Many of the metrics business owners and managers use to evaluate lighting and energy reduction projects, fail to take into consideration their “real” return on investment. One of the rules of thumb commonly used by decision-makers is the “maximum 2-year simple payback” rule. For whatever reason, people think an investment that takes more than two years to pay for itself is a waste of time.
In 1980, prime was at 18.75%. Back then, banks were offering 6-month CD’s for 16%. Fast-forward to 2016 and prime is at 3.50%. Today if you go to a local bank and ask for a 6-month CD you are lucky to get .5%
So why in the world would you be clinging to a mandatory 50% return on investment per year (which is essentially what two-year payback means) in 2016? It makes no sense, because the backdrop of alternative investment vehicles is totally different compared to 1980.
If a business owner or manager is committed to the idea of 50% return on investment, they should stop to think:
- In what other area of my core business am I currently enjoying 50% return per year?
- What risk do I have to exercise to get a 50% return on my money?
Most industries average net profits between 3% – 12%. It’s certainly nowhere near 50%. Why then, when it comes to energy efficiency projects would management require a 50% return. If they didn’t invest in the energy project we are recommending, they might invest it back in the core business and get no more than 12%. It’s worth re-evaluating and consider the fact that a 4 year payback is still an excellent return on their investment, not to mention the brighter, safer, more productive work environment their employees will realize with upgraded lighting.
For more information about taking advantage of lighting upgrades and the related energy savings, contact Bob Taussig, president of ROI Energy Solutions, Inc. We will provide a no obligation, lighting energy analysis, click here to contact us to help determine the right lighting solution for your facility as well as present your payback and ROI.
ROI Energy Solutions of Cleveland, Ohio and Houston, Texas has performed more than 300 industrial lighting upgrades and specializes in installing your lighting retrofit project without interrupting your operation. Don’t wait, contact us today. You’ll be glad you did.
Phone: 330-931-3905 or Bob@ROI-Energy.com website: www.ROI-Energy.com
Parts of this blog were taken with permission from the Sales Ninja blog posted by Mark Jewell, Wall Street Journal best-selling author of Selling Energy, Mark Jewell’s daily blog on ideas and inspiration for advancing efficiency. Sign up at SellingEnergy.com