A Broken Rule of Thumb

I talk a lot about “broken” financial metrics on this blog and in my online and in-person workshops. Many of the metrics by which prospects evaluate expense-reducing capital projects fail to take into consideration the complexity of the investment at hand. One of the “rules of thumb” that is commonly used by decision-makers is the “maximum 2-year simple payback” rule. For whatever reason, too many people believe that an investment that takes more than two years to pay for itself is a waste of time.