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Opportunity loss by not upgrading

When deciding on an upgrade, whether its a new piece of software, a new computer, or a new process to automate a task, the math is fairly simple to determine if the cost of the upgrade is worth it. To figure out if the price is justified you need to figure out the cost of the tool, the time saved by using that tool, and the cost of the labor gained or lost.

For simplicities sake I will use examples with easy round numbers. Lets say that you have an employee that makes $100,000 per year. Now take that annual salary and divide it by (52 weeks per year, times 40 hours per week, times 60 minutes per hour). You have $100,000 divided by 124,800 minutes worked per year, resulting in $0.80 paid to that worker per minute. Meaning that if the upgrade cost you less per minute saved than that worker is being paid per minute, you should make the purchase immediately and begin saving money.

Lets take a look at some upgrade prices to see how much they cost based on how much work they save.



Minutes Saved per day

1
5
15
30
60


$100.00

$0.39
$0.08
$0.03
$0.01
$0.01
$1,000.00
$3.91
$0.78
$0.26
$0.13
$0.07
$10,000.00
$39.06
$7.81
$2.60
$1.30
$0.65



256
1,280
3,840
7,680
15,360


Total Minutes saved per year

Again the math here is pretty simple. Take the cost of the upgrade and divide it by (the number of minutes saved per day, times 5 days worked per week, times 52 weeks worked per year). As you can see above, there is almost no reason a $100 upgrade won't be worth the investment. The $1,000 upgrade will have to save your worker at least 5 minutes per day to be worthwhile, and at $10,000 you would need to see a massive savings of 60 minutes per day for that investment to be worth it in 1 year.

There are some additional factors to consider, if the upgrade will last long than 1 year, that pushes the price out over a longer period of time and thus lowers the price per minute saved making larger purchases more reasonable. Just because an upgrade doesn't completely clear the profit line doesn't mean it can't be valuable. Employee satisfaction is a factor that can't easily be quantified and should be considered if the value proposition isn't obviously in favor of making the purchase.

Some upgrades won't be worth the cost, but it takes surprisingly little increase in productivity to justify the purchase of anything under $1,000.

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