Total cost of ownership – an approach to justifying big spend on PA and equipment
Total Cost of Ownership (TCO) sounds like a highly abstract concept. But it’s really not. It’s also something that churches—sadly—tend to miss out on. TCO is simply a calculation of what a particular product or service is going to cost you during it’s life. TCO has become popular in automotive circles, with some manufacturers boasting about the fact that while their car might cost a little more to buy, it will cost less to own. At least in theory.
Missing TCO Calcuations
TCO can be missed in several ways. Sometimes, a church will buy a particular piece of gear—sometimes a very expensive piece—that will dig into their cash reserves pretty significantly. Projectors are a great example of this. A really bright, say 15K, projector can cost well over $20,000-50,000. That’s a lot of money. However, it will also cost somewhere between $2,000 and $6,000 to re-lamp it. And at that brightness level, re-lamping is going to happen every 500-800 hours of use, which is right around a year (at least for us).
So not only did you spend, let’s call it $30K, on a projector, you can figure on another $20K in lamps over the next 5-7 years of life. And we haven’t even talked about filter replacements, electricity costs or service. Costs on this imaginary projector (that’s not that imaginary) will easily exceed $60K over the life of the unit. Did anyone think about that or did the initial purchase price double as a complete surprise?
Other times, a church will buy the cheapest piece of gear they can find, thinking they are saving money. However, what they find out is that the consumeables cost of that gear is far more expensive than a slightly more expensive piece of gear. Ink jet printers are a classic example here. But I’ve also seen churches replace older, heavy duty color laser printers with newer “cheaper” ones because the toner cartridges are 1/2 the cost of the old ones. What no one noticed was that the new cartridges last about 1/8 as many pages, which about quadruples the per page costs and aggravates the users who find the printers always out of toner.
Do Your Homework
Sometimes, it’s hard to choose between two seemingly comparable pieces of equipment. What you need to look at, besides initial cost, is total operating costs. I’ve compared projectors based on bulb and filter life plus electricity and found brand A to be almost 50% less expensive over a 5 year period than brand B. And these are projectors who’s output and picture quality are close enough to being called “the same.”
Rechargeable batteries are another great example. Yes it might cost you a few hundred dollars to get into the game once you figure chargers and the initial stock of batteries. But from that point on, your annual battery costs drop to under $100 to handle replacements. For us, we went from spending over $1500/year to about $200; and the only reason I spend that much is because we now have 5 rooms using rechargeable cells, and the ones in the student rooms go missing more regularly.
It’s Real Stewardship
If you want to win friends and influence people, especially your senior leadership, continually present them with plans that demonstrate you know how to make purchases that represent an excellent value over time. Showing them that you’ve done TCO calculations, and have chosen equipment with that in mind will show them you’re serious about leading your department well.
Of course, TCO doesn’t tell the whole story; it’s just one data point. But it’s an important one. You still have to consider usability, whether the product fits your needs and if the volunteers can use it. Still, TCO can often be the tipping point between brand A and brand B. Choosing the one with the lower overall lifetime cost will pay off in more ways that one. Trust me.
Thanks to Mike Sessler from ChurchTechArts for this post.