Every company is trying to do more with less. This is especially true for the maintenance department. If you are a maintenance professional, you know exactly what I am talking about. Management doesn’t want to spend money on anything that doesn’t directly affect the bottom line.
This provides a problem for a maintenance professional who intuitively sees the value of a good CMMS, but doesn’t know how to get his management to approve a new software purchase. However, there is a simple solution — show your management how much money a CMMS is going to save the company by calculating CMMS ROI (Return on investment).
While giving hard numbers is impossible since calculating ROI pre-implementation is just an estimate, you should do your best to make that estimate as accurate as possible.
Wondering how to do that? Keep reading this article.
If you don’t care about the calculation process, you can click here to go straight to our interactive CMMS ROI calculator.
CMMS ROI Formula
At face value, calculating the ROI of a CMMS doesn’t look too complicated. You only need to know 3 things:
- How much money can you save because you implemented a CMMS?
- What is the total cost of implementing and running your chosen CMMS software?
- What is the time-frame you are looking at?
When you know those numbers you just subtract the costs from savings and divide what is left with the costs.
The CMMS ROI formula is as follows:
The time frame is important because some costs and savings will be based on hourly calculations. Deciding on a time frame beforehand will ensure that all calculations cover the same exact time period.
Accurately estimating total costs and total savings can be tricky so we’re going to discuss both in the continuation of this article.
How much money can you save with a CMMS?
Sometimes you save money directly, sometimes you save money by saving time, and sometimes you save money by preventing output problems.
CMMS brings a lot of improvements across different areas which can make it hard to estimate the total value it brings to an organization. That doesn’t mean you should just give up or use random numbers that seem realistic.
Below, we outline 3 main areas in which you can see the positive effects of CMMS implementation, as well as how to get realistic numbers.
DISCLAIMER: If you are calculating CMMS ROI after actual implementation, then you can obviously use the real numbers. For those that are looking for pre-implementation estimates, you have two options. One is to ask your CMMS provider if they have relevant cost savings averages from their current clients. If you can’t get that or if the numbers seem suspicious, you can always try to look for industry averages.
In this article, we will show you the average savings Limble users experience so you can use those numbers for reference.
1) Productivity gains
CMMS solutions are often able to vastly improve and speed up your current workflow by giving everyone a firm structure to follow, quick access to important asset information, and uninterrupted communication flow.
To calculate productivity gains, you need to know 4 things:
- What is your hourly cost per employee?
- What is the number of people that will be using the CMMS?
- How many hours can CMMS software save you in a given timeframe?
- What is the number of working days per year (or a quarter/month if you want to calculate CMMS ROI for a shorter time period)
You can get the hourly cost of every employee by adding hourly salary with hourly benefits.
The number of people that will be using the software is self-explanatory.
To calculate savings, you need to know how much time can a CMMS actually save you. Limble customers, for instance, measure time savings of 1 to 3 hours every day for each Limble user.
“On average, Limble saves me an hour to two hours a day, depending on the workload. The biggest thing for me is being able to do things on my phone, on the fly.”
– Rob Siler, Maintenance Technician, MYGN
Multiplying the number of people that will be using the software with their hourly cost, the number of working days, and average hours saved per person will tell you how much money can you potentially save in a given time period.
Let’s show that on an example with the following setup:
- Hourly cost per employee (USD/hour) = $40 ($30 wage + $10 benefits)
- Number of people using software = 8
- Number of hours CMMS saves per user each day = 2 hours (which in translation means making your technicians 25% more productive when based on an 8-hour shift schedule)
- Working days in one quarter (3 months) = 66
Calculation = $40 * 8 * 2 * 66 = $42 240 (or you can look at it as 1056 working hours saved)
So, with the setup we used in this example, a company could save $42 240 in labor costs by eliminating 1056 hours of work.
2) Savings as a result of decreased downtime
For many businesses, a CMMS is a stepping stone towards proactive maintenance. Simply put, CMMS gives you the ability to quickly (re)schedule and track all maintenance work, improve communication flow, and stay on top of your inventory, all of which can be considered pillars upon which successful proactive maintenance programs are built.
