In this conversation, Alexander Schuessler, founder of SmartEquip and president of its international group, discusses the complexity of making Return on Investment (ROI) calculations for contractors, dealers and fleet owners. Drawing on his years of experience, initially as an economist and then working in the equipment industry, Schuessler uses SmartEquip’s suite of SaaS parts procurement, product support and equipment lifecycle technology as an example of why it is critical for construction business owners to gain not just an understanding of why ROI is important when considering new purchases, partners or services – but also how to apply and quantify those metrics downstream after an acquisition or service agreement has been reached.
With more than 25 years’ experience on the cutting-edge of emerging construction technology, Alexander Schuessler understands the pressures on equipment owners today as they deal with a seemingly endless deluge of new products, services, and technology. The pressure to make the right decision and invest wisely can be overwhelming at times. But, Schuessler says, understanding and applying return on investment (ROI) metrics to any procurement decision can not only allay concerns at the time of purchase, but also give fleet owners a sound business case for making the decision, as well as an accurate picture as to what the downstream benefits a purchase decision will have for their business.
“Doing a formal ROI calculation can be an intimidating task for people looking at technology solutions,” Schuessler says. “But, at the end of the day, ROI comes down to simply making both a short-and long- term business case to bolster – or negate – a purchase decision.”
At its most basic level, calculating ROI for technology is no different than for anything else, in that you map the cost of implementation against resultant cost and revenue improvement. “Those are the only important factors you have to contend with in assessing ROI,” Schuessler explains. “And for you to achieve a positive ROI, you either need to find a way to reduce your net operating costs or improve your revenue.”
Costs associated with equipment service, repair, and maintenance, Schussler explains, includes parts expenditures, supplies, labor cost time, service technician training, tools, and so forth. “To reduce these costs, you look for technology solutions which enable you to purchase parts efficiently and at the right price, which make your service technicians more efficient, and which generally automate many of the laborious manual steps associated with keeping your fleet running.”
“Revenue improvements, in contrast, emerge when you can put equipment to use more – be it as a rental fleet, where you can charge for additional rental cycles, or as a contractor, where you can put it to work in additional jobs.”
“What is wonderful about the right technology solution,” Schuessler adds, “is that sometimes the two are naturally linked. This is true for our Procurement solution. For instance, by enhancing the efficiency of service technicians, you automatically improve equipment availability and your ability to grow revenue. The link is very straight forward: for every hour you save in service technician cost – by reducing the time it takes them to complete a repair, to locate and order the required parts, to finish up all associated paperwork – that machine will be available for that same additional hour. Service costs go down and revenue goes up, together.”
In other words, from an ROI perspective, SmartEquip Procurement is an especially powerful tool in that it affects cost and revenue using one set of drivers.
Interestingly, Schuessler says that the original concept for SmartEquip was centered firmly on improving parts and service workflow and efficiency, for both equipment owners and their suppliers – regardless of whether they were dealers, distributors, or manufacturers. In fact, from the very beginning, the company’s DNA was about making ROI quantifiable.
When SmartEquip first began, its founders recognized that while parts procurement accounted for only 1-2% of the financial cost of total expenditures for a typical fleet owner, as much as 80-90% of the number of transactions they would create in any given year involved the purchase of parts. And from an operational perspective, these were by far the most expensive types of purchase they faced.
