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Improvement ROI Calculator

Payback, ROI and NPV.

When to use it

Use it to make the business case for an improvement. Enter the investment, annual saving, running cost and discount rate, and it gives payback, ROI, NPV and a cumulative cash flow chart.

What you enter

  • Investment ($)
  • Annual saving ($)
  • Ongoing annual cost ($)
  • Years to assess
  • Discount rate (%)

Net annual benefit = saving minus ongoing cost.

What you get

  • Result
  • Cumulative cash flow
  • Years

How it works

Payback = investment ÷ net annual benefit. NPV discounts each year at the rate above. Savings from time and waste reduction count only if the freed capacity is used or the cost actually leaves the budget.

How to use the Improvement ROI Calculator

The ROI calculator turns an improvement into numbers that management and finance understand.

Payback (months) = one-off cost ÷ monthly savings. ROI % = (annual savings − annual cost) ÷ investment × 100.

  1. Enter the time, scrap, inventory or other savings per period and their cost rates.
  2. Enter the one-off costs (materials, labour, equipment) and any ongoing costs.
  3. Use the result to rank projects and to report savings after implementation.

Worked example

A $3,000 fixture saves 20 minutes per shift on two shifts, five days a week, at $60 an hour. That is about $10,400 a year, a payback of about 3.5 months and a first-year ROI of about 247%.

Common mistakes to avoid

Frequently asked questions

What is a good payback period for a lean project?

Many businesses accept under 12 months; small kaizens often pay back in weeks.

Should freed-up labour count as savings?

Only if it is redeployed to valuable work, reduces overtime or avoids hiring. Otherwise call it capacity gained.

Can I include safety and quality benefits?

Yes. Add them as estimated costs avoided, but show them separately from hard savings.

Create your free accountUse the Improvement ROI Calculator online and download the Excel and print-ready PDF versions. Free, no credit card.

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