To calculate downtime savings, you need to know 3 things:
- How much does downtime costs you (per hour)?
- How much downtime do you experience on a monthly basis?
- How much downtime are you expecting to eliminate with a CMMS?
The hardest one to get a real number for are downtime costs as unplanned downtime can have many negative impacts on labor costs, productivity, asset lifespan, brand reputation, and so on. Here’s a decent resource on how to calculate your downtime costs if you’re interested in learning more.
To simplify this, we advise you not to go into too many details as you’re only going to get lost. Focus on high-priority assets as their downtime is usually directly connected to losses in revenue, which is the biggest part of the downtime cost calculation anyway.
Point number two is just a matter of tracking how many downtime hours did the assets experience.
In regards to decreasing downtime with a CMMS, that will vary from provider to provider. To give you a rough number to work with, we can tell you that Limble users have measured an average decrease in downtime of 26%.
“After about a month of using Limble we. . . witnessed a drop in our downtime. After using Limble for over a year I can say that it is paying for itself and worth every area of implementation.”
– Ethan Closson, Little Giant Ladder System
3) Spare parts inventory cost savings
To calculate spare parts inventory cost savings, you need to know 2 things:
- How much do you spend on spare parts inventory each month?
- How much savings can you expect with a CMMS?
Keeping a lot of spare parts in stock is not free. The room in which they are stored has to be maintained, and in some cases even kept under certain conditions (lighting/temperature). At a minimum, this will be reflected in the increased cost of your utilities. Here is a decent resource that could help you calculate your spare parts inventory cost more accurately.
Again, your savings could differ depending on the software solution you’re using. For reference, Limble customers reduce their inventory spend by an average of 17% when using Limble inventory management features (like stock level notifications, automatic part usage tracking, barcode lookup, etc.).
“With Limble, I can track all of our supplies that come in, how they are getting used, look at the usage rates, and then also be able to forecast budgets for next year. It has dropped my budget tremendously; I was actually able to hire another guy because of what we were able to save.”
– Benjamin Scott, Facilities Supervisor, Intercontinental Hotels Group
4) Additional value
There are many other indirect cost savings you can take advantage of if you implement a modern CMMS.
Two that are worth mentioning the most are increased asset lifespan and decreased labor costs. Both of these come as a result of fewer unexpected breakdowns. Fewer breakdowns combined with proactive maintenance is known to increase asset lifespan. Unsurprisingly, the fewer breakdowns you experience, the lower your labor costs will be (be it because you have less overtime to pay or fewer calls to expensive independent contractors).
While these are often considered optional and are rarely put into ROI calculations, it is an important thing to keep in mind.
What is the total cost of running a CMMS?
Implementation costs and cost of licenses are probably the first things that come to mind when you think about the investments you need to make to implement a CMMS.
While those things alone can give you a rough number to work with, for those who want to be really precise, you can find are detailed cost breakdown below.
1) Implementation costs
Implementation costs usually come in the form of time rather than money. To be able to use even basic features of any CMMS, you need to feed it some data. In translation, you need to:
- enter locations
- enter users/technicians
- import all assets you want to keep on your proactive maintenance plans
Many CMMS vendors will have tutorials and customer support that will help you speed up this process. To get an accurate estimate, ask your provider for a time estimate based on the number of the items you need to enter.
When you get that number, you just need to multiply it with the hourly wage of the person that will be entering this data into your brand new CMMS. And voila, you have the cost of your time investment spent on the implementation process.
If you’re switching from an old CMMS, there is a possibility you can just export/import asset information, but that is something you will need to review on a case-to-case basis.
Many CMMS vendors offer (or even require) an initial setup, but that is because they offer poor user experience and customers can’t use their software without someone to train them or help them with the setup. While we do offer implementation service because people ask for it every now and then, we sell them VERY rarely because people get a hand of the software very quickly by themselves.
