calculate-total-cost-of-ownership

name	calculate-total-cost-of-ownership
category	money
description	Compare full lifecycle cost across purchase, operation, change, risk, and exit. Use when headline price hides material implementation or long-term differences between options.

calculate-total-cost-of-ownership

Procedure

1. Define options, scope, currency, time horizon, tax basis, discount convention, and decision date.
2. Inventory acquisition, implementation, integration, migration, training, operation, support, change, compliance, downtime, and exit costs.
3. Separate fixed, variable, one-time, recurring, committed, avoided, and contingent amounts.
4. Use common volume, growth, staffing, inflation, utilization, and service assumptions.
5. Trace each input to a quote, contract, benchmark, transaction, owner estimate, or explicit unknown.
6. Model base, high, low, delay, growth, and exit scenarios.
7. Check for double counting, omitted internal labor, residual value, and mismatched timing.
8. Present ranges, major drivers, uncertainty, and break-even points alongside noncost outcomes.

Guardrails

• Do not treat vendor list price as total cost.
• Never hide internal labor, switching cost, or risk solely because it is hard to estimate.
• Label tax, accounting, and discount assumptions for qualified review.

Done

• A versioned TCO model compares options over the same scope and time horizon
• Sources, formulas, scenarios, uncertainty, and material exclusions are documented
• A reconciliation check confirms no unexplained gaps or double counting