{"id":2634,"date":"2018-04-22T20:00:00","date_gmt":"2018-04-22T20:00:00","guid":{"rendered":"https:\/\/mpulse.cloud.fruitionqa.com\/calculate-total-cost-ownership-tco-cmms-software\/"},"modified":"2025-07-30T06:27:47","modified_gmt":"2025-07-30T06:27:47","slug":"tco-analysis-for-cmms","status":"publish","type":"post","link":"https:\/\/mpulsesoftware.com\/blog\/cmms\/tco-analysis-for-cmms\/","title":{"rendered":"How to Calculate the Total Cost of Ownership for Your Assets"},"content":{"rendered":"<p>When it\u2019s time to buy or <a href=\"https:\/\/mpulsesoftware.com\/blog\/maintenance-management\/repair-or-replace-it\/\">replace an asset<\/a>, it\u2019s easy to focus purely on the initial purchase price. But digging deeper could save your organization a lot of time and money in the long run.<\/p>\n<p>The key is to calculate both the direct and indirect costs, which is called Total Cost of Ownership (TCO). TCO is the full cost of an asset over its life cycle or \u201ccradle to grave\u201d\u2014a number that might look very different from the initial purchase amount.<\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_81 counter-flat ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/mpulsesoftware.com\/blog\/cmms\/tco-analysis-for-cmms\/#Calculating_Total_Cost_of_Ownership\" >Calculating Total Cost of Ownership<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/mpulsesoftware.com\/blog\/cmms\/tco-analysis-for-cmms\/#Finding_TCO_Data\" >Finding TCO Data<\/a><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"Calculating_Total_Cost_of_Ownership\"><\/span>Calculating Total Cost of Ownership<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Total cost of ownership is a simple equation.<\/p>\n<p class=\"rteindent1\">TCO = [Initial Cost] + [Operating Expenses] + [Maintenance Costs] + [Downtime Costs] + [Production Costs] \u2013 [Resale Value]<\/p>\n<ul>\n<li><strong>Initial Cost:<\/strong> The amount of the initial purchase.<\/li>\n<li><strong>Operating Expenses:<\/strong> Cost of installation, testing, and training, plus energy usage and insurance (if applicable).<\/li>\n<li><strong>Maintenance Costs:<\/strong> Cost of repairs and maintenance, including both PMs and unexpected repairs.<\/li>\n<li><strong>Downtime Costs:<\/strong> Labor costs of delayed work, lost production, lost revenue, etc.<\/li>\n<li><strong>Production Costs:<\/strong> Output levels or production levels as well as environmental costs.<\/li>\n<li><strong>Resale Value:<\/strong> The amount that could be recouped by selling the equipment after a certain timeframe.<\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"Finding_TCO_Data\"><\/span>Finding TCO Data<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Let\u2019s look at an example.<\/p>\n<p>Kai needed to buy his maintenance shop a new generator. He looked at three\u2014and the price of one was about 20% higher than the others.<\/p>\n<p>It should be an easy decision, right? Pick the least expensive one. But Kai knew he had to dig deeper by looking closer at the TCO for each one.<\/p>\n<p>While the TCO equation seems easy, getting that information isn\u2019t always simple. Kai had a good start within his MPulse Maintenance Software. First, he found the existing data for his current compressor. Then he could compare that information against the new compressors and estimate the operating expenses, projected downtime costs, and production costs by pulling some key reports.<\/p>\n<p>The maintenance costs and resale value took a little more research. After comparing the manufacturer\u2019s recommendations, he discovered the more expensive generator required less maintenance. Additionally,\u00a0its resale value was significantly higher\u2014making its TCO lower than the others.<\/p>\n<p>Kai\u00a0knows it would be hard to calculate the TCO without his CMMS software. His numbers would be based more on assumptions than hard data.<\/p>\n<p>It\u2019s likely your purchasing or accounting department is familiar with TCO, so tap into that resource if it\u2019s available to you.<\/p>\n<p>Have you found a surprising result from your TCO calculations? <a href=\"https:\/\/mpulsesoftware.com\/contact\/\">Contact us<\/a> to learn how MPulse can help.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>When it\u2019s time to buy or replace an asset, it\u2019s easy to focus purely on the initial purchase price. But digging deeper could save your organization a lot of time and money in the long run. The key is to calculate both the direct and indirect costs, which is called Total Cost of Ownership (TCO). TCO is the full cost of an asset over its life cycle or \u201ccradle to grave\u201d\u2014a number that might look very different from the initial purchase amount. Calculating Total Cost of Ownership Total cost of ownership is a simple equation. TCO = [Initial Cost] + [Operating Expenses] + [Maintenance Costs] + [Downtime Costs] + [Production Costs] \u2013 [Resale Value] Initial Cost: The amount of the initial purchase. Operating Expenses: Cost of installation, testing, and training, plus energy usage and insurance (if applicable). Maintenance Costs: Cost of repairs and maintenance, including both PMs and unexpected repairs. Downtime Costs: Labor costs of delayed work, lost production, lost revenue, etc. Production Costs: Output levels or production levels as well as environmental costs. Resale Value: The amount that could be recouped by selling the equipment after a certain timeframe. Finding TCO Data Let\u2019s look at an example. Kai needed to buy his maintenance shop a new generator. He looked at three\u2014and the price of one was about 20% higher than the others. It should be an easy decision, right? Pick the least expensive one. But Kai knew he had to dig deeper by looking closer at the TCO for each one. While the TCO equation seems easy, getting that information isn\u2019t always simple. Kai had a good start within his MPulse Maintenance Software. First, he found the existing data for his current compressor. Then he could compare that information against the new compressors and estimate the operating expenses, projected downtime costs, and production costs by pulling some key reports. The maintenance costs and resale value took a little more research. After comparing the manufacturer\u2019s recommendations, he discovered the more expensive generator required less maintenance. Additionally,\u00a0its resale value was significantly higher\u2014making its TCO lower than the others. Kai\u00a0knows it would be hard to calculate the TCO without his CMMS software. His numbers would be based more on assumptions than hard data. It\u2019s likely your purchasing or accounting department is familiar with TCO, so tap into that resource if it\u2019s available to you. Have you found a surprising result from your TCO calculations? Contact us to learn how MPulse can help.<\/p>\n","protected":false},"author":6,"featured_media":2635,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"content-type":"","footnotes":""},"categories":[12],"tags":[],"class_list":["post-2634","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-cmms"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v27.0 (Yoast SEO v27.2) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>How to Calculate the Total Cost of Ownership for Your Assets<\/title>\n<meta name=\"description\" content=\"Discover why calculating the Total Cost of Ownership (TCO) is crucial when making asset purchase decisions.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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