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How Much to Spend on a Computer System
Steve Epner, Brown Smith Wallace, Consulting Group
Budgeting for a new computer system is always difficult. It is not like buying new shelving for the warehouse, floor planning new equipment or adding a service truck.
While you do not want to overspend, it is equally dangerous to spend too little.
After receiving your new system, the hardware will be worth very little on the open market and the software will be ineligible for resale. Its only value then is as an operating tool for the dealership.
Consider any new system as an operating expense, just like salaries. Calculate the cost over a 5-year period. For example, a $150,000 system (hardware and software) will cost under $3,000 per month (based on a fair market buyout for the hardware and interest rates). This is less than the fully loaded cost of a clerk (salary, benefits and overhead allocation).
If the system allows you to grow and provide additional information without the need to hire a new person for the 5 years, it can be easily justified. Any additional gains would be extra benefits for the organization.
When doing the final calculation of what you can afford, start by calculating what it would cost you to hire the personnel to do the same level of work. You may be surprised at how much automation you can really afford.
