SMB Tools / ROI & payback
Is it worth the money?
See how long an investment takes to pay for itself and the return it earns over time, for a piece of equipment, a buildout, or a whole acquisition.
What this means
- What moves it
- A middling payback: it works if the item lasts well past 2 yr 9 mo. A lower price, a used unit or a lease would shorten it.
- What to check
- A return 20% lower pays back in 3 yr 6 mo. Count only the money this purchase adds or saves, not sales you would have made anyway.
- Where this goes next
- Save it, then put the purchase in the cost to open (if before opening) or the growth plan (if after). Open →
Worked out from the numbers on this page. A description of the math and an estimate, not advice; what to do is your call, with your adviser.
The investment
Initial investment
$
Net annual return
$
Time horizon
years
Resale / salvage value (optional)
$
Payback period
2 yr 9 mo
$50,000 returning $18,000 a year
Cumulative cash flow
Normal3 yr 6 mo at 20% less
Two to four years is normal for a serious purchase; fine when the asset lasts well beyond that. At a return 20% lower, payback stretches to 3 yr 6 mo.
- Total return (5 yr)
- $90,000
- Net profit
- $40,000
- ROI (total)
- 80.0%
- Average annual ROI
- 16.0%
- ROI if the return is 20% lower
- 44.0%
A planning estimate using one steady annual return. It ignores taxes, financing, and the time value of money. Be conservative with the annual figure.