Making emergency replacement purchases can mire you in financial quicksand. Creating a 10-year budget can help you a.) analyze the purchase cost versus the cost of ownership for the expected service life of any piece of equipment, b.) get ahead of the immediate costs for new or replacement equipment and c.) become more cost-effective.
Setting up a spreadsheet can provide the clearest view for comparing purchase and ownership costs. Let’s use a 100,000-gallon pool as an example to show the considerations for installing a commercial-grade salt chlorination systems instead of residential systems that don’t have a long-range service life in heavy-duty applications. The decision-maker is looking at two options:
- Buy a semi-commercial salt system that makes 10lbs. of FAC per day for around $9,500
- Buy a true commercial salt system that makes 10lbs. of FAC per day for around $13,000.
Nobody wants to pay more for any piece of equipment, but in most cases, you’ll find that cheap today can be costlier over 10 years. You can populate a spreadsheet, as shown in Figure A, before making the purchase to see what that equipment is going to cost you over 10 years. What is its expected lifetime? What replacement parts will it need?
That hard-to-swallow $3,500 difference just for the equipment cost – which is always the first consideration for many people – becomes less prohibitive when looking at the 10-year picture and seeing that the semi-commercial system will actually cost over 30% more.
The semi-commercial system is less costly upfront because it isn’t designed for the high-demand run times of a commercial pool. So in addition to the possibility of a complete replacement, you need to project how many times you will need to replace power supply components and cells. As your spreadsheet can calculate, this will add up dramatically over a 10-year period.
You can use the spreadsheet to track your total operating costs (equipment, replacement parts, annual maintenance, and supplies) every year and keep a running total. This will enable you to track your actual costs against your budget and, if you chose the less expensive upfront cost, see when you might want to go for the lower life-cycle cost. If you follow the numbers in the spreadsheet, for example, you could anticipate a replacement in year four, and you could put aside money for the capital expense.
Everyone has different cost considerations in operating a commercial pool, and this spreadsheet can be most effective when used as a guide for setting up and monitoring your own budget. We are using hypothetical numbers here, but if you download the spreadsheet, you can change the numbers and the calculation formulas to match your specific needs.
Remember, cheap isn’t always better; it can be far costlier in the long term. Setting up a 10-year budget and tracking your numbers will tell you how effectively you are managing your equipment costs over time and help you make better, more accurate management decisions.
Find out more about ChlorKing, Inc.
Steve Pearce is Executive Vice president and Chief Operating Officer and one of the founding members of ChlorKing, Inc., Norcross, GA. Born in Johannesburg, South Africa, Steve has more than 16 years of experience in commercial water treatment and related industries.