficult to decide what to buy and when. As always, Lawton Brothers is here to offer a variety of products, services, and advice for your janitorial needs. Let us help you work through your ROI calculation, and if the investment isn’t worth it, Lawton Brothers has a range of janitorial equipment available for rent! Give us a call today at: 800.432.0813.