When you are looking at budgeting for maintenance upgrades, the question is: how do you get the biggest bang for your buck? Keeping your facility up to date to maximize performance and cut costs is important, but ROI is vital when you’re looking at capital expenditures.
Is it worth the investment to make your warehouse “smart”? Are there processes you can adopt to save money in the long run? Will upgrades make your staff safer or working for you more appealing?
There are several factors to consider when determining whether a maintenance upgrade is worth the investment.
Consider the source
Businesses have been through a lot in the past few years, with cutbacks, rising costs, and lost labour. Some decisions are emotional, rather than financial. For example, if you’re thinking about adding to your team, that may be coming from an emotional place rather than a practical one. Take a look at your productivity and your processes to determine whether it’s better efficiency or more bodies that will help your business grow best.
Look at the whole picture
When you’re deciding on an upgrade, all costs need considering. Compare costs on an annual basis for consistency and be sure to take the life cycle into account. Often, while the initial investment price might be attractive, once the maintenance, storage, operation, and removal are factored in, its ROI is no longer as appealing. This goes for technology, too – don’t forget to factor in added costs like employee training when making your decision.
Do the math
There are two common ways to calculate ROI mathematically. The first is the net value, which means that the project should present a positive return. The second method is an internal rate of return, which is a yearly return percentage on the investment. When you calculate your financial return, consider preventative costs as part of the equation, like whether this purchase saves long-term maintenance costs or future replacement.
The bottom line is that you can’t budget your best if you don’t weigh your return on investment. Maintenance upgrades may well be worth it, saving you time, money, or effort in the long run, but you need to be sure to make responsible choices for your building.
