Using ROI to Justify That Project or New Machine

If you're like me and have found it quite difficult to get approval for a new machine you really need or that project that is always getting shoved down the list, try using a ROI (return on investment) figure as a tool and it may just get you over the line.

This may be relatively new or unheard of for some or a regular tool in the arsenal for others, but it has helped me recently with a few new projects we were planning as well as some machinery purchases so I thought I would share a few things I have learnt that you may find useful too.

I will use the new machinery purchase as my first example as it is relatively clear to see. Last year we trialled a new implement on our fairways in the hope that if it passed all of our tests it would then replace our fairway topdressing program. Well, it passed our tests but now I had to show the club management why it would be a worthwhile investment.

Now for some facts. Traditionally we topdress our fairways annually which costs around 300,000 Thai Baht (approx. US$8,570) and the new machine in question costs 950,000 Thai Baht (US$27,140). Now simply map out those costs and savings in a table over time as pictured below.

 ROI = (Net Profit / Cost of Investment) x 100

ROI = (Net Profit / Cost of Investment) x 100

This is just a simplified version, you can be as detailed as you want with the costs and include estimated fuel usage, maintenance costs and any changes in the price of materials or just keep it simple like I have. 

Another example is a project we are currently looking into and involves changing the grass type on our course to one that is better suited to our location and site specific circumstances. The project would take approximately 2 years completing 9 holes each year and so any potential savings wouldn't be realised until the second year as shown below.

You can also calculate Net Present Value and Internal Rate of Return and add them to your presentation to further assist in the decision making. There are many helpful calculators available online free of charge and are quite simple to use. If you are looking for more information on ROI I have found this site to be quite helpful.

This was a slightly different blog from what I usually write about but I hope it was helpful all the same! 

Stay tuned for a new Vlog of our course renovation practices!