Q&A: To buy or not to buy equipment

Q: I want a digital radiography system. How do I decide if it's financially worth it?

Ideally, equipment will pay for itself in two years or less, says Veterinary Economics Editorial Advisory Board member Denise Tumblin, CPA, president of Wutchiett Tumblin and Associates in Columbus, Ohio. If you want to pay for the equipment within two years, divide the total cost of the equipment by two, and then again by 52 weeks. This is the amount of revenue you'll need to generate each week just to cover the cost of the equipment. Then, divide the amount of revenue you'll need to generate each week by your fee per radiograph to determine the number of images you'll need to complete each week. For example, if the equipment costs $100,000, and your fee for a digital radiograph is $138, you'll need to generate approximately $1,000 per week (seven to eight radiographs per week) to recoup the cost of the equipment in two years.

These calculations cover just the cost of the equipment. Other factors to consider include the cost of labor per radiograph and the desired return on your investment (ideally 12 percent to 18 percent). For example, if each radiograph takes an average of 30 minutes to complete and requires two technicians at an hourly rate of $20 each (salary, benefits, and employer payroll taxes), and you target a 15 percent return on the equipment, you'll need to generate approximately $300 of additional revenue per week. You can accomplish this by performing three additional radiographs per week or raising your radiography fee (or, ideally, a combination of the two).