Not that I'm aware of. What you're describing sounds more like a reinvestment into the asset as a conscious business decision rather than a solid way to establish an M&r budget. There are a number of ways to establish a good baseline budget, but using a percentage of profit is not one that I'm familiar with. The reason being, I suppose, is that profits and margins play a determining factor in a number of business decisions so setting a rule of thumb percentage of that margin aside for a budget would only leave you with that much less in other places. In addition net profit and EBITDA are typically calculated after the budgeting process has been completed. Maintenance and repair is an expense on the balance sheet, and although we may be splitting hairs I think it is still important to note that the establishment of a maintenance budget for your business comes before profits are realized. On the other hand, all things being equal, if an increase or decrease to a maintenance budget are planned then naturally that may impact profitability over time, but I think profit impact is typically a lagging indicator of budget performance and not one normally used to make budget increases or decreases simply because profits have grown or shrunk.
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Mike Kriebel
Maintenance Manager
Shearer's Snacks
Guys Mills PA
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Original Message:
Sent: 08-14-2024 03:06 PM
From: Derek Brown
Subject: Ratio Of Asset Profit To Maintenance Spend
Hi all, I am just curious if anyone would know if there is a rule of thumb for a production asset where a certain % of profit syphoned off back into the maintenance of said asset, i.e 1% of any profit made is spent on its maintenance budget.