A total cost of ownership template is a spreadsheet that totals an asset's lifetime cost: the upfront purchase, yearly running, maintenance and support, and disposal, less its residual value. Software is usually modelled over three to five years and equipment over five to ten.
Total cost of ownership (TCO) is what it really costs to own something, not just to buy it. The template starts with the one-off bill to get the asset in place, adds the costs that come back every year you use it, then adds the cost of retiring it and takes off anything you recover, so two options can be compared on the same basis.
Procurement and finance teams build a TCO before they sign anything with a multi-year tail, such as software, equipment, vehicles or an outsourced service. Software is normally assessed over three to five years and industrial equipment over five to ten. It is also the cost half of a make or buy analysis, where building in-house is compared with buying from a supplier.
The point is to stop the cheapest quote winning by default. A tool with a lower licence fee can cost more over three years once implementation, staff time and exit costs are counted.
One-off spend to get the asset in place: purchase price or set-up fee, delivery, installation, implementation and first training.
What it takes to run the asset each year: subscriptions, staff time, energy or fuel, consumables, hosting, space and insurance.
Routine servicing, upgrades and repairs, vendor support contracts, and the productivity lost while the asset is down.
Decommissioning, recycling, data export and exit fees, minus whatever the asset can still be sold or salvaged for.
Ready to use in Excel and Google Sheets. Fill it in, save it, reuse it.
Name the options, the users or volume, and the horizon. Use the same horizon for every option.
Pull prices from quotes, staff costs from finance and effort estimates from IT or operations.
Enter each cost as one line, tagged acquisition, operating, maintenance and support, or end of life, in the year it is paid. Year 0 holds one-off upfront costs.
Total each option, then discount future years if finance uses a cost of capital. Check which lines drive the gap.
After signing, log actual costs against the model each year so the next TCO is more accurate.
Start with one row per cost and five columns: Cost line, Category, Year 0, Year 1, Year 2, Year 3, Total. Add discounting and per-user figures once the totals are agreed.
The example below models a 200-user software platform from Brightline Software over three years. The subscription is only 53% of the total; set-up, admin time, support, downtime and the exit cost make up the rest. The download runs to Year 5; for equipment with a five to ten year life, add year columns before Total.
| Cost line | Category | Year 0 | Year 1 | Year 2 | Year 3 | Total |
|---|---|---|---|---|---|---|
| One-off set-up fee | Acquisition | 6,000 | 0 | 0 | 0 | 6,000 |
| Implementation partner | Acquisition | 24,000 | 0 | 0 | 0 | 24,000 |
| Data migration | Acquisition | 8,000 | 0 | 0 | 0 | 8,000 |
| Initial training | Acquisition | 5,000 | 0 | 0 | 0 | 5,000 |
| Subscription licences, 200 users | Operating | 0 | 48,000 | 50,400 | 52,920 | 151,320 |
| Internal admin, 0.25 FTE | Operating | 0 | 15,000 | 15,000 | 15,000 | 45,000 |
| Integration middleware | Operating | 0 | 3,600 | 3,600 | 3,600 | 10,800 |
| Premium support plan | Maintenance and support | 0 | 4,800 | 5,040 | 5,292 | 15,132 |
| Configuration changes and upgrades | Maintenance and support | 0 | 2,000 | 2,000 | 2,000 | 6,000 |
| Downtime, staff hours lost | Maintenance and support | 0 | 1,500 | 1,500 | 1,500 | 4,500 |
| Data export and exit | End of life | 0 | 0 | 0 | 7,500 | 7,500 |
| Less residual value | End of life | 0 | 0 | 0 | 0 | 0 |
| Total cost of ownership | 43,000 | 74,900 | 77,540 | 87,812 | 283,252 |
Illustrative figures for a fictional vendor. Licences and support rise 5% a year. Software has no resale value, so residual value is 0.
Works in Excel and Google Sheets. Headers in row 1, cost lines in rows 2-30, totals in row 31.
| Col | Header | Entry or formula | What it does |
|---|---|---|---|
| A | Cost line | Text | One cost per row, never a bundle |
| B | Category | Drop-down: Acquisition, Operating, Maintenance and support, End of life | Feeds the category summary |
| C | Year 0 | Currency | One-off costs paid before go-live |
| D:H | Year 1 to Year 5 | Currency | Costs in the year they are paid |
| I | Total | =SUM(C2:H2) | Lifetime cost of this line |
| J | Share of TCO | =I2/$I$31 | How much of the total this line drives |
| C30 | Less residual value | Negative number in the final year | Deducts resale or salvage value |
| C31 | Year total | =SUM(C2:C30) | Copy across to I31 for the full TCO |
| K | Source | Text | Quote, contract, payroll or estimate |
A SUMIF on column B shows where the money goes.
