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Veterinary Offices: Buy or Lease? Go New or Used?
Expanding, updating, or opening a new veterinary practice doesn’t necessarily require a small fortune. When it comes to equipment or office space, there are ways to reduce the costs without sacrificing quality, ambiance, and your peace of mind. The same goes for how you fund the practice.
It’s important to find the right balance between renting and buying equipment, as well as knowing when it makes sense to go for new versus used equipment. That’s where we come in. Through our veterinary practice loan, we’ve been able to help medical professionals like you put together financing plans for mission-critical equipment (i.e., for imaging and surgical supplies that you’ll definitely want to buy new, as well as what you may want to self-fund or lease).
This article will help you determine when it makes sense to buy or rent and whether you need new or used equipment. For example, by buying some specific equipment new and renting other pieces, this could help keep costs down while you build up your business credit score so you can finance new upgrades as your practice grows.
Pro-tip: Your practice can tap into grants like the veterinary services grant program for free or low-cost funds to purchase equipment, depending on where you practice and what you focus on.
Here are some of the larger purchases you’ll likely be making and how to decide whether to purchase or lease and go new or used, as well as some of the financing options available if you don’t have cash on hand.
Imaging equipment
Buying makes sense when you know the exact technology you’ll use for the next decade, whereas renting is a better option when you can wait to see what kind of patients build your practice.
Imaging equipment to buy
X-ray machines are the first imaging equipment to buy since you’ll use them regularly and they last a long time. However, each state requires testing at different intervals for veterinary X-ray equipment, so check your state’s laws and fee schedule. You can find Texas here and Virginia here as examples.
If you’re buying used, ask the seller for a detailed history of issues and inspection results. If you do not want a traditional small business loan or veterinary practice loan, equipment financing loans are designed specifically for purchasing expensive equipment like this. The rates may be good since the equipment serves as collateral on the loan and there is a large market for used machines, thus mitigating risk for lenders.
Imaging equipment to rent
You may be better off renting imaging equipment like CT or MRI machines because doing so lets you see what kinds of customers will build your practice without locking you into a specific expensive technology from the get-go. Once you have a solid customer base, you can determine whether they’ll pay the extra cost for MRIs.
Ultrasound equipment could also be worth renting, especially if you’re considering making house calls. In this case, you can rent the mobile ultrasound machines without getting locked into them.
Pro-tip: Read the fine print of rental agreements to ensure maintenance is handled, calibrations are up to date, and that there are specific service level agreements (SLAs) for acceptable downtime or replacements. Also, check with the equipment manufacturer to make sure they’ll keep making parts for the particular model you’re renting so that you don’t run into unexpected problems that the rental company can blame on supply chain issues.
Exam equipment
Shopping for used exam equipment, including tables, boarding cages, scales, and lights, will help keep upfront costs down without degrading patient care. There are marketplaces like this one and this one where you can find deals, but make sure the images, descriptions, and sellers are reputable, as marketplaces can be a risk.
Pro-tip: Before making a purchase, ask around on VIN for other vets that might be retiring or buying new equipment. They may sell their items for a great price in exchange for an easy transaction.
If you can, self-funding is a great way to purchase this type of equipment, as it tends to be less expensive. If you cannot self-fund, look at the total cost and see what your current revenue per visit is. If the equipment can increase how many patients you can see, and that increases profit enough to cover the cost, you could consider putting this purchase on a business credit card. By paying the balance before interest kicks in, you’ll avoid interest payments and potentially get reward points if your card offers perks.
Surgical and dental
Surgical equipment is usually best purchased new, unless you’re completely sure that any used or rented equipment has been very carefully maintained. Surgical gear directly affects life-and-death situations, and high-quality equipment typically lasts a long time.
Meanwhile, renting dental equipment to start is a way to provide services while keeping upfront costs under control until you can gauge your customers’ demand for dental services. If you don’t need to offer dental services right now, build a referral relationship with a DAVDC (i.e., a board-certified veterinary dentist). You can refer patients to them for dental work, especially if you don’t specialize in dentistry, and they can refer their patients to you based on your specialties or if they live closer to your practice.
Cross-promotional relationships can help you go far. Once the relationship is there, place a pamphlet in each other’s lobbies. You can also reference each other on your websites and possibly co-sponsor local events (i.e., a golden retriever meetup if your area is known to have many of the breed). You’ll save costs by sharing a booth or sponsorship and build off of each other’s credibility.
Furniture and technology
Renting furniture is the best way to start since the office furniture rental market is huge and there is no shortage of deals. Furniture is a biannual industry so, as new styles roll out, you can get a strong price on last year’s model if you’re purchasing (and a discount if you wait for the brand to lease it).
Pro-tip: Leasing is a great way to not pay full price on the latest models, and you can update once the lease is over.
For technology, subscriptions are likely best for software and software-as-a-service (SaaS) products like EMR and practice management programs. These are typically billed monthly. However, if you know you will be using the software for a minimum of a year, you may be able to save if you subscribe annually vs. monthly.
Pro-tip: Most SaaS products require customization to work with your practice. This comes with upfront development costs. Before picking your particular software vendor, talk with other vets on VIN about different software vendors so you choose the best one for your practice.
Buying makes more sense for computers, monitors, printers, and other hardware because you can get them directly from the major manufacturers through their small business programs. This gets you the latest technology, keeping your systems running smoothly and allowing you to focus on patient care instead of admin tasks. Plus, many of the manufacturers offer great financing terms to keep costs low.
Pro-tip: Track when new models are released. The resellers and big-box retailers normally slash prices to clear the way for new inventory, and last year’s computers are still going to work great for the foreseeable future. If you can provide quality care without buying new computers and hardware for a couple months, it could be worth waiting.
Office space
Office space is another area where you can either rent or buy. Renting makes sense if you want to keep your upfront costs as low as possible and it gives you flexibility to change locations easily if needed.
Buying lets you set up your office exactly how you want, and your monthly payments build equity to boost your business’s value rather than simply paying rent as an ongoing expense. Buying also lets you get a bigger space than you need, so that you can rent some of it out for immediate cash flow. Then, as your business grows, you could expand to take up that additional space.
Buying or leasing, and going new or used, for veterinary equipment comes down to the level of care you’ll be able to provide, if it is mission critical, how long it will last, and how you finance it. There are always ways to save without sacrificing quality, like waiting a month or two until a sale happens or using a marketplace when a trustworthy seller is listing the equipment you need.
QuickBridge does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only. You should consult your own tax, legal and accounting advisors.
