E711 | The Right Way To Look At Equipment Financing

In this podcast episode, Dr. Danny explores the important topic of equipment acquisition for physical therapy clinics. He emphasizes the need to evaluate whether adding new equipment can be financially justified, drawing parallels to real estate investments and focusing on generating positive cash flow. By assessing whether new equipment can bring in additional revenue to offset the monthly cost, clinics can make informed decisions about their purchases.

Dr. Danny provides two insightful case studies to illustrate his points. In the first case study, a clinic invested in a shockwave therapy unit and was able to generate significant additional revenue, ultimately resulting in a net positive cash flow. In the second case study, a clinic purchased a golf simulator and offset the cost by renting it out to golf professionals, creating a secondary revenue stream. These examples highlight the importance of carefully evaluating the potential revenue and client benefits of new equipment acquisitions.

The podcast also touches on additional considerations such as the ability to depreciate equipment for tax purposes and the use of debt to generate positive cash flow. Dr. Danny stresses the importance of analyzing the potential benefits of new equipment and ensuring that they outweigh the monthly cost. By viewing equipment purchases through the lens of cash flow and revenue generation, clinics can effectively utilize new equipment to improve patient outcomes and grow their business.

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Podcast Transcript

Danny: The other sneaky benefit to this, something you got to keep in mind too, is that you can depreciate equipment in your facility, right? So you're able to actually depreciate the equipment, which can help with taxes as well. So there's a lot of sort of nuances to how you can leverage this effectually effectively.

And it's basically financial jujitsu. You're understanding how to leverage. Debt and create revenue streams that are going to outweigh that debt on a monthly basis Hey, are you a physical therapist looking to leverage your skill set in a way that helps you create time? And financial freedom for yourself and your family if so, you're in the right spot My name is danny mattei over the last 15 years.

I've done pretty much everything you can in the profession I've been a staff pt. I've been an active duty military officer physical therapist I've started my own cash practice. I've sold that cash practice. And today my company physical therapy business helped over a thousand clinicians start growing scale, their own cash practices.

So if this sounds like something you want to do, listen up, cause I'm here to help you.

Hey, what's going on? Doc Danny here with the PT option or podcast. And today we're talking about equipment and how you can look at whether you can justify adding equipment, whether you should add equipment and a different sort of perspective in terms of just straight up buying things for your space.

So what brings us up is a couple of clinics that I visited recently on a road trip where we went to a handful of clinics. Of our clinics, which I'll talk about in a separate podcast of lessons learned from that. But one thing in particular that I saw at a couple of locations was people buying equipment for their clinic and doing so in a way that it basically paid for itself.

So here's what I mean by that. There's a term called cashflow that you may have heard for me, a part of my investment strategy outside of our business is in real estate in. In real estate, you want to look at cash flow. Cash flow is if I was to buy a building, let's say I bought a house that I could buy and it cost me 1, 000 a month to pay for as far as the mortgage is concerned, but I could rent that house for 1, 500.

That would be a, in a simple sort of terms, a 500 net. Cause I'm charging 1500. It costs me a thousand. So I'm positive 500. But if I looked at that house and I had to buy it outright, let's say the house costs 200, 000 as, as just, a simple example, if I had to buy it outright and pay for the whole thing up front, it'd be really hard.

Most people don't do that. They put a certain amount down and. Then they get a loan for the rest in the form of a mortgage, a loan from the bank. When we look at equipment for our space, we can look at equipment in a very similar way. Can this equipment create cashflow for my business? And that could be in a couple of different ways.

That could be purely from the utilization of. That equipment, if you can charge for it, for the use of it, it could be for bringing new patients in. It could be something that you use at local marketing events that allows you to be more efficient with, how you're getting clients. There's a lot of different ways you can justify it, but the most simple way of looking at it is, can you charge more, can you charge money for it?

And does that offset the cost of this? So I saw this with a shockwave therapy unit at one clinic. where they were charging an additional small amount of money. I think it was an additional 40 or 50 for this specific treatment for whatever they're using for, tendon issues or plantar fascia issues.

