Let’s face it, you are more than likely asked to accomplish a great deal with minimal resources, especially funding. I wish it was different, but it is a reality in the church facility world. Another reality is that as technology improves, and the Internet of Things continues to expand, leveraging technology to gain savings is a real way to do more for less…eventually.
Unfortunately for us, to leverage the long-term savings on emerging technology will generally require an upfront investment. In that investment, those figures can be a hard pill to swallow. Consider an average facility that wants to install 20 WIFI stats and integrate them with their scheduler…that project cost could easily be around $6500. For a facility looking at saving money, how do you justify the investment?
That is where learning how to calculate a return on investment (ROI) is critical for every facility steward. The concept is simple, but the execution is difficult. In general terms, a ROI will give you a qualified estimate as to how long your investment will be paid off through (typically) operational savings. Every moment after that point would then be considered savings (or newly available dollars for other areas).
A simple ROI formula is [(Gain from Investment-Cost of Investment)/ Cost of Investment]. Because it gives you a percentage, it is easy to compare returns from different investments. For us, we are trying to justify an investment by providing an estimated time it achieves a return of 0 (meaning we have saved enough to pay back project cost). Once it is paid back, theoretically it is now additional income (or rather reduced operating expenditures).
So, how would we approach it as a facility steward? Energy Star states that with simple energy efficiency measures, facilities can achieve 2-10% savings annually on their costs. More aggressive programs can achieve up to 60% savings. I recommend that you are conservative with your target and use a reduction potential of 18%. If you are serious about saving money, 18% is easily attained.
How about a practical example. Remember the church from above, a project cost of $6500 to invest in connected stats. Let’s say their monthly utility bill is $7000. (I know, for many of you that number would be awesome). If they could achieve an 18% per month reduction in utility bills ($7000x .18 =$1260), they could save $1260 a month. Taking the project cost divided by the savings ($6500/$1260= 5.2) tells us that in a bit over five months the ROI is at 0%. Every month after the five-month point the church has $1200 that can be invested elsewhere. The counter-point to the example is this: for every month that you do not invest, you are spending $1200 you shouldn’t have to. In 12 months if you do the investment, you gain approximately $8400, if you do not you spend an extra $14,400.
This is very simplistic in presentation, but this method is easy to understand and reproduce. If you want to start getting deeper, then for ROI’s in energy savings you can start getting in to KwH difference and so forth. The facility steward should always include an ROI when presenting or asking others to approve an efficiency project. The ROI is a critical part of an effective decision-making process. By leveraging emerging technology to improve efficiency, it is an actual investment into the facility. The “sticker shock” that comes with many of these types of projects needs a tempering figure.
When you have taken the time to evaluate the ROI on total project completion, then you can also consider ways to spread the project out. Many times, companies will let you purchase in stages to spread out the cost if you will commit to a total order. It draws out the time to achieve 0%, but it can make it easier to get approved.
Bottom line, calculating an ROI informs both you and those you present the project to where the money is, and how to get it back from the facility and into other ministry areas. If you want some more info, or help putting one together, let us know in the forum, we are here for you.