Today's Veterinary Business

OCT 2018

Today’s Veterinary Business provides information and resources designed to help veterinarians and office management improve the financial performance of their practices, allowing them to increase the level of patient care and client service.

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Your Equipment Buying a new piece of equipment represents a much smaller invest- ment than a facility purchase or expansion. If equipment breaks or becomes quirky, replacing it is a no-brainer. Do it. Your doctors and staff need the equipment to provide care to patients. However, don't buy something new just to attract a buyer. Do you really need an underwater tread- mill when you plan to retire in six months? Not unless the existing treadmill is broken. Again, con- sider how quickly the equipment will pay for itself. Something as large as an underwater treadmill will require an investment beyond the equipment itself. Consider the costs of installation, staff training and maintenance and the need to educate clients about the benefits. Replace your workhorse equip- ment as necessary, but don't buy new equipment just to have new equipment. If the equipment you purchase turns out to be some- thing the buyer doesn't want, the practice becomes less attractive. Sales reps are experts at making an equipment investment sound appealing, and you might be tempted by potential tax savings. Buying equipment or other de- preciable assets is a common tax strategy. The principle behind it is that the allowable accelerated de- preciation expense taken on new equipment will reduce your taxable income and therefore, the amount you must pay in income taxes. Remember that you will not have a dollar-for-dollar reduction in income taxes. A $50,000 piece of equipment, assuming you can deduct the entire cost on this year's tax return, does not mean your tax bill is reduced by $50,000. It means that you will have $50,000 less in taxable income. Take the decision making beyond the desire to simply lower taxes. Will you use the equipment immediately and at full capacity? By no means should you enter into a new, long-term equipment lease unless you are fully pre- pared to make the lease payments yourself. This advice applies both to equipment that is leased outright as well as relationship leases — those agreements that provide equipment at little or no cost provided certain usage levels are maintained. Any agreement that requires a practice buyer to continue payments after the sale should be avoided because these payments reduce the price a buyer can pay for your hospital. Liabilities such as these are frequently paid in their entirety by the sellers with the proceeds they receive from the practice sale. Occasionally, and assuming the loan can be assigned, the buyer will agree to pay off the loan. However, consider this large caveat: For every dollar in equipment loans the buy- er assumes, there is a dollar-for-dol- lar reduction in the amount they can pay for your practice. Think about it. Buyers can buy the prac- tice on a debt-free basis, meaning the only loans they have relate to the acquisition, or they can pay less for the practice and take over the balance of other loans. Your Software One piece of equipment that you need to evaluate is your practice management software. Has the program kept up with your current practice needs? Is it expandable to accommodate a growing practice? If you use an older program that is no longer supported, a buyer will have to upgrade or replace it. Also, the use of paper charts signifies to a potential younger buyer that your practice has not kept up with the times. Before you put more money into your practice, evaluate how quickly the investment will con - tribute to the bottom line. Invest in things that fit with the practice as it is now, not what a potential buyer might wish to do with it. Money Matters columnist Leslie A. Mamalis is the owner and senior consultant at Summit Veterinary Advisors. Learn more at www.summitveterinaryadvisors.com.

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