Buy Now vs Wait
Should you buy that software or equipment now, or wait? A time-value comparison for boards and managers.
The assumptions
3-year comparison period. Purchase price $50,000. Annual maintenance $5,000. Current workaround cost $25,000/year in staff time. Discount rate 5%. Price escalation 3% per year if you wait. Productivity gain from day one if purchased now.
What the spreadsheet says
Buying now saves approximately $18,000 over 3 years compared to waiting 12 months — primarily because of the foregone productivity gains and price escalation.
What the spreadsheet cannot say
This model assumes you actually realise the productivity gains. If the software requires 6 months of implementation before benefits appear, the gap narrows significantly. It also ignores the option value of waiting for a better product.
The question
You need new software or equipment. The question is not whether to buy, but when. Does waiting cost you more than buying now?
What might change the answer
- Implementation time — long rollouts erode the benefit of buying early
- Technology cycle — if a major upgrade is due in 12 months, waiting may be smarter
- Cash flow — even if the NPV favours buying now, you need the cash to do it
- Contractual commitments — existing contracts may constrain timing