It only estimates recovery time under constant net benefit. It does not compare all cash flows or investment risk.
Try this with your own numbersFormula and worked example
Simple payback = investment / (extra monthly contribution − extra running cost)
| Input | Example |
|---|---|
| Equipment and setup cost | 15,000 |
| Extra monthly contribution | 2,000 |
| Extra monthly running costs | 500 |
| Calculated result | 10 months |
Choose reliable inputs
Plan materials, travel and crew time before committing to a price. For this carpentry shop calculation, use a completed job sheet, supplier quotes and a crew schedule and a consistent definition of one carpentry job.
- Timber: include the portion belonging to this carpentry job or reporting period, and record where the value came from.
- Hardware: include the portion belonging to this carpentry job or reporting period, and record where the value came from.
- Finishing time: include the portion belonging to this carpentry job or reporting period, and record where the value came from.
Use the same currency for every money input. Do not mix weekly costs with monthly revenue, or count the same expense in both an itemised cost and allocated overhead.
Is simple payback a full investment appraisal?
It only estimates recovery time under constant net benefit. It does not compare all cash flows or investment risk.
Excludes financing, taxes, resale value, and the time value of money.
What if this input changes?
If equipment and setup cost rises by 10%, this example changes by 1 months. This shows the effect of one change; it does not predict what will happen.
Open the calculator, save your baseline, then change the input supported by the least reliable estimate in your records. Compare both scenarios before committing to a price or capacity promise.