09-04-2022, 02:49 PM
Is this a bad investment and how to show it?
<!-- SC_OFF --><div class="md"><p>A company that I maintain software for wants to get rid of their software and they gave me an offer to buyout their current installations. It is a legacy system so there is no new installations. Just maintaining existing one. The software will need to be maintained for at least 3-5 more years.</p> <p>NOTE: the amounts written here are not real, but the ratio to other amounts is. </p> <p>Currently I get paid by the hour for $100 to maintain. I spend on average 2-3 hours a month on it. So I make, lets say, $300 from this job. Client pays a $500 a month retainer that includes 3 hours of work. Every additional hour is $200. So far they have managed to stay in the 3 hour budget. The company has offered me $11,250.00 to buy out the rights to it. This would mean that after 22 months I will break even (this is Return On Investment?). But, since I had to invest time, 3 hours a month, to maintain it, that would mean that during those 22 months I lost $300 a month for a total of $6600. After those 22 months I will make $200 extra. To recoup the lost months profit of $6600 at $200 it would take me an additional 33 months (Does this has a name or is this this ROI?). To to make actual money that I would not normally get from the Company, it would take me 55 months or 4.5 years. </p> <p>Am I correct in this calculation? What are the names for the parts of the calculation? I want to sound like I know what I'm talking about so that they can't use <em>fancy words</em> to confuse me into thinking it is actually a good deal .</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/codebreaker101"> /u/codebreaker101 </a> <br/> <span><a href="https://www.reddit.com/r/investing/comments/x4zsd1/is_this_a_bad_investment_and_how_to_show_it/">[link]</a></span> <span><a href="https://www.reddit.com/r/investing/comments/x4zsd1/is_this_a_bad_investment_and_how_to_show_it/">[comments]</a></span>
<!-- SC_OFF --><div class="md"><p>A company that I maintain software for wants to get rid of their software and they gave me an offer to buyout their current installations. It is a legacy system so there is no new installations. Just maintaining existing one. The software will need to be maintained for at least 3-5 more years.</p> <p>NOTE: the amounts written here are not real, but the ratio to other amounts is. </p> <p>Currently I get paid by the hour for $100 to maintain. I spend on average 2-3 hours a month on it. So I make, lets say, $300 from this job. Client pays a $500 a month retainer that includes 3 hours of work. Every additional hour is $200. So far they have managed to stay in the 3 hour budget. The company has offered me $11,250.00 to buy out the rights to it. This would mean that after 22 months I will break even (this is Return On Investment?). But, since I had to invest time, 3 hours a month, to maintain it, that would mean that during those 22 months I lost $300 a month for a total of $6600. After those 22 months I will make $200 extra. To recoup the lost months profit of $6600 at $200 it would take me an additional 33 months (Does this has a name or is this this ROI?). To to make actual money that I would not normally get from the Company, it would take me 55 months or 4.5 years. </p> <p>Am I correct in this calculation? What are the names for the parts of the calculation? I want to sound like I know what I'm talking about so that they can't use <em>fancy words</em> to confuse me into thinking it is actually a good deal .</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/codebreaker101"> /u/codebreaker101 </a> <br/> <span><a href="https://www.reddit.com/r/investing/comments/x4zsd1/is_this_a_bad_investment_and_how_to_show_it/">[link]</a></span> <span><a href="https://www.reddit.com/r/investing/comments/x4zsd1/is_this_a_bad_investment_and_how_to_show_it/">[comments]</a></span>