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Equipment Upgrades Offer Serious ROI

How much thought does your company put into capital upgrades like heavy equipment and new building?

While it would certainly be great if warehouse managers and site foremen could simply whip out a credit card and buy whatever new equipment they need, the real world generally doesn’t work that way, and you will probably need working capital financing. Unless you work for a massively successful company like Google that’s flush with cash, these kinds of decisions are likely the subject of great scrutiny.

Working out this formula, however, is not particularly complicated no matter what line of work you happen to be employed in. Business managers simply examine the cost of purchasing the new item against how much revenue that purchase will save and/or how much outgoing expense it saves. The resulting number is called the return on investment (ROI).

As it turns out, there are many instances when the ROI is so great that business owners can more than justify the outgoing expense. Here are a few examples of ROI in action with regards to new equipment.

How Much Does Downtime Cost?
You don’t need to hold an MBA to know that equipment that’s in a state of disrepair is not going to produce revenue. The same holds true for mission critical gear like industrial belt conveyors that have been in use so long that they’re held together with duct tape.

Just think about it for a moment. Every moment your employees spend fiddling around with antiquated and dilapidated equipment is time they’re not spending working on bringing in revenue.

In this case, calculating ROI is pretty easy. Simply total up the amount of time your workers spend repairing the conveyor and multiply that times their hourly wage. Unless you’re paying your workers an embarrassingly small wages, downtime can take a huge bite out of your annual revenue stream.

Increasing Employee Morale
You know that feeling you get when you put on a brand new pair of tennis shoes? That’s the feeling your workers will get when you trot out new equipment for them to use. They’ll almost certainly get a morale boost from knowing management thinks enough of them to purchase new equipment.

(You might also get find that they take better care of new equipment than its dilapidated predecessor.)

Deals Are Out There
Despite what you might think, capital upgrades, including new equipment purchases, don’t have to take a big bite out of your bottom line. There are plenty of places, including auction houses, where nearly new equipment can be had at deeply discounted prices.

We encourage business owners to keep an open mind as they look over the inventory at auction houses.

Remember, a lot of the items that hit the auction block come from businesses that have gone bankrupt. Those bankruptcies are usually the result of too much overhead (in the form of equipment) and not enough jobs for the equipment to work at.

As a result, sharp-eyed auction goers can frequently find brand new heavy machinery and warehouse equipment that are still covered by their original warranties.

Any investment that’s going to increase worker productivity and morale is an investment that’s going to provide a valuable ROI for your business.

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