Taking the right approach will make the difference between success and failure.
Before approaching management about purchasing new equipment, become thoroughly prepared to demonstrate financial advantages the equipment would bring to the practice.
Of course, you’ll want to point out the benefits it could provide. But, ultimately, solid evidence of the financial rewards is what will make the hardware show up in your hospital.
Keep a log of missed opportunities…
Begin making preparations at least a month before you plan to present your request to management. As you’re seeing patients, keep a written, verifiable list of missed opportunities to use the proposed equipment. Include in the list a conservative estimate of the income that could have been generated by having the equipment in house.
Ask a fellow doctor to help you by keeping a similar list. At the end of the month the list could be twice as long and the potential income doubled.
The data you collect must indicate there is a market for what the piece of proposed equipment does and that there is sufficient patient volume to justify the purchase.
Show up prepared to present ways the equipment will solve the problem of lost income…
Gather all the data
This information will include hard facts, so keep it short and don’t let your presentation become boring.
Still, it will include some very practical stats like size and electrical requirements. Imagine how embarrassing it would be to discover there’s no space in the hospital to accommodate the equipment.
Have a list of features and benefits
Here’s where you’ll need to give an explanation of what it does (features) and how it improves workflow and patient care (benefits).
Project evidence of positive return on investment (ROI) potential…
Now you’re ready for the knockout punch. Back it all up with hard numbers showing how the equipment will pay for itself and continue generating profits into the future.
The complexity of calculation formulas for ROI on equipment can vary widely. Since you’re a veterinarian, no one expects you to be a CPA. So, keep it simple, conservative, and as factual as possible.
The following is a basic list of items to use for calculating ROI on equipment.
Gross revenues collected
Less: Financing costs (loan payments)
Less: Direct costs of operating the equipment (labor, training, materials)
Less: Indirect costs of operating the equipment (utilities, maintenance)
Equals: Net profit (or loss)
To convert those numbers into a percentage ROI, use the simple formula below. ROI=
Net profit = Investment Revenue – Investment Cost
For example, let’s say you want the practice to purchase a veterinary surgical laser and loan payments would be $765 / month for 5 years. That would mean financing costs total $45,900 over a 5-year payout.
Let’s say direct and indirect cost estimates equal $110 / month, or $6,600 over the five years.
Finally, you have evidence that this equipment could produce 30 laser surgeries each month at $105 each and 21 “lumps and bumps” excisions at $45 each. Then, the additional income would be 30x$105 + 21x$45 = $4095 per month investment income. That’s $245,700 over a 5-year period.
Investment revenue (5 years) = $245,700 – Investment cost (5 years) = $52,500= Net Profit of $193,200 divided by $52,500 = 3.68 which equals 368% ROI.
If the decision makers still aren’t convinced, use this interactive calculator to provide more information like net present value, payback in years, and internal rate of return.
Taking steps to present convincing reasons to purchase additional equipment yields benefits to the health of the practice and its patients. That looks like a win-win proposition to me.
If you have any questions about this blog, please feel free to contact me on my cell at 804.833.0585 or via email at email@example.com for further details. All communication is CONFIDENTIAL.