PrintSense
The price of print: evaluating total cost of ownership for your business
Alan Pettit Head of Sales PrintSense
Total cost of ownership (TCO) refers to the overall cost of a purchase, including the purchase price as well as any operating costs and expenses over an asset’s life span. TCO is a calculation that can help potential buyers make
informed decisions about spending, giving a realistic estimate of costs to determine whether you’re making a worthwhile purchase. If you’re choosing between two items and one has a lower TCO than the other, this means it will be better value for money overall, even if the upfront costs are higher. The TCO can be applied to anything. To get a better
understanding of how it can work in practice, let’s apply it to the scenario of buying a car: You’ve settled on car you want to buy second-hand; you
know the make, model, colour and age that you’re looking for. You’ve found it advertised with a private seller – it’s got some minor issues and signs of wear and tear, but the price looks great. You’ve also found a newer model in slightly better condition at a car dealership, and the dealer is off ering a monthly PCP price that includes a three-year warranty with servicing and repairs, but at a far higher price than what you’d be paying the private seller.
If you choose to buy from the private seller, you’re getting
the best upfront cost. It’s a no brainer, right? Wrong. When considering ‘how much will this cost me? Am I
getting a good price?’, we can make the mistake of disregarding all the indirect, long-term costs of the car that can add up. Maintaining the ‘cheaper’ car may eventually outweigh the cost of the more expensive option, meaning the bargain you thought you had bagged wasn’t actually a bargain at all. T e measured (albeit slightly less fun) approach is to work
out the TCO before buying the car. T e formula TCO = F + V can be applied to pretty much anything to work out exactly how much something is going to cost you or your business over a set time. TCO = F + V is where F represents the fi xed costs of the
car. T ese would include your MOT and tax in addition to the agreed purchase amount (regardless of whether this is a lump sum or repayment plan). We call these fi xed costs because no matter how much you use the car, that is how much you’ve committed to own and use the car and from the moment you sign on the dotted line, that cost is fi xed. V represents your variable costs. T ese are the things that
might vary depending on your usage of the car. For example, the amount of fuel needed or the cost of servicing along with any parts that might need replaced such as tyres, brakes, clutches etc. Using the TCO calculation, the car buyer can see whether
paying a little extra and getting the servicing included in the fi xed price is a better deal than the lower upfront cost with no servicing included.
ALL THINGS BUSINESS | 36
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