To Do Or Not To Do: What Are The Costs?

To Do Or Not To Do: What Are The Costs?

Most people consider the price of a particular action, before taking that action. Seems logical, right?

However, how about considering the price of failing to take an action? Ever consider this? For instance, what is the price of receiving a heart transplant when you urgently need one? $600,000….$900,000….more? I have no idea. Regardless of the price of having the transplant, the price of failing to have it is greater.

Let us remove the life or death issue from the discussion for a moment, and change the tone of this article to a more welcoming one. Let us consider an upgrade of LED lights on your commercial property.

What is the price of a retrofit of LED lights? $50,000….$400,000….more? This varies, based on how big your building is, obviously.

However, what’s the price of failing to install LED lights in your building? Let us examine the cost of forgoing an LED lighting retrofit.

1. Consistently High Electricity Bills

LEDs reduce your electricity bills, because they use roughly thirty percent of the energy your present lighting system uses. Therefore, irrespective of how much the retrofit costs, it should not be as much as the total ongoing higher energy bills for the period you use your building.

If you could save $100,000 every year after LEDs are fitted, then the price of failing to fit them is $100,000, multiplied by the quantity of years you remain in your current location and carry on using your existing lighting system. So, if you intend to stay in your premises for another decade, then the price of forgoing an LED retrofit is $1,000,000 (and this does not take into account the increase in electricity costs over the following decade).

2. Regular Maintenance Expenses

LED lights are high efficiency energy and last for fifty times as long as conventional lights. Therefore, regardless of how much the retrofit costs, it will not be anywhere near as much as the regular replacement and maintenance expenses of a conventional lighting system.

For instance, if your present lights have a lifespan of three years under ideal conditions, every thirty-six months you will have to purchase a new ballast or bulb for each fixture. Obviously, they do not all stop working simultaneously, so this means you may have to hire a full time staff member to maintain and monitor your lights.

What’s the yearly price of a staff member, who needs to replace ballasts and bulbs regularly? What’s the price of a ballast or bulb? Multiply these figures out over the following decade. This is an additional cost of failing to have an LED lighting retrofit.

3. Missed Chances to Complete Other Tasks

Whatever the price of the LED lighting retrofit, you need to compare this with the other tasks on your list of things to do for your building. Need some new equipment, a new garage, or new a wall? All these things are vital and required to run your business, however they do not always save you cash over the long term. These are just capital overheads (or the price of running a business). Bear in mind that upgrading to LED lights, can funnel up to 50% of your budget for electricity back into your pocket — each year. That is plenty of cash.

However, you decide not to do the upgrade, so you can free up cash to fund these other tasks.

Let’s review the scenario:

1) Your building needs a new widget. The price of this is $400,000.
2) The price of upgrading to LEDs is, say, $100,000, and you will save $50,000 each year in maintenance and electricity expenses over the next decade.
3) You opt to use the $100,000 that would have paid for the LED lighting system and put it towards buying the $400,000 widget.
4) You forgo lifetime savings of $500,000 that the LED lights would have given you, to use instead, the $100,000 to fund a business overhead that costs $400,000.
5) If you had paid for the $400,000 widget and retrofit simultaneously, the retrofit covers the cost of the widget for the next decade.

CONCLUSION

What is the cost of DOING the LED retrofit? In simple business terms, it is the most logical solution. Just make sure not to overpay, nor purchasing low quality LEDs.

Then again, what is the cost of NOT DOING the LED retrofit? 95% of the times NOT DOING an LED retrofit is much more expensive than DOING the LED retrofit.

pedrososa
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