A vegetable grower is considering replacing their old tractor with a new one. There are lots of jobs going on around the farm and they feel that a modern tractor will offer greater benefits. However they are worried whether the extra capital required to replace the tractor is worth it.
The grower is also not sure whether it might be worth keeping the old tractor to do some of the odd jobs that they get contractors for, because the timing of operations means that they could not use the new tractor in both roles.
A business case is a formal process of planning to provide the decision-maker with useful information to help them make a decision.
You will have greater confidence in your decision, if you use a formal process and make sure you count the right things the right way, whilst also considering the things that cannot be counted.
The attached business case has been developed as an example. You can use the method described here to help you with your own decisions by inserting your figures into the Tractor Calculate - spreadsheet.
Business Case : Tractor Replacement
The decision for this grower is : do I replace the old tractor and keep the contractors ? or do I buy a new tractor, keep the old one and save on contractors ?
Key Variables :
The key variables that will determine if it is worth replacing an old tractor with a new one, is just how much it will cost versus what productivity benefits you can capture.
- Cost of capital
- Productivity benefits
- Operating costs
- Contracting costs
- Unmeasurable benefits and costs
- Occupational Health and Safety
- Comfort and ease of use
- New technology
When considering keeping the old tractor in addition to the new tractor, the key variable is the cost of the contractor.
This factsheet has been facilitated by Horticulture Australia Limited (HAL), in partnership with AUSVEG, through the National Vegetable Research and Development Levy. The Australian Government provides matched funding for all HAL R&D activities.
This business case was produced and edited by RMCG (ph: 03-9882-2670). RMCG produces these business cases with the expectation that users exercise their own skill and care with respect to its use. Before relying on or altering any business practices, users should carefully evaluate the accuracy and relevance of the information for their purpose and should obtain appropriate professional advice relevant to their particular circumstances.