To calculate ROI on an equipment purchase in Cookeville, Tennessee, estimate what the equipment saves or earns each month, subtract its running costs, and compare the result with its price and with the monthly payment. Rockbank Capital Group, a small-business funding broker in Cookeville, Tennessee, works a hypothetical restaurant cooler through by hand for Putnam County's 180 restaurants.
Why restaurants are the example
Putnam County had 180 restaurants and other eating places with employees in 2023, within 202 food service and drinking place employers (U.S. Census Bureau, County Business Patterns 2023). Few businesses buy as much hard-working equipment per square foot: ranges, fryers, hoods, dish machines and coolers that run all day. The same arithmetic works for a contractor's loader or a dental chair.
Three numbers to estimate first
- Monthly gain: money the equipment saves (less waste, lower repairs, less labor) or earns (more covers, a new menu line) each month.
- Monthly running cost: power, maintenance contracts, supplies the equipment consumes.
- Total price: the equipment, delivery, installation and any electrical or plumbing work it needs.
Be conservative with the gain and generous with the costs. A plan that only works with optimistic numbers is not a plan.
The formulas, by hand
- Net monthly gain = monthly gain minus monthly running cost
- Payback period in months = total price divided by net monthly gain
- Simple annual ROI = (net monthly gain times 12) divided by total price, as a percentage
These ignore taxes, depreciation and financing cost on purpose. They answer one question: does the machine earn back its price within its useful life?
A hypothetical walk-in cooler
Every figure here is invented for illustration. A Cookeville restaurant is quoted $15,000 installed for a new walk-in cooler to replace an old unit and a row of reach-ins. The owner estimates it will cut spoiled product by $350 a month and repair calls by $150 a month, and allow bulk buying that saves another $200. Extra power and a service contract add $100 a month.
- Net monthly gain: $350 + $150 + $200 - $100 = $600
- Payback: $15,000 / $600 = 25 months
- Simple annual ROI: ($600 x 12) / $15,000 = 48 percent
If the cooler should last well beyond 25 months, it pays for itself with years to spare. If the estimates are halved, payback stretches past four years; still worth checking against the cooler's expected life.
Now bring in the financing
Financing changes the cash timing, not the underlying return. The test is simple: does the net monthly gain cover the monthly payment? If the hypothetical cooler's $600 net gain exceeds the payment on the offer you are holding, it adds cash from the first month. If the payment is higher, the business funds the difference from elsewhere until the loan is paid off.
To get a payment for a given amount, rate and term, use the startup loan calculator with the price minus any down payment as the amount. Then compare. Equipment financing explains loans, leases and finance agreements, and a term loan may suit when the equipment comes with a larger fit-out.
Common mistakes
- Counting revenue the equipment does not actually create, such as sales you would have made anyway
- Forgetting installation, electrical work or a new hood that the equipment requires
- Choosing a finance term longer than the equipment's useful life
- Comparing offers by payment alone instead of total cost
Where to go next
Restaurant-specific funding questions are on restaurant financing, local sector figures on the Putnam County overview, and other articles on the Rockbank blog.
By Rockbank Capital Group ยท Updated