The constant influx of new technology greatly impacts your practice assets. As new equipment comes on the market, previously purchased equipment can become outmoded all too soon. For this reason, I counsel practices to consider these following five tips:
Tip 1: Purchase your new equipment with cash.
“Why?” you may ask. One major reason to do a cash purchase is that it keeps the debt off the books. Secondly, you can negotiate better deals with cash in hand. Companies are more willing to give bigger discounts if they know you are ready to buy with cash.
Tip 2: Purchase equipment at the end of the quarter or, better yet, at the end of the year.
Timing is everything. I’ve sold medical equipment for many years and know firsthand that management is under pressure to meet sales quotas. By making your equipment purchase at the end of the quarter or at the end of the year, chances are very high that sales reps will be more willing to negotiate pricing. You’ll be surprised by how much you can save your practice in purchase costs.
Tip 3: Consider leasing in lieu of purchasing equipment.
Several companies will provide lease/purchase arrangements for equipment. A lease/purchase arrangement is a great option to consider if your practice cash flow is low and projections are unstable. In this scenario, the lease is for a definite period of time and the equipment is then returned. Remember, everything is negotiable.
Here’s an actual situation that underscores why leasing is an important option to consider. Several years ago, a physician asked me about acquiring a LASIK laser. I advised the physician to rent the laser for a few days per month and let the rental company remove the laser at the end of the rental period and then rent it again the next month. Sadly, he decided to purchase the laser for $500,000, paid the per patient card cost as well as the $50,000 annual maintenance cost. In just a few years, the $500K-laser was worth less than $100,000.
The lease/purchase option is great for obtaining equipment when funds are low for cash outlay and you need the equipment for testing and diagnosis. Make a down payment and pay the monthly payment.
At the end of the lease, you can purchase the piece of equipment for $1.00. The potential con to this approach is that you need to determine what the interest cost is above the equipment cost. That being said, don’t forget this potentially great solution: Your local banker and lease/purchase companies want your business, so explore options and negotiate with them to save your practice considerable dollars.
Tip 4: Consider purchasing used equipment with warranties.
If purchasing a new piece of equipment is not financially feasible for your practice, consider buying used equipment with the important caveat that you get a warranty. Usually, some companies will offer a 30-day warranty, but you should hold out for a 90-day warranty.
Tip 5: Sell your used equipment to a company that will refurbish and recertify it.
In my work, I often work with physicians who have used equipment that they no longer need. I suggest that they sell their used equipment to a company that will refurbish and recertify their equipment. Yes, that company will make a profit, but you will be able to get a recertified piece of equipment with a warranty at a much lower cost than a new one.
In summary, consider what fits the needs of your practice. You should look at all options that are available when acquiring equipment — new, refurbished, lease, lease/purchase, rent — and make sure to negotiate the best possible arrangement for your practice.
Don't miss the second article of this two-part series: Equipment Corner: Why Caring for Your Equipment is a Winning Investment Strategy
About the Author
Jim Hamlett, the owner of Asset Appraisal Service has been involved in the medical equipment and supply field in sales and management since 1981 and has been conducting asset appraisals of practices and ASCs for 28 years. He can be reached at 865.250.1855 or firstname.lastname@example.org.