Article Date: 12/1/2010

A Coffee Machine for $6,000?
instrumental strategies

A Coffee Machine for $6,000?

Yes, it's expensive. But some argue it's the best investment they can make.

Sheldon H. Kreda, O.D., F.A.A.O.

Would you pay $5,995 for a cappuccino machine? While it's a bit pricey for me, my friend Tony did. He loves showing it off too. You might think that's quite an extravagant purchase. I would disagree. I think he got more than his money's worth. Oh, I forgot to mention, Tony bought it for the restaurant he owns. Do you still think his purchase was over the top?

Buying vs. investing

Since he bought the cappuccino machine for his business, it's not really a purchase, it's an investment. Unfortunately, many of us look at our equipment investments as extravagant purchases, often deciding between putting money into a new instrument or a new car. A $60,000 automobile to you is a luxury, but an investment to a cab driver — it's his livelihood. The lesson: Look at equipment purchases from a different perspective.

Tony borrowed the money for his new machine. His monthly payment is $150 for four years. My friend serves about 250 patrons per week at his restaurant. He figures at least 10% will forgo their regular after-dinner cup of Joe and splurge on a cappuccino. That's 25 patrons at $3 more profit per cup. That adds up to $75 per week, or about $300 per month. How much did Tony pay for his cappuccino machine? And, consider that he's now able to deliver something his customers obviously want, so his new machine will encourage more frequent return visits to his establishment. Further, his patrons have another reason to recommend the restaurant to friends and family.

Tony didn't buy a cappuccino machine, he bought another profit center.

From coffee to cameras

Recently, a doctor asked me whether he should buy a fundus camera in light of the fact they are “so expensive.” Unless he's buying it to take vacation photos, a few quick calculations may make this decision a no-brainer.

A new digital fundus camera costs roughly $500 per month for five years. Unlike Tony, many of our patrons don't have to pay out of pocket for this service. Others, however, are quite willing to pay. The question for this doctor isn't how much will this instrument cost? But, how many patients per day must use the instrument to break even?”

Conservatively, you will average $40 per patient use. Divide the monthly payment by the reimbursement (500/40=12.50) Therefore, you make money if you use the instrument only 13 times per month. Since there are 20 workdays in a month, use it only once a day, and you've made a very wise investment. In fact, this doctor should pay for expedited delivery because he's losing money every day he's without the instrument.

The numbers are manageable

Apply this logic to any business purchase. Simply break down the cost of the instrument into patients per day. This translates these often frightening figures into manageable statistics. Don't forget the intangibles. These are things, such as increased referrals by impressed patients, or the ability to perform new services.

With a little number crunching, you'll likely discover that a new instrument is not only quite affordable, but it will also help you to provide excellent care while increasing your practice revenue. OM


DR. KREDA PRACTICES IN A PRIMARY CARE SETTING IN LAUDERHILL, FLA. HE'S A FREQUENT LECTURER AND AUTHOR. YOU CAN E-MAIL HIM AT EYERX@COMCAST.NET, OR COMMENT ON THIS ARTICLE AT OPTOMETRICMANAGEMENT@GMAIL.COM.

Optometric Management, Issue: December 2010