CMMS ROI Calculator

This calculator takes what a maintenance software purchase costs and what you expect it to save, and shows the first year’s net savings, the return, and the months the one-time costs take to pay back. Every figure is one you enter.

Formula

• One-time costs = setup fee + setup staff hours × loaded labor rate
• Yearly costs = software cost + upkeep hours per week × weeks worked × loaded labor rate
• Yearly benefits = downtime hours avoided × downtime cost + overtime reduced + parts and materials reduced + inventory reduced × interest rate + paperwork hours saved per week × weeks worked × loaded labor rate
• Year-one costs = one-time costs + yearly costs
• Year-one net savings = yearly benefits − year-one costs
• ROI = (yearly benefits − year-one costs) ÷ year-one costs
• Simple payback in months = one-time costs ÷ ((yearly benefits − yearly costs) ÷ 12)

Simple payback assumes the benefits and recurring costs arrive evenly through the year. It ignores everything after the payback month, so read it as a first screen, not a forecast.

Source

NIST Handbook 135, Life Cycle Costing Manual for the Federal Energy Management Program, section 6.4: simple payback is the time for cumulative savings, net of costs, to recover the initial investment. It is undiscounted, and NIST calls it a screening measure. U.S. Department of Energy, Federal Energy Management Program, Operations & Maintenance Best Practices Guide, chapter 4: the cost and benefit lines below. NIST, The Costs and Benefits of Advanced Maintenance in Manufacturing (NIST AMS 100-18): downtime includes the capital and labor cost of a stop, and the revenue lost to it. Plant Services, David Berger, P.Eng., “How to prepare a cost justification document using your CMMS”: inventory is worth the cash freed times the interest rate, and staff time is cash only when headcount changes.

Worked example

Example only. The starting values and every figure are invented.

Starting values:

• Setup fee: $2,000
• Setup staff hours: 24
• Software cost: $3,000 a year
• Upkeep hours: 1 a week
• Weeks worked: 48 a year
• Loaded labor rate: $40 an hour
• Downtime hours avoided: 12 a year
• Downtime cost: $400 an hour
• Overtime reduced: $2,000 a year
• Parts and materials reduced: $3,000 a year
• Inventory reduced: $10,000
• Interest rate on inventory cash: 5% a year
• Paperwork hours saved: 2 a week

The example counts the paperwork hours as cash, so it assumes that time is put to paid work.

One-time costs: $2,000 + 24 × $40 = $2,960 Yearly costs: $3,000 + 1 × 48 × $40 = $4,920 Year-one costs: $2,960 + $4,920 = $7,880

Yearly benefits:

• Downtime: 12 × $400 = $4,800
• Overtime: $2,000
• Parts and materials: $3,000
• Inventory: $10,000 × 5% = $500
• Paperwork: 2 × 48 × $40 = $3,840
• Total: $14,140

Results:

• Year-one net savings: $14,140 − $7,880 = $6,260
• ROI: $6,260 ÷ $7,880 = 79%
• Simple payback: $2,960 ÷ (($14,140 − $4,920) ÷ 12) = 3.9 months