When buying or leasing equipment, it’s important to avoid over-capitalising. There are a number of different ways to help minimise costs. By Kerryn Ramsey
When starting a new practice, the goal is to open with the least financial outlay and be as profitable as soon as possible. Undoubtedly, the biggest and most necessary outlay is for veterinary equipment. While some expenses are unavoidable, there are some ways to save money when buying equipment. The first thing to consider is whether everything needs to be brand new.
On the one hand, buying up-to-the-minute equipment makes the business run efficiently, offers more services, and impresses clients. But it’s expensive. On the other hand, second-hand equipment saves money but there are extra costs when it comes to servicing and upgrading models.
Every new practice needs to put together a financial package, taking into account what equipment they need and what’s available on the market today. Richard Curia of BOQ Specialist says it’s important to be realistic about the cost of capital equipment, whether you’re opening your first practice, a subsidiary practice or expanding.
“A vet wanting to start up a small practice with one or two treatment rooms, a vet nurse and a receptionist, will be looking at up to $350K to set up, depending on how high-end they would like to go. Of this, around $200K would be for an X-ray unit, ultrasound, autoclave, lab analyser and all the other essential equipment required to complete your day-to-day functions.”
These amounts vary depending on a practitioner’s area of interest. “I have seen many set-ups cost way more,” says Curia.
There are a number of different ways to save money when buying equipment. VetPartners CEO John Burns suggests signing with one particular supplier and getting them to set up the entire practice. “That can save you a considerable amount of money,” he says. “Suppliers are definitely willing to offer substantial discounts with that kind of arrangement.”
He also recommends searching for bargains, particularly online. “There’s a large market of second-hand goods and they’re significantly cheaper than new,” he says. “Ebay is a good option provided you know exactly what type of equipment you’re looking for and you purchase from a reputable seller.”
While some online deals may save money, Burns believes that building a good relationship with suppliers is a win-win situation. “For a new fit-out, you want equipment that isn’t going to fail because you won’t have the money to replace or fix it in the short-term,” he says.
While private practices can’t compete against bulk orders, Sam Bowden, CEO of United Vets Group, suggests thinking outside the box as a way of saving money when it comes to equipment. “A quality consulting table, for example, costs around $600 to $800. A colleague pointed out that it’s just a table made of stainless steel. He’d spotted one from Ikea for $120.”
Networking with your peers is a great way to pick up plenty of price-saving suggestions. “Simple, day-to-day questions can save you time, money and a lot of research and headaches,” says Bowden.
“Pretty good quality is fine for a lot of equipment—but not for high-tech items such as digital X-ray units. In these cases, the newer the better. There is no advantage in buying old technology.”—John Burns, CEO, VetPartners
Attending conferences and continuing professional education (CPE) sessions are also great ways to buy well-priced equipment. “When you’re at a conference, you can often negotiate a good deal—say, 10 per cent off,” says Burns.
There are also bargains at international conferences. “We recently went to a Las Vegas conference and spotted quality surgical loupes 40 per cent cheaper than what they cost in Australia,” he says.
While a business can save money by buying second-hand and lower priced items, this doesn’t work for high-tech equipment. “Pretty good quality is fine for a lot of equipment—but not for high-tech items such as digital X-ray units,” says Burns. “In these cases, the newer the better. There is no advantage in buying old technology.” This equipment is also a good generator of revenue as it is used regularly each week.
While it’s tempting to buy the latest whiz-bang products when setting up a practice, Sam Bowden believes that purchasing large equipment in the early stages is a false economy. “Most people spend a lot of money on equipment before they have built a client base and turnover. That can cause ‘debt hangover’.”
While a veterinary business can have healthy net profit, it also has large overheads. Care must be taken not to go deeply into debt by buying or leasing new equipment before the business can support it.
“It’s a bit of a balancing act but it’s a good idea to start with some less flashy equipment and be very selective when purchasing,” says Bowden. While it’s nice to be covered for all eventualities, if a piece of equipment is used infrequently, don’t buy it early on.
Bowden explains, “I see a lot of clinics with equipment that is underused. It’s a battle between the business mind versus the technical. The technical mind is saying, ‘I need to have that endoscope or ultrasound even though they are only used once every three or four weeks’. Delayed gratification—waiting until the business is generating plenty of revenue—usually makes good financial sense.”
Time is on your side. Once you’re up and running and earning a good healthy profit, then it’s time to think about purchasing the likes of ultrasounds, endoscopy units and hydro-therapy treadmills.
Sharing with colleagues is another way to minimise the cost of buying expensive equipment. If a nearby practice owns a CT scanner or ultrasound, a mutually beneficial arrangement can be set up between the two practices. Your patients can be sent there for scans without the need to purchase the specialised equipment. Likewise, if another practice employs a specialist, patients can be referred to them, provided you feel comfortable that they will send them back to you.
Working closely with specialists is also a way to minimise costs. “You charge the client the specialist’s fee and the specialist charges you directly,” says Bowden. “You then earn income from hospitalisation and anaesthetics.” This way you are still generating revenue while the patient gains the benefit of the specialist’s skill set.