Why Medical Spas Fail Reason #1: Paying Too Much for Equipment and Build-Out

Investing in an aesthetic practice can be very costly.

You can easily drop $700,000 to over a million to get your practice established.  Paying top dollar for new equipment allows peace of mind with warranty protection, but it comes at a very high cost.  While it is true that most used laser equipment is no longer under a manufacturer’s warranty, research has shown that you are almost ALWAYS better off buying used equipment and paying out of pocket for maintenance and repairs versus buying new and having it covered under warranty.  You are simply paying too high of a premium for the luxury of buying new.  If peace of mind is the issue, then buy a back-up piece of equipment at a 70% discount that you can rely on when your primary equipment goes down.  The reality is you will still be paying less than buying the brand new piece of equipment.

The key to this issue is to identify the companies who repair the used equipment you are considering to purchase.  Ask them to quote you prices on repairs and warranties if you have them.  Also make sure that parts are readily available for this equipment and that the equipment manufacture does not hold a monopoly on spare parts.  You need to do this footwork BEFORE you buy.  After you buy it can be too late and you may be taking too large of a risk.

You also need to find out which laser manufacturers are user-friendly to pre-owned equipment.  Some manufacturers can charge you a laser “RECERTIFICATION FEE.”  Recertification fees are sometimes required by the manufacture if the laser device is sold to someone else.  The laser manufactures claim it is to ensure the device has not been tampered with, however the real reason is to protect the manufacturer from being undersold by doctors looking to sell their used equipment.  Charging a “recertification fee” levels the playing field between the new and used price.  These fees can be as high as $25,000.

Sadly, most aesthetic equipment becomes obsolete 2 or 3 years after the initial purchase, however most leases on that same equipment last for 5 or 6 years.  In the world of aesthetics, technology is evolving at a rapid pace.  This evolution also means that technology does not remain useful for very long.  It’s a hard pill to swallow when you continue to make monthly lease payments on equipment that has become a “doorstop” inside your practice.  If you’ve paid top dollar for that equipment, it just makes that pill you’re swallowing even the more bitter.

Let’s use an example to illustrate this point.  If your practice buys a new Laser Gadget and your competitor buys the same Laser Gadget pre-owned at a 70% discount, your competitor has a large competitive advantage over you.  His fixed costs on capital equipment are 70% less than yours which means higher profit margins for him.  He also has the ability to offer lower treatment prices and potentially put you out of business.  You also have the option to match his lower prices, but you will need to compensate for the higher costs you are paying on that equipment by having a higher treatment volume.  If you choose to keep your prices higher, then you will need to somehow differentiate your practice from the competition by offering other “value-added” benefits that justify your higher prices.  This could be “Board Certified Dermatologist” or “Onsite Physician” etc.

If you feel strongly about buying new laser equipment versus used, do not accept the sticker price presented to you by your laser sales rep.  You must understand that everything is negotiable.  Do not accept a 1 year warranty, ask for a 3 year warranty.  If they are not negotiable on the price, then ask for a “DEMO” unit.  Demo is normally code word for a discounted price.  In most cases, demo units are not even used pieces of equipment, but it allows the manufacturer to legitimately sell you a new piece of equipment at a much lower price while maintaining their price integrity.

Regarding clinic build out, my recommendation is to find a medspa location that is already built out.  There are hundreds of medspas that have gone out of business.  In most cases they have ALREADY spent HUGE bucks to create a beautiful facility.  They have already spent the big bucks for tenant improvement.  You can pick these built-out locations for FREE.  Don’t invest this money yourself.  Find a realtor in your city who specializes in renting medical office space along with retail space.  He should have a good lay of the land on what is available.  You will be surprised with what gem locations are available.

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