2) Cost of the software itself
This is the easiest cost to calculate. As most CMMS providers base their pricing plans on the number of users, you can just multiply the number of people that will be using the CMMS with the select pricing model. You can check Limble’s pricing here.
One thing you should pay attention to is if the pricing is based on a monthly or yearly subscription. The yearly subscription is always cheaper, but it does mean a higher upfront cost as you are basically paying to use the software for the whole year ahead.
Here is an example to help you picture this.
Let’s imagine you have 13 technicians and 1 maintenance manager that will be using the software. You decided you want our Professional plan on a Yearly subscription.
The total cost of the running Limble CMMS, in this scenario, is: number of users (14) * cost of the license ($49) * months of use (12) = $8232 per year (or $686 per month)
We also offer custom pricing plans for non-profits, businesses who need a license only for a few months every year and/or manage seasonal workers, and other unique scenarios. Contact us for more info.
One last thing you can do is to check with the provider for any hidden costs like:
- paid add-on features
- consultation fees
- on-going support fees
This is mostly to ensure you’re not going to get surprised with additional costs later down the road.
3) Onboarding costs
Onboarding is another cost that comes in the form of time you need to spend on it. What it boils down to is the number of working hours people who will be using the software need to spend on learning how to use it.
This is again something you need to consult with your CMMS provider. They probably have some average numbers regarding the onboarding process.
The onboarding process can consist of activities like:
- watching video tutorials
- watching live webinars
- participating in scheduled training programs
To help with the onboarding process, every one of our clients gets a free dedicated Customer Success manager whose sole purpose is to ease the transition process by answering questions and delivering needed materials.
To get the total onboarding costs, simply estimate the total time one person will spend on the above-mentioned activities, multiply that by the number of people that need to be onboarded, and multiply that again with the average hourly salary of those employees.
4) Hardware costs
If you plan to implement a mobile maintenance software (and I do not see why anyone would look at desktop-only solutions), there can be some hardware costs involved.
This cost can come in two forms:
- mobile devices
- setting up a decent wireless network (might not be necessary if your facility has a good enough coverage so people can use data plans)
Let’s review what we’ve covered so far.
We have the CMMS ROI formula:
CMMS savings can be calculated by adding together productivity gains, downtime savings, and spare parts inventory savings.
CMMS costs can be calculated by adding together implementation costs, cost of the software itself, onboarding costs, and the potential hardware costs.
For the purpose of this article, let’s imagine that total savings due to the implementation of the CMMS in one year are $360 000 and that the costs of implementation and running the software for one year are $41 000.
Under these conditions, CMMS ROI = ($360 000 – $41 000) / $41 000 = 7.78
This would mean that return on investment after a single year is almost 8 times (or 778%) its value.
(Limble) CMMS ROI calculator
We know that writing all the numbers down and doing the calculations can be a drag. To speed things up, we created an interactive online calculator you can see below.
Before you start throwing in your numbers, here are a few things you should keep in mind:
- Some fields will be automatically populated with numbers that reflect average savings Limble users have measured in the past.
- These numbers are there to give you an idea of realistic savings you can expect to see yourself.
- If, for whatever reason, you expect to see different numbers, feel free to change them.
- When you’re finished entering the numbers, just write in your email address and we will send you the whole cost/savings breakdown to your email, as well as give you the link with a full access to the calculator which you can use to test different scenarios.
- All calculations are based on the time span of 1 year and they show you what your return on investment could be one year after implementation of Limble CMMS.
Is your department ready for a CMMS?
These days, implementing a CMMS is not nearly a hassle as it used to be.
Modern solutions are built to be user-friendly so it doesn’t take ages for technicians to get accustomed to new software. Implementation costs are minimal and the software itself is not highly expensive, which means that upfront costs usually aren’t a barrier to entry.
What is probably best of all is that CMMS solutions are built for preventive maintenance as all of their options help you start an effective preventive maintenance program. Implementing a CMMS can be a great way to start reducing the amount of reactive maintenance you might be doing at the moment.
If you have any questions about Limble, feel free to leave a comment below or get in touch with us via email or phone.