Green Dealer Support


What is the ROI?
July 24, 2012, 10:18 am
Filed under: Going Green | Tags: , , ,

Dealers I talk to are always telling me that if they are going to do something “green” they would like to have a good Return On Investment (ROI).  In principal, we agree with the need for investments to have a good ROI. The challenge is always how to measure the ROI  By definition ROI is the performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. To calculate ROI, the benefit (return) of an investment is divided by the cost of the investment; the result is expressed as a percentage or a ratio. 

The formula is pretty straight forward:

Most Investments have some sort of direct $ cost and so that part may be easy to figure. It is the Gain from Investment that is often a challenge.

Take the replacement of an Incandescent 100 watt bulb with a 23 watt CFL. The needed wattage was derived from the n:vision Energy Efficient Lighting Chart. The cost should not be too hard to calculate, next time you are at Home Depot or your local hardware store, figure out the size and color rendition and any other unique characteristics and you will find the cost is $3-7 each. Now you know the cost, let’s call it $5.00.

The Gain from Investment becomes a little harder to figure. Here are some of the items to include:

  • The reduced use of electricity (the easy calculation)
  • The CFL bulb last more than 13 longer than it’s Incandescent replacement
  • The CFL generates a limited amount of heat (AC load)
  • In hard to reach location it requires replacement much less often
  • The image of your business projects to customers and employees
  • The impact on the environment

So the Gain from Investment is a little more complex but in most cases can still be calculated and become part of the ROI calculation.

But making decisions on the impact of ROI on being “green” frequently does not stop with an ROI study. For example in the above calculation some additional things to consider are:

  • What about disposal of CFL bulbs which contain trace amounts of mercury
  • Under some circumstances CFL perform differently than Incandescent bulbs
  • What about other alternatives such as LED
  • What about considerations for ways to keep lights turned off when not needed or harvesting natural light.

Decisions about being “green” are not just a matter of saying you want a good ROI.

Green Dealer Support focuses on helping car dealers become greener and sort through the sometimes complex issues related to the all important ROI.

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2 Comments so far
Leave a comment

Excellent points. ROI is much more complex to measure then just plugging in straight numbers. For instance, how many customers do you gain when they become educated that you are a green dealer? How do you measure the community good will? Sometimes you can’t just put a number on it, but the value is there.

Comment by Jerry

Jerry, Exactly and if dealers only take into account the straight numbers they may be missing out on the real value of taking some action. The good news is that all these other things that are harder to measure are also where the greates benifit may be. I believe sometimes a ultra conservative estimate can still become a signifiant factor especailly when accumulated with other potential returns. The good news is that the negative impacts are generally few.

Chuck Golden

Comment by greendealersupport




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