Project economics
CAPEX, OPEX and ROI: how to build a business case and sensitivity scenarios without relying on sales promises
A supplier's payback figure is a claim, not a result. This guide shows how to build the numbers from your own baseline, label every assumption and find the few inputs that decide whether the project still makes sense.
Short answer
Build the case from your measured baseline, not from a brochure. Total the full installed CAPEX (equipment, freight, duties, installation, utilities, civil work, commissioning, training, spares and contingency), estimate the change in annual OPEX and the annual benefit you can measure, then calculate payback and simple ROI. Run at least three scenarios — expected, cautious and adverse — and change one input at a time to see which assumption the result depends on. Ask suppliers to confirm the inputs they control in writing, and treat anything they cannot document as unproven.
Why shouldn't a supplier's payback figure be your business case?
A supplier's payback estimate usually assumes full utilisation, ideal yield and the supplier's own view of your costs. None of that is dishonest; it is simply not your data. Your business case has to survive your real volumes, prices, staffing and downtime.
The useful question is not “what payback does the supplier quote?” but “which of my inputs decide the result, and how confident am I in each one?”
Key point: Use supplier figures as inputs to verify, never as the conclusion.
What belongs in full installed CAPEX?
Equipment price is often only part of what you will spend before the line runs. List every cost needed to reach accepted operation, and mark which ones each quotation includes.
| Cost item | Often excluded from quotes? | Where the number should come from |
|---|---|---|
| Equipment and controls | Rarely | Normalised supplier proposals |
| Freight, insurance, duties and local taxes | Often | Incoterm stated in the quote, customs adviser, forwarder |
| Installation and supervision | Often | Supplier scope plus local contractor quotes |
| Civil, structural and building work | Usually | Local engineering estimate |
| Utility connections and upgrades | Usually | Measured site capacity versus demand |
| Commissioning, testing and training | Sometimes | Contract test protocols and training plan |
| Initial spares and tooling | Sometimes | Recommended spares list priced by supplier |
| Permits, design and owner's costs | Usually | Buyer's own estimate |
| Contingency | Always | Buyer's choice, stated as a percentage and reason |
Key point: Compare suppliers on the same installed scope, not on equipment price.
How do you estimate the change in OPEX?
Estimate operating cost per year for the new situation and, where relevant, for today. The difference is what the project changes. Use your own tariffs and wage rates, and state the date and location they apply to, because energy, labour and material prices vary by country and over time.
- Energy and water per unit of output, from measured consumption or supplier data you will test at acceptance
- Labour hours per shift and the roles needed
- Consumables, packaging and cleaning materials
- Planned maintenance, service contracts and expected spare-parts use
- Waste, rejects and product losses
- Insurance, software licences and other recurring fees
How do you define an annual benefit you can actually measure?
A benefit counts only if you can measure it the same way before and after. Typical examples are extra saleable output, lower losses, lower energy or labour per unit, or avoided costs such as outsourcing. Write each benefit with its metric, unit, baseline value, target and measurement method — the same format as your acceptance criteria.
Key point: If a benefit cannot be measured, leave it out of the base case and mention it separately.
Which formulas should you use for payback and ROI?
Keep the planning formulas simple and transparent, so anyone reviewing the case can reproduce them. Discounted methods such as net present value are better for long-lived assets; use them with your finance team's discount rate.
Annual net benefit = annual benefit − change in annual OPEX Simple payback (years) = full installed CAPEX ÷ annual net benefit Simple ROI over N years (%) = (annual net benefit × N − CAPEX) ÷ CAPEX × 100
These are planning estimates only. They exclude taxes, financing costs, inflation and currency effects unless you add them explicitly.
How do you build sensitivity scenarios?
