Figure the true cost of equipment

Did your practice buy any toys at the end of the year to take advantage of IRS code section 179? Or are you budgeting for new equipment in 2006? Before purchasing an ultrasound, surgical laser, or updated lab equipment, ask yourself: Is it profitable for the clinic to own the equipment? Does the clinic have the expertise to properly use the equipment to obtain diagnostic/surgical results?

Be sure to determine the true cost before you sign on the dotted line. Take that $40,000 ultrasound machine, for example. The sales representative can get you the unit for $850 a month for a five-year term and claims it'll be a profit center for your clinic. Just do two procedures a week at $125, and you'll be above the break-even point, right?

But in reality, the $850 is far from the true cost. For example, you may also pay:

Added together, your estimated $850 monthly payment could go as high as $1,416. Can you still make a profit?

Once you buy, track the number of procedures you do and the revenue generated every month. We just did a one-year analysis on new equipment and discovered we weren't meeting our goals. If we'd checked monthly, we would've picked up the trend right away and adjusted by pumping up our marketing efforts or perhaps raising fees.

So do your homework, calculate the true cost of owning equipment, and track your usage and profitability to see whether or not your equipment's living up to expectations.

Dr. Jeff Rothstein

Veterinary Economics Editorial Advisory Board member Dr. Jeff Rothstein, MBA, is the president of The Progressive Pet Animal Hospitals and Management Group, which owns and operates hospitals in Michigan and Ohio.