You should budget approximately 2% to 5% of your total replacement asset value (RAV). This metric, known as %RAV, is calculated as a proportion of your facility's value and spending. %RAV is a guiding KPI that aids facility and maintenance managers. It helps determine when it is appropriate to spend money on maintenance, versus when it is time to buy a new asset all together.
Use Equipment Cost as Your Baseline
One of the less obvious facets of maintenance cost is equipment cost, which involves anything from spare parts and consumables to entirely new assets.
When we look at equipment cost, we're also looking into how much it costs to have these pieces of equipment serviced (whether that be by the facility maintenance team or by the equipment vendor). It also accounts for the lifespan of the asset, since maintenance costs will probably go up as the equipment gets older. Lifespan and equipment cost are therefore inverse functions, meaning the equipment budget within a maintenance budget constantly evolves.
Maintenance as a Percent of RAV
One way to quantify equipment cost is to look at maintenance cost (MC) versus the replacement asset value (RAV) of your equipment (expressed as a percentage, %RAV). Essentially, we are comparing how much it costs to make repairs, perform routine maintenance, and replace parts on an asset to how much it costs to replace the entire asset wholesale.
Note: The world-class standard for %RAV is anywhere from 2%-5%.
A %RAV between 2 and 5 percent allows maintenance planners to estimate the amount of money necessary for equipment maintenance because that amount of money shouldn't exceed the facility's %RAV.
Some important things to note:
- %RAV isn't a hard and fast rule for every industry. This means that some industries need to budget more money than others for their equipment because their equipment naturally costs more or requires more intensive maintenance. That's okay - just make sure you understand a world-class %RAV for your industry.
- It's possible to have a very low %RAV and still be inefficiently performing maintenance. For example, a low %RAV could be achieved by cutting all but one maintenance technician in a facility. This is obviously not a good solution. As such, tracking %RAV over time helps a facility understand how its maintenance costs need to change (and how much more or less money they need to allocate to equipment costs).
- It's also important to continually evaluate the lifespan of your equipment. %RAV should never be a static figure, which means your equipment costs can increase or decrease over time in a 20-year plan. Account for these things by understanding the specifics of your assets.
FAQs
Generally, equipment owners should expect to budget 2-6% of their total replacement asset value (RAV) as their routine maintenance fund. This formula called %RAV is flexible depending on the equipment type and the operating conditions involved in your work.
How much should you budget for maintenance? ›
Some specialists recommend setting aside 1% to 2% of the purchase price of your home each year for routine maintenance projects such as roofing repairs, sewer updates, or new appliances — each of which can cost several thousand dollars. If 2% seems too much, consider starting with less and working your way up.
How to calculate equipment maintenance cost? ›
By dividing the new cost of the machine by its expected life in hours and multiplying by 70 percent or 100 percent, you arrive at an estimate of its maintenance and repair costs per operating hour. Note that this is an average over the life of the machine.
How much money should you have for maintenance? ›
1% rule. First up is the so-called “1% rule," which, unsurprisingly, says that homeowners should set aside 1% of your home's purchase price annually for home maintenance. * For example, if you paid $500,000 for your home, you'd budget $5,000 per year for maintenance.
How much should I allow for maintenance? ›
This aligns with Zillow's recommended benchmark for maintenance costs at 1-4% of total home value. For the January 2023 average UK home sold for £295,903, a 1-4% maintenance budget equals £2959 to £11,836. The £3000 national average fits within this typical range for older homes requiring greater upkeep.
What is the 50 30 20 rule? ›
The 50-30-20 budget rule states that you should spend up to 50% of your after-tax income on needs and obligations that you must have or must do. The remaining half should dedicate 20% to savings, leaving 30% to be spent on things you want but don't necessarily need.
What is the 1% rule for maintenance? ›
The 1 percent rule is a good standard because it's so easy to remember. Just put aside 1 percent of the total purchase price of your home for home maintenance repairs. A $250,000 home would require you to save $2,500 annually, or about $209 per month.
How do you calculate average maintenance cost? ›
This is known as “cost of ownership”, which follows the formula below: Cost of labour + Cost of materials + Suppliers (outsourcing) + Energy + Other Expenses. Please note that this formula only considers routine maintenance activities, minor repairs, and the cost of parts.
What is a good maintenance ratio? ›
Many maintenance departments aim for 80% preventive maintenance and 20% reactive repairs. According to the Federal O&M Best Practices Guide, a company can save between 12-18% using a preventive rather than reactive maintenance strategy.
What is the maintenance cost? ›
Maintenance costs are the costs associated with keeping a business running. These include the physical parts of your business and all the people and systems that keep it running.
Examples of maintenance costs include simple electrical repairs, bulb replacement, paint touch-ups, pool cleaning, lawn care, etc. Capital expenditures, on the other hand, involve major repairs, replacements, and upgrading of components, and such activities require time, effort, and money to achieve.
What is maintenance amount? ›
Maintenance is the amount payable by the husband to his wife in case she is unable to maintain herself either during the existence of the marriage or upon the separation of the marriage. Maintenance includes various provisions like provision of residence, maintenance of wives, maintenance of children etc.
How to calculate maintenance charges? ›
Per sq, ft method is extensively used for the calculation of the maintenance charges for the societies. On the basis of this method, a fixed rate is levied per sq ft of the area of the flat. If the rate is 3 per sq ft and you have a flat of 1000 sq ft then you will be charged INR 30000 per month.
What is a good budget for car maintenance? ›
AAA encourages motorists to save at least $50 a month to cover routine maintenance and unexpected repairs. But because maintenance and repair costs can vary widely depending on vehicle make and model as well as location, Experian suggests setting aside closer to $100 per month to minimize unnecessary debt.
How much does it cost to run for maintenance? ›
In terms of weekly mileage, a maintenance schedule of 10 to 15 miles a week for 5k/10k training is perfectly adequate. A suggestion for minimal maintenance mileage is 3 miles, two times a week, with one slightly longer weekend run of 4 to 5 miles.
What are the costs of doing maintenance? ›
Maintenance expenses are costs incurred when performing routine actions to keep an asset in its original condition. Examples of maintenance costs include simple electrical repairs, bulb replacement, paint touch-ups, pool cleaning, lawn care, etc.
