Midwest Mechanical - An HVAC Blog

A Cost Benefit Analysis for Upgrading your HVAC System

Published: March, 30 2016

Written by Tony Ponzo

Upgrading or replacing a commercial HVAC system often gets put on the back burner because of the large investment required. After all, quality equipment, expert design and installation all come with a price tag.

However, looking at the value of upgrading an HVAC system can override procrastination. If the long-term value outweighs the shorter-term cost, then it makes good business sense to upgrade.

Let’s explore a cost/benefit analysis for upgrading or replacing a commercial HVAC system.

Why consider upgrades or replacements in the first place?

At its core, HVAC is a comfort business. When tenants or employees are uncomfortable, it creates pain points that must be relieved. One of the ways to do that is to carry out equipment upgrades and replacements as needed.

The risk of this approach is that in some unfortunate cases, replacements are required immediately due to catastrophic failure.

While we’re proud to handle emergency repairs better than anyone else in the Chicago area, it shouldn’t be your preferred service option. An emergency repair usually means that maintenance has been neglected or recommended upgrades that should have been performed months or years earlier have been ignored. Plus, emergency repairs can come with a high price tag.

Approaching system maintenance and upgrades strategically and proactively saves money in the long-run. Devising a plan that maximizes the lifespan of equipment ensures optimal performance while eliminating costly downtime caused by failures.

What benefits can you expect to see from proactively upgrading your HVAC equipment?

Taking a proactive stance on HVAC system upgrades and replacements offers a number of valuable benefits for any commercial building or manufacturing facility:

  • Improved comfort - Tenants, employees, and customers enjoy a more pleasant environment.
  • Increased production - Happier, more comfortable employees are more productive.
  • Increased property value - For commercial buildings that rely on income from satisfied guests and tenants, quality HVAC systems can significantly increase property value.
  • Increased sales - Retailers that maintain a comfortable shopping environment entice customers to stay longer and spend more as a result.
  • Improved product quality - In the case of clean room production or other environments that require optimal air quality, a perfectly functioning HVAC system improves the quality of the finished product.
  • Increased equipment longevity - As components are strategically and proactively upgraded, the entire system is able to run optimally, extending its lifespan
  • Reduced operating costs - Strategic upgrades promote energy efficiency and optimized production, reducing operating expenses
  • Controlled capital expenditures - Enhanced equipment longevity and performance lead to greater ROI for HVAC-related capital expenditures and a more predictable operating budget

In short, proactive HVAC system upgrades and maintenance saves money and expands the return on investment, while allowing system improvements to be budgeted and strategically planned, all of which benefit your business.

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How do you decide if the benefits outweigh the costs?

Many building managers and owners suffer from a condition we call “cost myopia.” Once the price tag is in front of their eyes, that is all they see, and it clouds their judgment, resulting in less-than-ideal decisions for the business’s long term success.

To prevent short-termism from controlling the decision-making process, stakeholders need to focus on their bottom line. While everyone’s bottom line is specific to their situation, here a few points to consider when evaluating HVAC needs:

  • HVAC equipment can provide service for 15 to 30 years or more. This long-term commitment means a quality design may take precedence over cost.
  • Lifetime operating costs usually far exceed initial equipment costs. Incremental investments upfront can result in long-term operating cost reductions.
  • Create a budget and plan for upgrades and replacements ahead of time. Planning improves the likelihood that the replacement or upgrade will meet your needs in the long run.
  • Identify how HVAC is integral to your business or how it aligns with your business goals. Consider the value a good HVAC system has for your operation in real-world dollars and cents.

Consider an operational assessment to see how an HVAC upgrade would impact your “bottom-line”. Our team of experts can provide a thoroughly researched business case outlining recommendations and their impact on cost of ownership, building performance and property value.

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