We all love new toys. And like most things we want, we can rationalise a need for them quite easily! But when making that next purchase decision, it’s important to ask yourself a few questions.
Can I justify this purchase?
The best reason for buying new equipment is upgrading something that’s holding you back. To use a non-veterinary example, I’ve just replaced my 8 year old laptop that was incredibly slow, would take hours to update and had lost the ability to use the touch mouse pad. Buying a new one was a no brainer. I’m now using a fast, touch screen laptop and my output has never been quicker. It’s the same with your veterinary equipment. If your existing equipment is temperamental and doesn’t meet your needs; then great. But if it’s not actually preventing you from obtaining a diagnosis or is used rarely, then what are you really bringing to the table? Are you really going to do more of a particular procedure to justify the expense? Check your PMS data to see how many you’ve done in the past year.
Have I done a cost benefit analysis?
Cost benefit analysis is an essential part of every equipment purchase. You need to fully understand what costs are associated to your purchase, both direct and indirect. It’s never just the figure shown in the brochure! This will include the cost of the equipment, maintenance fees/subscription fees but also cost of training, lease or loan interest, increased utility costs, increased insurance costs, staff time, etc. Not to mention the depreciation/amortisation on your P&L.
Now you’ve done that, you can determine the benefits that the equipment will bring. A new revenue stream, increased output, increased fees, reduced inventory or labour costs (e.g. no more fixer and developer, disposal costs and saving on staff time was the clincher when Digital X-Ray came along!). Define what those figures are.
Now put them together. You will be able to see when you’re likely to break even and what the new kit stands to contribute over time. If you’ve never done one before it’s a real eye opener (and has stopped me from buying things in the past).
Is the equipment the most pressing thing you need to spend money on? Is everyone behind it?
It’s always a good idea to utilise vet meetings or practice meetings to talk about equipment needs. If none of your vet colleagues are interested in the area that you’re considering an equipment purchase, it’ll be much harder to get a return on investment. What is most pressing in your staff’s opinion? There may be something you’ve overlooked that your nursing or support staff may be desperate for. Buying a piece of new equipment without considering other stakeholders in the practice can be a drain on morale. For example, if you’re organising training on your new ultrasound when the paint is cracking off the walls in reception, it may not be received well by everyone. Broadcast what your budget is to your staff. This is a great way of showing that you’re receptive to their needs whilst on boarding them to the exciting new machine that they can all use and grow their expertise. You may well be able to please all parties.
Ultimately, remember that running a business in an industry with low profitability makes these types of decisions very important. You have to balance the need to deliver the best care to your patients with the need to be in the black. The point of owning a business is to generate positive cash flow, so whatever decisions you make, make sure that there is a tangible benefit to your bottom line as well as benefit to the pets under your care.