Illustrative structure — enter your own values
Define three coherent cases. In each, write down why the inputs could take those values — for example, a slower ramp-up, a lower selling price or a higher energy tariff. Then vary one input at a time to see how far the result moves.
| Input | Adverse | Expected | Favourable | Source of the value |
|---|---|---|---|---|
| Full installed CAPEX | Expected + contingency used | Your estimate | Expected − savings confirmed in writing | Normalised quotes and local estimates |
| Utilisation in year 1 | Slow ramp-up | Your plan | Fast ramp-up | Demand plan and commissioning schedule |
| Annual benefit | Lower price or volume | Your plan | Higher price or volume | Sales data and contracts |
| Energy and labour cost | Higher tariff or rates | Current tariff | Lower consumption proven at test | Utility bills, wage data, test results |
Key point: The input that moves payback most is where you need the strongest evidence.
How do you find the assumption that breaks the project?
For the two or three most sensitive inputs, work out the break-even value: the level at which payback exceeds your limit or net benefit falls to zero. If the break-even is close to your expected value, the project is fragile and needs better evidence, a different scope or contractual protection.
- Set a maximum acceptable payback or minimum return before you look at quotes
- Calculate the expected case
- Change each key input until the result crosses your limit
- Record how far that is from your expected value, in percent
- Decide what evidence, test or contract clause would reduce the uncertainty
Which inputs should suppliers confirm in writing?
- Guaranteed throughput, yield or quality values and how they are measured
- Energy, water and compressed-air consumption at stated conditions
- Recommended spare parts and service intervals with prices and validity
- Installation, commissioning and training scope and duration
- Delivery time and the conditions it depends on
- What happens if a guaranteed value is not reached at acceptance
Link the guaranteed values to your acceptance tests, so the numbers in your business case are the numbers you check on site.
Sensitivity check (planning estimate)
Enter all four values. Nothing is saved or sent. The tool shows payback and simple ROI for your expected case and when CAPEX or the annual benefit moves by ±20%.
Enter all four values to see results. No result is shown from incomplete data.
Planning estimate only — not a quote, supplier offer or credit assessment. Excludes taxes, financing, inflation and currency effects. Same currency for all values.
Free, optional tools
Use the framework on your own, or with these free tools. Nothing here commits you to anything.
- CAPEX calculatorA planning estimate of total installed cost.
- OPEX calculatorPlanning estimate of annual operating cost.
- ROI calculatorPayback and return from your own inputs — a planning estimate.
- Total cost of ownership calculatorCompare whole-life cost under your assumptions.
- Debt capacity calculatorPlanning view of what cash flow could service — not a credit assessment.
- RFQ BuilderTurn the brief into one structured request.
Sector-specific projects
Global B2B Group covers cross-sector industrial projects. Single-sector projects are handled in depth by the group's specialist platforms.
Frequently asked questions
Is a simple payback calculation enough for a decision?
It is a useful first screen. For long-lived assets or large projects, add a discounted method such as net present value with your finance team's discount rate, and always show the sensitivity scenarios beside the result.
How much contingency should we include?
There is no universal figure. It depends on how complete the design is, how many interfaces there are and local conditions. State your percentage and the reason for it, and reduce it as quotes and site data become firm.
Should we use the supplier's energy consumption data?
Use it as an input, but ask for the measurement conditions and make the value part of the acceptance test where possible. If it cannot be tested, use a cautious value in the base case.
Does the ROI calculator give a financing or credit decision?
No. The calculators produce planning estimates from the values you enter. Lenders and other financing providers make their own assessments.
Can Global B2B Group validate our business case?
Our team can help structure the RFQ so suppliers provide comparable cost and performance data. The business case, its assumptions and the investment decision remain yours.
Turn your assumptions into comparable quotes
Start with the free CAPEX, OPEX and ROI calculators. When the inputs are clear, a structured RFQ asks every supplier for the same cost and performance data, so your scenarios rest on comparable numbers.
Managed RFQ support applies to projects from USD 250,000. Buyer tools are free; no price, availability, financing or outcome is guaranteed.
Sources and frameworks
Next in this series: From RFQ to a verified operating result: stages, tests and acceptance
Overview framework: Start with the Outcome: A Practical Framework for Better Agrifood Procurement
General procurement guidance only. World Bank documents are cited as useful methodology frameworks; they are not binding on private buyers. Confirm legal, technical and regulatory requirements with qualified advisers.
