Aaron J. Crowley

Crowley’s Granite Concepts

My mentor has an uncanny way of getting to the heart of an issue I’m facing by asking me painfully direct questions.   

Generally, my answers are stuttering, rambling, backpedaling attempts to justify or defend the line of reasoning that has led me to the latest predicament I find myself in (picture an uncoordinated clown trying to juggle while riding a unicycle backwards and uphill).

But in the end, despite the momentary discomfort caused by these questions, they tend to cut through the emotion by leading me back to the fundamentals… the basics… where self-evident truths make resolving the issue pretty straightforward.  

That being said, if you were sitting down with my mentor and excitedly describing all the benefits, possibilities, and vague concerns of your dream machine, here is the question he would ask you: “What is the ROI?”  In other words, what do you stand to gain financially by indebting yourself to the leasing company and acquiring this new piece of equipment?  

If your first reaction is to stutter, ramble, and backpedal, then the following questions will be helpful in gaining balance and control over the answer and considering more fully the implications and possible outcomes of this momentous decision. 

Question #1 – Will your equipment investment decrease labor costs on current sales? If so, what positions may no longer be necessary once the equipment is installed? Signing on the line to buy an automated piece of machinery isn’t easy, yet it’s a lot easier than telling a good worker that a machine has replaced his job function. But in this scenario, what is the point of adding the new payment if you don’t achieve labor savings that cover the cost of the new payment, as well as generate new profits that were unattainable otherwise?

Question #2 – Will the equipment increase your output without increasing labor?  In this scenario, the additional counters that the equipment will produce must first be sold, measured and eventually installed. Will the displaced labor from the new equipment be capable of performing all the other necessary tasks?  If not, additional staff (and expense) will be required in those departments, and your costs will actually go up in order to fully utilize the machine. There’s the separate issue of retraining that I will save for another article.

Question #3 – At what point in the month do the labor savings or productivity increases cover the cost of the equipment? The answer to this question is measured in time and money, perhaps even square feet produced or number of installs. Regardless of how it is quantified, you must be able to objectively forecast the point in the month where the machine pays for itself as well as the actual new profit it will produce by the end of the month. Does it produce enough new profit to justify the expense of researching, buying, shipping, installing, learning, and using a new machine?  

As a fellow fabricator with a shop full of automated equipment, I understand that painfully direct questions like this can diminish the emotion and excitement that defines a big purchase.  

But to let excitement obscure the most fundamental and basic consideration in our business – the bottom line profit – you can jeopardize all your previous investments of blood, sweat, and tears as well as your future prosperity

Comments? Please contact the author at  aaron@crowleysgranite.com .