Question: The surgical laser I use in my veterinary practice has died. It needs a piece of equipment that will cost about $5,000. The laser is 13 years old and will be fully functional once repaired — but probably will need the same repair in about five years. My other option is to spend $40,000 for a new unit that doesn’t have the part that wears out. I’m not sure when I will sell the practice — perhaps in five years, perhaps 10 if my health is good. I’m 68 and still enjoy my work. Buying the $5,000 part seems logical. Your thoughts?
Ric's Answer: Going with the new one might not be crazy — IF, and only IF, it will increase the value of your practice. If your future buyer knows a new device is needed, the cost will be debited from the offer. But if you can brag that the practice comes with a new device with several years left on it, you can ask for more. It’s similar to selling a house knowing that the roof needs to be replaced.
Ask yourself whether the new unit will allow you to sell the practice for more — and enough more — to recover your excess costs.
The answer can be hard to calculate (more so than for a homeowner selling a house with a bad roof), because you have to consider the depreciation — both during the time you will continue to own the practice and the time the buyer will get to use the device.
Your tax advisor can help you with the math.