After all the benefits and potential savings have been looked at, it’s time to add them up and calculate an expected ROI.
Adding It Up
So how does one take this information and use it to answer all the pertinent questions, including the main one – how do all these benefits translate to cost-effective operation and, ultimately, ROI?
ROI isn’t an across-the-board standard. In fact, it can vary greatly based on factors like hourly labor rate, charge per pothole, and material costs, including mix and equipment like saws, grinders and compactors. Every entity will save in each of these areas. It’s just a question of how much – and how quickly – ROI is achieved. Though the timeline and final number will differ, a few basic calculations will help add it up.
The impact of time savings is best exemplified by looking at total patch count. When factoring in four minutes for the actual repair process and about two minutes for set up, clean up and travel in between, a typical crew performing a traditional technique can get about 10 potholes repaired per hour. Not bad, right? A spray patcher, figuring just one minute for the actual process and about thirty seconds to travel from one to the next (no equipment set up or clean up required), can repair about 40 potholes in an hour – feel free to take that long lunch break, the other guys will still be playing catch-up.
Next, there is the simple hourly labor rate. While this number will differ from one entity to the next, the bottom line is still the same: fewer workers to pay, less operating costs. Combine this with greater productivity and profit and you’ll find it adds up quickly, especially those charging a per-pothole rate.
For example, let’s say a contractor charges a rate of $25 per pothole repaired and pays workers $15 per hour. Using a traditional method and six workers, the total cost of labor per hour is $90. Figuring the crew can repair 10 potholes per hour, the gross profit per hour is $250. Now subtract the labor cost and net profit per hour is $160.
Take the same situation, only this time the company utilizes spray injection patching. Considering a productivity rate now of 40 potholes per hour, the gross profit per hour works out to be $1,000. Because only one worker is needed at $15 per hour, the net profit ends up at $985 per hour. And that’s only considering one hour in one day – imagine how the amount would add up for a company that repairs every day.
Beyond everyday working hours, this pay savings example is especially evident when looking at overtime hours. As a realistic example, consider a scenario in which a winter storm has struck. After the blizzard clears and the plows finally finish up, it’s 2:00 a.m. – and with the roads clean, it’s now apparent that some potholes need to be repaired before the morning commuter traffic hits. A company or department that offers spray patching is ideally equipped to handle this situation. From a convenience standpoint, it’s much easier to call one worker out to the site at 2:00 a.m. than to wake up six and get them out there quickly – not to mention all the equipment. Factor in overtime (or perhaps after-hours) pay and costs add up quickly. Imagine the difference of paying a single worker for just one hour of overtime versus six workers multiple hours of overtime.
Furthermore, the workforce utilization is a major benefit to consider and must be factored into the ROI calculation. Because only one laborer is required for pothole repair, the remaining workers can be utilized on other projects. This results in more efficient job completion – and, in some cases, a bonus for finishing ahead of schedule.
And the benefit is two-fold. Along with completing projects faster, larger jobs and a greater number of projects can be handled. Without hiring new workers and expanding the company or department, the entity is now equipped to take on additional jobs, and those of greater scope and size. This is especially valuable in a down economy when every company is trying to do more with less, and for government entities that are often on fixed budgets and don’t have the ability to hire additional laborers as workload increases.