Time is Money - Delaying Cost Savings Measures Means Permanently Lost Income

I’ve heard this saying so often that it has lost some of its impact on me yet it remains as true as ever. After recently completing an energy efficiency study for a building owner where all parties agreed that certain actions would result in this 600,000 SF building immediately reducing their electricity expenditures by 20% there seemed to be no sense of urgency. Given this building is currently spending $2.00/SF per year on electricity, taking this action would save them $20,000/month. Unlike a one-time saving such as a discount on a purchase, we’re talking about operational savings where they will achieve the savings each and every month if and when they implement the prescribed action. So for every month they delay they forever lose the opportunity to save those dollars.

Let's say the improvements that would generate savings are delayed 6 months. That would represent $120,000 in lost savings.

Using a 5% discount rate, the present value of that lost 6 months of $20,000/month in operational savings would be $101,513.