Energy and Smart Building Industry Blog

Use ROI to Align Your Budget with Strategy


Facility and energy managers often dread the onset of budget season. As spring approaches, they are calculating expenditures for fall. They move from project planning to spend allocation for new equipment, upgrades, and maintenance—and then must implement those projects before heading into another budgeting cycle. This post offers tips to help get you through the process more successfully.

Budget proposals that resonate with management

The process of projecting needs for the next fiscal year and clearly stating the reason for funds and resources is daunting. After all, budget requests cover multiple locations, including capital projects and projected maintenance costs. During fiscally tight periods, you may have to deal with a “let’s do more with less” mantra, causing you to push back things your buildings need. And of course, there is always dealing with senior approvals by people who lack the knowledge or experience to properly interpret budget justifications written from a maintenance engineer’s perspective. 

As you build your budget proposal, it is helpful to start by considering the alignment between your request and the current and future states of the entire company. The framework of your request should consist of stakeholder, functional, and technical requirements, as well as desired benefits. Each set of requirements and benefits should match the overall strategy and vision of the company. 

Successful budget requests connect to other areas of the company. For example, if your request includes an upgrade to a building automation system, you should consider your IT support team's impact and the systems they support. When making a case for expenditures, always consider the impact of your request on your company's customers. Budget requests that do not adequately cover keeping tenants in a comfortable working environment could cause a loss of revenue.

Whether it is a good or bad year, your budget request will compete with budget requests from other parts of the company. Resources are limited. When listing requirements, consider the short- and long-term strategies that your company has set for energy use and savings. While a short-term perspective emphasizes the recurring costs of operations and maintenance, a long-term strategy plans for capital expenditures and may seek to spread project costs over a multi-year span. 

Demonstrate your ROI awareness

As technologies and priorities change, your company’s leadership team may prioritize either conservation or cost. Companies that prioritize conservation often place a higher emphasis on meeting or surpassing energy savings benchmarks and reducing carbon footprints. With those priorities in mind, you can support your budget request with energy performance calculations and information about energy use, energy savings, and cost forecasts.

Priorities based on cost rely on Return-on-Investment (ROI) measurements and payback calculations. The ROI aligns the goals of a facility project with the business goals of your company. Your ROI should measure the probability that an investment in new equipment or maintenance programs will yield a return from a financial perspective. Your task involves showing how each investment--from the purchase of a new energy management system to maintenance costs--provides a solid return on investment.

Demand Management

Building data

The data gained from building energy management systems can help with calculating the costs associated with a location. However, you'll face the challenge of translating data obtained from HVAC, mechanical, lighting, electrical, and plumbing systems into information that a CFO can utilize. The ROI can be laid out in an easily recognized metric by showing profits and costs as a percentage. In turn, the ROI percentage works as part of the calculations for cost/benefit ratios and the payback period.

An ROI formula displays as:

ROI = (Net Profit - Cost of Investment / Cost of Investment) x 100.

If the net profit for a particular location equals $25,000 and the total amount of funds invested in the location equals $22,000, the ROI for the location equals:

ROI = ($25,000 - $22,000 / $22,000) x 100 or 13.6%

Your ROI statement can include an average cost of maintenance for a particular location based on a three-year total maintenance cost. A budget request for replacing a HVAC unit at the location should show the elimination of repair costs for that unit for one year. 

roi of building maintenance

Take a Different View of ROI

The art of building an ROI statement also includes additional factors. While “return-on-investment” seems to focus on profits and costs, avoiding downtime or improving tenant comfort through enhanced lighting systems can serve as another metric. Using lighting systems as an example, you can compare the tangible costs of electricity expenses and lighting system replacements with the savings produced through installing more efficient systems. The intangible factor occurs through the ability to provide better lighting that results in a better work environment for tenants. 

Along with dollar profits and costs, the combination of tangible and intangible factors allows you to illustrate how an enhanced lighting system responds to the company’s strategic goals. Your business case can show which lighting system provided the best operation and that the system produced benefits for a specific group of tenants. In addition, the benefits gained from installing the lighting system may help you determine the best deployment strategy for future projects and show that potential benefits exist by installing the enhanced lighting systems at other locations. 

Capex projects 

If your budget request includes capital budgeting projects, a CFO may request an ROI analysis as part of your business case for the project. Estimates for the payback period--or the number of years required to pay back the original investment--rely on the investment and cost values used to determine the ROI. While you can use ROI to project the value of a capital project from the start of the project through operation, capital projects that extend over multiple years may have lower actual ROIs. 

From a capital expenditure perspective, identifying equipment that reduces energy consumption improves the profitability of a location. Considering capital expenditures from an operational perspective also can assist your efforts to prioritize those costs by location and improve the ROI. As you break down costs by location, compare current equipment performance to new equipment that runs more efficiently and has a lower energy load. Then, connect your planning with other areas of the company by considering the impact of an equipment upgrade or replacement on construction or remodeling requirements. 

Building comfort and safety

Are you trying to stay on top of healthy building compliance reporting? Through our building technology software, we offer specific reporting that helps you do this, including reports on:

  • Zone Temperatures across locations 
  • Comfort Mitigation Program Performance 
  • HVAC Daily Diagnostics 
  • Call Tracker (hot calls)


Learn about these reports and also healthy building compliance recommendations and best practices in our ebook Shopper and employee comfort and safety in a COVID-19 environment. The guide is free and is an excellent resource to have on hand. 

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Additional Resources:

Using Building Analytics to Weigh Repairing vs. Buying New Equipment 
Don't Wait For Building Upgrades To Save Money On Energy
How To Test The Quality Of Your Preventative Maintenance

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