Calculating the Cost of Doing Business: Money

"Money" is usually the thing most people think of when they are asked "How much does it cost you?" Some people look at the price tag and figure that that is what they are going to pay, so that is how much it costs. There are many other issues that should be taken into account to understand the true "Cost" of buying equipment. One of the first items that need to be looked at is the usable life span of what they are buying. A truck does not last forever and requires incremental payments to keep it running. An abbreviated list for a truck might look like:

• Purchase price

• Gasoline

• Oil changes

• Interest payments

• Cleaning

• Parts

• Tires

• Service outages

You can see that the true cost includes not only the moneys that you initially pay for the item, but also the moneys you will spend to keep it in working order and any revenue losses associated with the truck not being available. To get a good understanding for any purchase it is useful to create a list of costs associated with the total life of the purchase and then generate a cost per year or month as a better measure of the monetary cost of equipment or services.