OpEx vs CapEx
As companies strive to become increasingly sustainable and energy efficient, one of the most important investments they can make is in lighting projects. Lighting accounts for a significant proportion of a company's energy consumption, so any effort to reduce these costs will be a have a direct impact on the financial result of the business.
Investing in energy-efficient and sustainable lighting solutions deliverslong-term savings , but it requires careful consideration in the decision to invest via OpEx or CapEx. While both approaches have advantages and disadvantages, understanding how they work and their implications for sustainability and energy efficiency can help companies make the right decision for their situation.
OpEx (Operating Expenditure) involves paying a fixed amount for services such as installation, maintenance, repair, etc, while CapEx (Capital Expenditure) requires a large upfront investment in equipment such as lighting, fixtures and their installation. Both options affect sustainability goals and financial business situation in the short and long term - but which one is the best?
What is OpEx?
Operational expenses (operating expenditure or OpEx) are the costs needed to run a business on a day-to-day basis, such as subscriptions, maintenance costs or office equipment. Employee wages also fall under the OpEx category.
Operational hubs are short-term expenditure and are usually used up in the tax year in which they are purchased. OpEx purchases are paid weekly, monthly or annually and are deducted from a company's budget when they are made.
OpEx expenses are tax deductible in the tax year in which they are incurred.
What is CapEx?
Capital expenditure (capital expenditure or CapEx) consist of expenditure to acquire or improve physical assets such as buildings, land, vehicles, equipment and other items. CapEx is the money used to purchase long-term investments, such as IT infrastructure upgrades or new production lines.
CapEx are not tax deductible in the same year they are incurred - instead, they have to be depreciated over the period of their useful life. CapEx expenses are usually purchased on credit or via a loan and require a large upfront investment.
OpEx and CapEx in (re)lighting projects
You have at lighting projects thus the choice of an OpEx or CapEx approach; at Project Nekton we distinguish here between Light as a Service (LaaS) and Light at Your Service (LayS).
Light as a Service or LaaS
With Light as a Service (LaaS) we offer a OpEx model where no prior major expenditure or capital investment is required. Here, the customer receives a turnkey service: from design and financing to installation and maintenance.
A flexible service term allows you to choose the solution that best fits your company's budget and energy efficiency and sustainability requirements. Moreover, you can benefit from lower energy consumption costs without having to invest a large amount upfront; the financing associated with energy savings is lower than your current operating costs.
Read more about Light as a Service and its benefits
Light at your Service of LayS (CAPEX)
In addition to the LaaS model, we also offer a traditional Capex-procurement model. We call this model Light at your Service or LayS.
We still provide a 100% outsourced service, but as a customer you invest your own capital for the system and then enjoy the guaranteed ROI of the new system.
Based on diagnoses, you manage installation and have insight into actual savings. Something goes wrong? Then our team will be intervening before you know it. We take away the customer's worries and take full responsibility for a continuously perfectly functioning installation.
Read more about Light at your Service and its benefits
What is the best choice in lighting projects?
In lighting projects, both OpEx and CapEx have advantages and disadvantages.
For companies that want to avoid significant upfront investments, the LaaS model offers a financially interesting and efficient solution. Customers can allocate capital to their core business instead of infrastructure upgrades, and have the choice of a flexible service term according to their own needs, fianancial situation and business objectives.
This makes it easier to manage cash flow, but also limits potential long-term savings.
A traditional CapEx approach may offer better control over the project timeline and budget, but requires higher initial capital expenditure. In the long run, greater savings are possible with accelerated ROI, by using our buying power, independent market knowledge and quick assembly.
Overall the ROI of CapEx takes longer to realise than OpEx.
The best option for each project depends on a range of factors, including available capital, timeframe, objectives and desired/expected ROI.
A trusted partner like Project Nekton helps to explore both OpEx and CapEx models in the most efficient and effective way for your business situation. Whichever solution you choose, we take away all worries and take full responsibility for a continuously perfectly functioning system!