The ROI on Scheduled Maintenance

 

I know that this has been done before, probably to death, sometimes I believe that if you get back to the basics and really analyze the fundamentals, it can be extremely clarifying.

Bear in mind, I believe these to be very conservative numbers. Disclaimer: (Actual results may vary; calculations are based on industry averages and may not reflect your actual situation, not valid in all 50 states, terms subject to change in Alaska and Hawaii)

 

What if I came to you and said, “Mr. Client , If I could show you a way to add over $7000.00 per year to the bottom line of your P&L for the next 15 years would you sign up for my program?” After all the usual evasions and qualifications, the answer would be yes, right?

 

Everyone who would say no may stop reading here and return to your comic book or soap opera.

 

Let’s take a $35,000.00 piece of equipment and say that its lifespan with proper scheduled maintenance would normally be around 15 years. Typically for a complex piece of mechanical equipment, with no maintenance that lifespan would shorten to 5 years. 

That would mean that during the normal 15 year life you would be replacing that equipment every 5 years. The lifecycle cost for that piece of equipment would be around

$ 120,000.00 (averaged with a 10-12 % cost increase per purchase).

If we then take that same piece of equipment with an average initial purchase price of $35,000.00 and factor in an annual maintenance cost of $3700.00 per year (averaged with 5% per year increase),that would make the total lifecycle cost over 15 years $90,500.00

This nets a savings over the life of the equipment of $29,500.00 or $1967.00 per year. 

Next let’s factor in some energy efficiency. Take a monthly average energy cost of $5000.00 per month or $60,000.00 per year and with annual maintenance, we should see at least a 10% savings. Actually the savings would probably be much higher but let’s use 10%. A 10% savings would net us $500.00 per month or $6000.00 per year.

The combined annual savings of replacement cost plus energy efficiency would net an annual savings of $ 7967.00 per year or $119,505.00 over the 15 year life of the equipment.  

Let’s recap:

 

15 year lifecycle with no maintenance = equipment cost $120,000.00 over 15 years

15 year lifecycle with maintenance = $35,000.00 initial purchase + $55,500.00 cost of maintenance for 15 years = $90,500.00

Savings= $29,500.00 over 15 years

 

15 year energy cost, $900,000.00 ($5000.00 per month for 15 years) with no maintenance.

15 year energy cost $810,000.00 with proper maintenance program.

Energy Savings = $90,000.00 over 15 years

Total 15 year savings = $119,500.00 or $7967.00 annually – STRAIGHT TO THE BOTTOM LINE! 

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