Brightline example, 3-year total of 283,252. Formula for each bucket: =SUMIF(B2:B30,"Operating",I2:I30).
Orbit Analytics quoted 42,000 a year against Brightline's 48,000, so it looked 12.5% cheaper. Its heavier implementation and higher admin effort reverse that over three years. Run the same exercise for every shortlisted vendor before the price negotiation starts.
| Category | Brightline Software | Orbit Analytics | Difference |
|---|---|---|---|
| Acquisition | 43,000 | 68,000 | -25,000 |
| Operating | 207,120 | 198,000 | 9,120 |
| Maintenance and support | 25,632 | 22,500 | 3,132 |
| End of life | 7,500 | 12,000 | -4,500 |
| 3-year TCO | 283,252 | 300,500 | -17,248 |
Illustrative. Difference = Brightline minus Orbit; a negative figure means Brightline costs less on that line.
Illustrative. Discounting moves both totals down but keeps the ranking, because most of Orbit's extra cost lands in Year 0.
Licences are usually the largest line, so a fair price matters. For software, compare the quote against pricing benchmarks before you lock the TCO, and read more on SaaS TCO and ROI.
The one-line formula suits assets whose yearly costs stay flat; the year-by-year sheet in Part 1 handles price rises. Use the discounted total when finance compares options with costs in different years, and keep the discount rate on an Assumptions tab so every option uses the same one.
TCO = acquisition + (operating + maintenance + support) x years + disposal - residual value. On a Quick TCO tab: acquisition in B2, yearly operating, maintenance and support in B3:B5, years in B6, disposal in B7, residual value in B8.
| Measure | Formula |
|---|---|
| Quick TCO, flat yearly costs | =B2+(B3+B4+B5)*B6+B7-B8 |
| Total cost of ownership, Part 1 sheet | =SUM(C31:H31) |
| Discounted TCO (rate in Assumptions!B2) | =C31+NPV(Assumptions!B2, |
| Average annual cost (3-year horizon) | =SUM(C31:F31)/3 |
| Cost per user per year (users in Assumptions!B4) | =SUM(C31:F31)/3/Assumptions!B4 |
| Next year's licence with uplift (rate in Assumptions!B5) | =E6*(1+Assumptions!B5) |
Illustrative. Equipment usually sits in the five to ten year range; software in the three to five year range.
Illustrative. The real annual cost is almost double the licence line on the quote.
The software example compares building an internal tool with buying Brightline. Building is cheaper on paper, but it ships six months later and ties up two engineers. For physical goods, the break-even formula below shows the volume at which making beats buying.
| Category | Make: build in-house | Buy: Brightline Software |
|---|---|---|
| Acquisition (build or roll-out) | 90,000 | 43,000 |
| Operating (licences, hosting, admin) | 18,000 | 207,120 |
| Maintenance and support (0.5 FTE, security reviews) | 135,000 | 25,632 |
| End of life | 0 | 7,500 |
| 3-year TCO | 243,000 | 283,252 |
Illustrative. Make saves 40,252 over three years but goes live six months later.
Fixed cost to make in B2, variable cost per unit in B3, expected volume in B4, supplier price per unit in B5.
| Line | Formula |
|---|---|
| Cost to make | =B2+B3*B4 |
| Cost to buy | =B5*B4 |
| Saving from making | =B5*B4-(B2+B3*B4) |
| Break-even volume | =B2/(B5-B3) |
| Factor | Question to answer | Favours |
|---|---|---|
| Core capability | Is this part of what makes us different? | Make |
| Time to value | Can we wait for a build, or do we need it this quarter? | Buy |
| Volume certainty | Will volume stay above break-even for the whole horizon? | Make |
| Supplier risk | Is there more than one capable supplier? | Buy |
| Skills and capacity | Do we have people free to build and maintain it? | Depends |
Licences are the biggest TCO line. Spendflo's pricing benchmarks show what similar companies pay.
See pricing benchmarksThe number of years the TCO covers: usually three to five for software and five to ten for industrial equipment.
