The right approach to calculating crushing equipment ROI can help you justify the capital investment as part of an overall business plan. Luckily, you can take the following practical, actionable steps to make those calculations. This article will explain how you can make a financial decision that’s beneficial in the long term and driven by your specific business data.
You can calculate the ROI of crushing equipment by using two main standard formulas:
For example, let’s say that a business purchases a new crusher system for $1 million. This crushing equipment then generates $200,000 in net profit in its first year. The return on investment for that first year will be 20%.
In this scenario, the crushing equipment payback period can be determined by using the same numbers used above in the ROI calculation.
The cost of investment ($1 million) and the annual net cash flow of $200,000 gives you a payback period of five years.
While the pricing of your equipment will vary depending on a range of factors, these are standard methods for calculating ROI in the construction industry. They provide a simple, clear, high-level snapshot of an investment’s potential profitability and the time required to recoup the initial outlay.
This is where you can focus on the net gain from investment aspects of your ROI calculation. Revenue can be forecast using the following variables:
Keep in mind that your choice among specific crusher models will directly impact production capacity.
A strong TCO calculation has two key components: CapEx and OpEx.
CapEx is your upfront investment used to purchase the crushing equipment. It will include:
The purchase price and any attachments that come with your equipment.
Any associated freight, shipping and delivery fees.
Installation and site preparation costs.
It’s important to ensure all these elements are captured in a formal quote to accurately forecast your initial investment.
OpEx are the costs that a business must pay to function on a daily basis, including:
You should also subtract your residual (resale) value from the total cost. This gives you a more accurate final TCO calculation.
Finally, be sure to factor in tax savings from depreciation. The IRS allows a 5-year MACRS depreciation schedule for most construction assets, which directly affects your net cost.
Crushing equipment is a sound business investment. But when purchasing this equipment, a strong return on investment depends on:
Partnering with an industry expert is the best way to accurately model these variables and choose the right equipment to turn potential into profit.
Crushing Equipment Solutions™ offers the complete line of METSO crushing and screening solutions. With 40 years of experience and a focus on customer satisfaction, we know that the ROI of crushing equipment requires a strategic partner who understands your business’s needs.
Contact our team today for a consultation about ROI and your crushing equipment.