Business case
Payback and ROI in CAD
Simple payback is the system cost divided by the net money you expect to save in a year. On this page the saving is loaded labour you free, minus annual maintenance.
Simple annual ROI is that same net saving divided by the system cost. A result of 40 percent means the net annual saving is 40 percent of the system cost on the figures you entered. It is not an accounting rate of return. Tax, depreciation, grants, quality, scrap, and the cost of capital are left out.
The wage, the day count, and the system cost in the fields are example inputs. They are not a Canadian wage survey and not a published price.
Every number in the fields is an example input. Replace it with a figure from your plant. Nothing you type is saved.
Formula
- Annual labour savings = hourly cost × hours × shifts × days × people freed
- Net annual benefit = annual labour savings − annual maintenance
- Simple payback = system cost ÷ net annual benefit
- Simple annual ROI = net annual benefit ÷ system cost
Worked example
- Example inputs: loaded labour CAD 32 per hour, 8 hours per shift, 2 shifts, 240 days per year, 1 person freed per shift, system cost CAD 250,000, annual maintenance CAD 12,000.
- Annual labour savings = 32 × 8 × 2 × 240 × 1 = CAD 122,880.
- Net annual benefit = CAD 122,880 − CAD 12,000 = CAD 110,880.
- Simple payback = CAD 250,000 ÷ CAD 110,880 = 2.3 years (27.1 months).
- Simple annual ROI = CAD 110,880 ÷ CAD 250,000 = 44.4%.
Calculator
The fields open on the worked example. Change a number and the result updates.
Related calculators
Questions
Should this ROI go into a capital request as the return?
Only as a simple sketch from the labour and maintenance figures you type. It ignores tax, depreciation, grants, quality, and the cost of capital. It is not a measured return and not an Automation Supplier quote.
What does simple annual ROI mean here?
Annual labour savings minus annual maintenance, divided by the system cost. If maintenance is as large as the labour saving, these inputs do not pay back.
Free Automation Project Review
A payback figure is only as solid as the station behind it. A free project review looks at one job, the labour it actually uses, and what a serious scope still has to include. It is not a savings guarantee.