And it was a few thousand dollars for the equipment. I believe it was like eight or 10, 000 for the equipment, but the cost per month. Just like a mortgage, right? The cost per month was 400 per month for the equipment over the course of a couple of years. And yes, there's interest associated, all that, but we got to look at is the cashflow number.

So if it's going to cost you 400 a month and this person was generating about three times that much maybe closer to four times that much on a monthly basis, just in using it, an actual Revenue generated from treatments they were doing with it. So they're paying 400 a month for a piece of equipment that they're going to have paid off over the next couple of years.

And they're generating, let's call it 1, 600 a month. They're net positive 1, 200 on a piece of equipment that they're using to get better outcomes with patients. And they're making money off of something that. They are able to spread out payments over a period of time and not have to pay for all that up front.

So really efficient utilization of cash. And you have to be pretty confident that you're going to be able to use whatever piece of equipment that is in a positive manner, because we don't want to do is to pay for a piece of equipment over a long period of time that you're not even using. So that's the only, I would say risk with this, but you have to know what your clientele wants.

You have to know your niche, all that. The second thing I saw, which I thought was really interesting in a much bigger purchase was a golf simulator. A, and it costs about 50, 000 and. With a loan over I believe it was six years, the monthly payment for this equipment was about 700 a month. 700 a month, and the clinic owner that I was chatting with about this, he, at the time, they'd only had it for a short period of time, only a couple months.

And they were already at a point where they were above break even just on the equipment from being able to do something is secondary that they weren't able to do before, where they were actually renting out the use of the simulator to golf professionals. And obviously this person works heavily in the golf niche, but renting out the use of it to golf professionals that were using it with their clients.

To actually work on. Improving different metrics of hitting a ball. And what's interesting about these, I haven't really spent too much time with them, but you can see all this objective data of how much the ball is spinning, how far it's carrying the club speed, all these numbers that you can start to make.

in terms of how you're swinging or in this person's case for the clinician, building more capacity to swing a club faster potentially, but the pro is going to look at ball contact, right? So a little bit different objective information, but what a great way to actually train their clients.

And he's able to rent this out to them during off hours when they're not seeing patients and they can come in and they can work with their clients and For him to be able to have that in his clinic was able to completely offset the cost of it By creating this secondary revenue stream of subleasing the equipment to somebody else so that they can actually you know so they can actually use it with their clients as well The other sneaky benefit to this something you got to keep in mind too is that you can depreciate equipment in your facility, right?

So you're able to actually depreciate the equipment, which can help with taxes as well. So there's a lot of sort of nuances to how you can leverage this effectually effectively. And it's basically financial jujitsu. You're understanding how to leverage debt and create revenue streams that are going to outweigh that debt on a monthly basis and debt for a lot of people really scares them.

They're very anti debt. I'm anti debt too, except for if I can use it in my business and I can create cashflow, if I can buy a building with it and I can create cashflow. Cashflow is the name of the game. And also if you can use it to drive more new business into your clinic, it's an even bigger win because he's getting more new patients because of this a piece of equipment he's able to get.

More referrals because people are sending their friends to want to use a piece of equipment while he's working with them on treating injuries or working on performance, whatever it is they're doing. And they can host local workshops where they're highlighting, the golf niche and using the simulator to show different things, play a little fun games with it at a workshop, stuff like that.

That's really going to help drive more new volume into the clinic. So getting over the sticker shock sometimes of what these things will cost. If you have a plan in place where you feel very confident you can use it to generate additional revenue stream for the business, it can be a really good decision to do that as long as the numbers add up.

So remember, it's not about what the cost of the equipment is, as much as it is, the cashflow that you can generate from adding that piece of equipment to your business, the positive elements of additional patients coming in, clients coming in, referrals, all of that from this piece of equipment, differentiating yourself from other people, potentially they can drive more business, all of that.

You have to wear all that. Together as you look at, is this a good investment in my business? Because if you're paying for something that's not offsetting the cost of it, it's probably not a good move. But if you can put something in your clinic that attracts new clients, that gets you better outcomes, and it's something that can be offset by additional revenue streams, that can be a win.

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