Equipment & Automation ROI
What a machine or a system pays back, and when.
Replaces: Vendor ROI calculators built to flatter the vendor
How to use it
Enter what the asset costs to buy and run, what it saves, and how much of the time it will actually be used. The calculator applies the utilisation and ramp adjustments that vendor business cases leave out, then reports payback and return.
Where the number comes from
- Total investment is the purchase price plus installation and training, because none of it is optional.
- Gross savings are scaled by utilisation: an asset used 80% of the time saves 80% of what it could.
- Running and maintenance costs are deducted in full, since they largely do not scale down with use.
- Year one delivers only the months after the ramp period, which is what pushes payback out.
- Break-even utilisation is the point where running costs equal the savings — below it the asset costs money to own.
- Net present value discounts every year of benefit at your cost of capital and subtracts the investment.
What goes wrong
The part most calculators leave out.
- Labour saved is only a saving if the labour actually goes. Automation that frees half a person’s time saves nothing unless that half-person is redeployed or not replaced — and on a small team, usually neither happens.
- Utilisation assumptions in vendor cases are close to fiction. Ask what utilisation the case assumes, then ask what your current equivalent asset actually achieves.
- Running costs are routinely understated: consumables, servicing contracts, spares, energy, and the training that recurs every time someone leaves.
- Downtime is not modelled. An asset the whole process depends on creates a single point of failure whose cost appears only when it stops.
- Obsolescence can arrive before the useful life does, particularly for anything with software in it.
- The savings and the useful life are both estimates supplied by whoever wants the purchase approved. That is worth remembering when the payback lands conveniently under three years.
The two-year payback that takes four
A 180,000 machine with 25,000 of installation promises 78,000 of labour saving and 12,000 of other savings — 90,000 a year against 205,000 invested, so payback in a little over two years. Then apply reality: at 80% utilisation the saving is 72,000, and 19,000 of running costs leaves 53,000 net. Year one only delivers eight months of that. Cumulative cash turns positive in year four, not year two. Nothing was misrepresented; the vendor case simply assumed the machine runs constantly from the day it arrives and costs nothing to keep running.
Questions
- Should labour savings count if nobody is made redundant?
- Only if the freed time is genuinely redeployed to work that produces value, or a planned hire is avoided. Time saved that gets absorbed into the working day is not a cash saving, and counting it is the most common way these cases overstate returns.
- What utilisation should I assume?
- Whatever your comparable existing assets actually achieve, measured rather than estimated. If you have no comparable, assume materially less than the vendor case and see whether the decision still holds.
- Why does payback come out later than the simple calculation?
- Because the simple calculation divides the price by the full annual saving, ignoring that the asset ramps, is not used constantly, and costs money to run. Those three adjustments routinely double the payback period.
- Does anything I type get sent anywhere?
- No. The whole calculation runs in your browser. Nothing is transmitted, stored, or logged, and there is no account to create.
Last updated .
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