A Framework For Making Smart Buying Decisions for New Equipment
"Just because you'll get a deduction, doesn't mean you should buy it."
That's the conversation I had with two practice owner clients this week.
A super common question I help clients think through is when should you buy new equipment?
That new OCT you've been dreaming about? The visual field machine or automated exam lane calling your name?
With Vision Expo West approaching, the temptation starts to creep in.
It’s especially tempting this time of year. Vendors bombard you with “incredible” deals you supposedly can’t afford to miss. Then after September, they’re knocking down your door with urgent messages about year-end tax benefits.
There’s manufactured urgency everywhere. But how do you cut through the noise and make an objective decision that’s right for your practice?
Here’s the framework I walk through with clients, in order of importance:
1. Does Your Practice Actually Need It?
This isn’t about wants - it’s about genuine business need and return on investment (ROI).
Revenue questions to ask:
Will this equipment increase revenue per patient? Does it open a new specialty, service line, or revenue opportunity? Will it meaningfully improve patient outcomes or experience?
Efficiency questions to ask:
Will it allow you to see more patients without sacrificing quality? Can it help you avoid hiring additional staff? Does it solve a current bottleneck in patient flow? Can you get more out of the same fixed costs?
If you can’t answer “yes” with specific numbers to at least one of these, stop here. The equipment probably isn’t worth buying - regardless of the “deal.”
Critical follow-up: If there is expected benefit, how exactly will you implement and market the new investment? What’s your realistic timeline to break even?
2. How Will You Pay for It (And Can You Actually Afford It)?
You have two basic options: cash or financing. You may see it called a capital lease, but it's effectively borrowing to buy the assets.
Here’s what to evaluate:
Cash considerations:
Do you have sufficient cash above and beyond a reasonable emergency buffer ?
Can you build up enough cash in the near term without compromising your financial safety net?
Financing considerations:
Are current interest rates reasonable from healthcare lenders or equipment financing companies?
Can you comfortably afford the monthly payments alongside your existing debt payments and expenses? Do you need to pay down other debts first to free up cash flow?
Important reminder: Your practice’s cash flow and profit aren’t always the same thing. The actual cash flow available each month can be very different than what shows up on the profit and loss statement.
For example, depreciation and amortization aren't actual cash expenses but decrease profit. But the principal portions of loan payments and owner distributions do - even though they don’t show up on your P&L. This is why I love the Statement of Cash Flow.
3. Tax Planning Comes Last (Yes, Really)
Notice we’re just getting to taxes now. This is intentional. Too many practices let tax considerations drive equipment purchases, especially when vendors heavily market “year-end tax benefits.”
This is backwards thinking. The math reality: You still spend $1 (or more with interest) to save ~$0.20-$0.40 in taxes. If your practice doesn’t actually need the equipment, you’re better off keeping that dollar after taxes and investing it elsewhere.
Don’t let the tax tail wag the dog. Remember that your primary goal is to increase the profit and cash flow of the practice as much as possible.
When tax planning does matter: After you’ve determined there’s a genuine business need and figured out how to pay for it, then we'll consider two tax planning options:
- Default approach: Depreciate the cost over 5 years (typical for equipment)
- Accelerated approach: Accelerate the depreciation and expense the full cost in year one using Section 179
The right choice depends on your specific tax situation.
Will you be in a higher bracket this year? Are you phasing out of certain credits and deductions, like the QBI deduction or the recently increased State and Local Tax deduction?
Will your practice income be higher in coming years? For example, are you a recent cold-start or practice purchase, or do you expect higher amounts of taxable income in the coming years?
Work with your financial planner and tax professional to model different scenarios and see what makes sense for your situation.
Remember, you're trying to get the biggest bang for for each dollar of deduction - and it doesn't always make sense to stuff the current tax year with every possible deduction.
Don’t Get Caught Up in the Hype
As we head into fall conference season, you’ll be surrounded by exciting new technology and urgent sales pitches. That’s normal, but don’t let a false sense of urgency drive your decisions.
Start with the needs of the business, decide on the best way to pay for it, then work on the tax planning.
When you approach equipment decisions this way, you’ll make choices that truly benefit your practice’s long-term financial health - not just this year’s tax bill.
Fortunately, there are great financial planners and tax/accounting professionals that specialize in helping optometry practice owners - there are plenty of resources out there to help you navigate these decision.
Have a great weekend!
Evon Mendrin CFP®, CSLP®
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