Costs paid before or at go-live, such as set-up and implementation. They are not discounted.
The yearly return your company expects on its money, used to convert future costs to today's value.
What the asset is worth at the end of the horizon, deducted from TCO for equipment or vehicles.
Costs that do not change with volume, such as a flat licence or a support contract.
Costs that move with usage, such as per-seat fees, overages, energy or consumables.
| Measure | Formula |
|---|---|
| Total cost (TC) | =TFC+TVC |
| Total fixed cost (TFC) | =TC-TVC |
| Total variable cost (TVC) | =Variable cost per unit*Quantity |
| Average fixed cost (AFC) | =TFC/Quantity |
In the Brightline example, the set-up fee, implementation, middleware and exit cost are fixed. The licences, support plan and admin time scale with the 200 users, so adding 50 users raises those lines by roughly a quarter while the fixed lines stay put.
Three to five years for software, five to ten for equipment, and the same for every option.
Multiply hours by a loaded hourly rate from finance, because internal effort is a real cost.
Add the yearly price increase from the contract, or ask the vendor to cap it.
A quote, contract clause or estimate on every row lets reviewers challenge the right number.
Compare real spend with the model each year so the next TCO starts from evidence.
The quote is often half the TCO or less, as the Brightline example shows.
A three-year total against a five-year total makes the shorter one look cheaper.
Data export, termination fees and overlap with a replacement belong in the last year.
Upfront costs are paid today, so leave them out of the NPV range.
Enter the horizon, discount rate, user count and price uplift on the Assumptions tab.
Copy every priced line from the vendor quote into its own row and category.
Add staff time, integration effort and exit costs, then run the hidden-cost checklist.
Read the comparison tab, check which lines drive the gap and attach the sheet to the business case.
Harbour Facilities pays Kestrel Data 30,000 a year and was offered 24,000 a year by a rival. Over three years the rival saves 18,000 on licences, but migration (12,000), retraining (4,000) and running both tools for two months (5,000) add 21,000. The switch costs 3,000 more, so the team negotiated the renewal instead. Illustrative figures.
Every part on this page, in Excel and Google Sheets, with the examples filled in.
Three-year horizon. Watch seat minimums, renewal uplifts, integration fees and admin time, and include data export at exit.
Five to ten year horizon, matching the asset's life. Add energy, insurance, servicing and downtime, then deduct resale value at the end.
Contract-term horizon. Add the internal team that manages the supplier, transition costs in and out, and any volume bands in the price.
Best for full comparisons and discounting.
Best when IT, finance and the budget owner each add lines.
One tab with formulas and no sample data.
$3.7B in software spend processed through Spendflo, at 30% average savings.
See your savingsA TCO template shows what an option really costs over its life and stops the lowest quote winning by default. Once the decision is made, the biggest lever left is the price you negotiate and how you manage the renewal.
Quick answers to what people ask most about the total cost of ownership template.
List every cost of the asset in the year it falls, total the rows and years, then subtract any residual value at the end. The download does this with =SUM across each row and year, plus a discounted version using NPV for options whose costs land in different years.
TCO equals acquisition costs, plus yearly operating, maintenance and support costs multiplied by the number of years, plus disposal costs, minus residual value. The download includes it as a one-line Excel formula, =B2+(B3+B4+B5)*B6+B7-B8, next to the year-by-year sheet.
It is what something really costs you over the years you own it, not just the price on the quote. The download shows this with a software example where the first-year licence is 48,000 but the three-year cost is 283,252.
Yes, the total cost of ownership workbook on this page is a free download in Excel and Google Sheets. It costs each option line by line and year by year, and adds a vendor comparison and a make or buy tab.
You can download it free from this page in Excel or Google Sheets, with the TCO sheet, vendor comparison, formulas, make or buy tab and hidden-cost checklist included. A blank one-tab version is also in the download for quick single-option estimates.
Sourcing and RFx
Purchase orders
Contracts
Vendor management
Budgets and business cases
Procurement
Accounts payable
Purchasing
Software buying
Supply chain
For software, Spendflo's pricing benchmarks and managed negotiation bring the biggest TCO line down, and renewal tracking keeps it there. Spendflo has handled 15,000+ agreements.
Enter your work email and we'll unlock every format.
Didn't start, or need another format? Pick one below.
Google Sheets: upload the file to Google Drive, then open it with Google Sheets.
