Calculating Return On Investment (ROI) For Equipment Purchases From cradle to grave and beyond, what are you getting from your cleaning machines? ROI is also known as the payback period and is often expressed in a period of time, such as weeks, months or years. The calculation is based on how long it will take to earn back — in the savings generated — the cost of the investment required to purchase a piece of equipment. Normally, a payback period of one to three years is considered acceptable and a good investment, as this would leave two additional years of expected useful life for most pieces of equipment. equipment you plan to purchase. To be safe, Iʼd figure the estimated production rate at 65 percent of whatever hourly production rate the manufacturer or distributor provides you with as that is probably closer to what youʼll actu-ally get versus published marketing numbers found in promotional literature. Itʼs a good idea to ask the manufacturer what the basis of their marketing production rates are. Did they use ISSA standard times or come up with their own, and if they are not ISSA times, why not? Itʼs also good to know how much time, if any, was included in the estimates for set up, dump Photo courtesy of Tennant Company By: Wm R. Griffin R Wm R. Griffin is the presi-dent of Cleaning Consultant Services Inc. For more information, please visit www.cleaning-consultants.com. Labor Savings Labor in most cleaning operations will account for at least 55 percent, and in some facilities, as much as 85 percent of cleaning costs. When it comes to calculating the savings pos-sible from purchasing or upgrading a piece of equipment, look at your labor costs closely. Cost savings is what will get managementʼs attention and be a major factor in justifying the benefits of your purchase request. Other savings and benefits are certainly worth looking at, but the dollar amount saved will be small in comparison to the labor cost savings pos-sible from the use of more productive equipment. To calculate the hours saved per day, week, month or year, calculate the hours now spent per-forming the tasks at hand and separately do the same for the estimated hours that would be spent doing the same tasks with the equipment you plan to purchase. To do this, you will need to come up with an hourly production rate for existing machinery as well as the equipment you plan to purchase. A manufacturer or distributor can provide you with an hourly square foot production rate for the for more info Visit www.cmmonline.com and type in search keyword: Equipment . For more information on related products, visit www.cmmonline.com , select SUPPLIER SEARCH from the main navigation bar, and enter keyword: Floor care . Electrolysis and oxygenation of water eliminates the need for use of chemical detergents for normal cleaning tasks. 30 CM/Cleaning & Maintenance Management ® • October 2009
CMM – Archives Oct 2009: 30
