Veterinary Equipment Can Pay for Itself and consultants advise looking at the return on investment when weighing a big-ticket purchase. Manufacturers and consultants advise looking at the return on investment when weighing a big-ticket purchase.
Manufacturers and consultants advise looking at the return on investment when weighing a big-ticket purchase.
Lynn M. Tiffany
Investing in new clinic equipment can quickly improve or create a profit center.
“Equipment is an investment instead of an expense,” says Jamie Renner, veterinary products market manager at Midmark Corp. of Versailles, Ohio. “Every business owner knows the best investment is in yourself. If veterinarians think in those terms, they are helping their own bottom line.”
Vendors can be very helpful to veterinarians, practice owners and managers by providing an analysis of the return on investment, says Shelley Johnson, founder of Company 42 LLC, a veterinary management solutions business in Winchester, Va.
“A vendor is motivated to sell equipment,” Johnson notes. “Good business relationships with vendors who help your practice shop for the right equipment may be beneficial. When a high-end purchase is made and installation has been completed, who will help troubleshoot any issues? Some vendors and distributors are excellent at this.
“A veterinarian or practice manager should understand where to get data needed to make decisions for the practice,” she says. “Practice management software should be able to extract data on the number of services performed for an exact period of time if the practice has been utilizing service codes and inventory codes.”
Johnson advises veterinary practices to anticipate how often equipment will be used and whether its usage will surge under a marketing plan or a change in client demographics.
Renner notes that the economy has been hard on veterinarians and clients alike.
“But veterinarians are still investing in their clinics and getting good return on that investment,” he says.
Calculators are available to help big-ticket shoppers determine the overall and annualized return on investment.
“Some equipment can pay for itself in as little as a year, some as little as six months,” Renner says.
He cites a mobile dental high-speed system that retails for $6,000 to $7,000.
“If you charge $300 for a full dental procedure, add one more dental procedure a week and you are paying the equipment off in six months,” he says. “From there on out, you’ll be making more profit.”
The return on X-ray equipment depends on patient needs, Renner says.
“X-ray images themselves are a charge, then consider pathology and findings to determine the final charge to the customer,” he says.
Any time savings tied to a new piece of equipment may reduce clinic labor costs. For example, direct digital dental images are ready instantly and a full mouth set within 10 minutes. Film image processing, on the other hand, can take 30 minutes or longer, not including retakes.
Practice management software may determine the maximum revenue based on fee schedules.
“It is the nature of a veterinarian to place animal health first,” Renner says. “Veterinarians sometimes forget they are in business to make a profit. When they pay off equipment or save money on a procedure, they don’t have to charge their customers less. They can increase their profit margin.”
Any equipment investment should be structured to grow revenue and decrease costs, says Bethany Hoppenthaler, marketing and brand manager at Shor-Line of Kansas City, Kan., which makes animal holding, treatment and surgical equipment.
“How can new equipment add profit centers to a clinic?” Hoppenthaler asks. “New tables and sinks could add grooming services, and lift exam tables could promote staff safety and efficiency.
“Consider equipment construction, quick cleanup and quality materials to add efficiency, longevity and value to your purchase,” she says. “For instance, housing equipment should be considered a long-term investment. And know that anything made of stainless steel has a long life.”
The lease or loan terms need to be considered when weighing the return on investment, says Johnson, the veterinary consultant. She also suggests factoring in:
• Warranty, insurance and security costs.
• Support and technology upgrades.
• Human resources and training.
• Additional equipment needed, such as a computer.
• Disposal of retired equipment.
• Downtime for implementation/integration.
Mark Hazarabedian, director of marketing at Animage LLC in Pleasanton, Calif., says advanced diagnostic imaging equipment can translate into more revenue opportunities for companion animal veterinarians. Animage develops and manufactures radiological imaging equipment, such as CT scanners, for companion animal veterinary practice and research.
“Purchase price is not the end of the calculation,” Hazarabedian says. “The costs of installation–room modification, operation, and maintenance–must be considered.”
Wayne Dickinson, a sales manager at Fujifilm Medical Systems of Valhalla, N.Y., says the return on investment for the latest digital imaging equipment is good.
“New practices don’t need to incorporate darkroom facilities as is needed for film processing,” he says. “Because computed radiography is relatively self-contained, that clinic space can be repurposed.”
Digital imaging equipment can provide a new revenue source, he says.
“Clinics have the capability to create a CD of animals’ X-ray images, which can be offered to pet owners for about $5,” he says. “For practices performing an average of five studies per day, that translates into $25 per day in new revenue, multiplied by the number of days that X-rays are taken. Often, the revenue will cover the monthly lease payment.”
Because of the quality and the number of images taken with today’s CR and DR systems, veterinarians can charge more per study, Dickinson says.
Vendors remind veterinarians that equipment is not just tables, tools and scanners.
“For most clinics, the entire cost of modular cabinetry can be depreciated over five years. There’s a huge tax advantage to this,” Midmark’s Renner says.
U.S. veterinarians considering a capital purchase would do well to learn about the Section 179 tax credit, which aims to encourage businesses to buy equipment and invest in themselves, Renner says.
According to Section179.org, the Internal Revenue Service tax code allows businesses to deduct the “full purchase price of qualifying equipment and/or software purchased or financed during the tax year.”
“Veterinarians who buy or lease a piece of qualifying equipment and put it into service by Dec. 31, 2011, can deduct the full purchase price from their gross income,” Renner says.
“Veterinarians aren’t just concerned with animal health; they are running a business,” he stresses. “Taxes are a cost of doing business. But why pay the government when investing in your practice can reduce your tax bill?”