1) Spend less than you were initially planning to spend. Brand new lasers, IPLs, or RFs (LIPLRF) can cost anywhere from $50,000 to more than $200,000. The presumption is that you need to spend this amount of money in order to be successful. This isn’t true.
First, when you enter a new phase of your business, you need to be able to pivot the business in six to twelve months. No matter how much planning you do in order to develop this new business segment, ultimately your customers have the final say on what they want. If you have leveraged $50,000 to $200,000 in a new device that has lost at least half of its value the moment you buy it, how can you sell or trade the now “used” device? The answer is you can’t – not without taking a massive financial loss.
Second, in addition to your customers’ needs, you also need to consider the competition’s response to your new venture. You will attract customers who have never had an aesthetic procedure, but you will also pull customers away from their current providers. In response to your pricing, location, staffing, and other competitive branding factors, your competition will respond with their own lower pricing, free treatments, and other customer retention strategies. If, at this point, you have invested heavily in one technology, how can you pivot without a significant loss or new cost?
Lastly, as with any initiative, you will learn valuable information about your customers, market, staffing, costing, margins, and more over the first six to twelve months. If you start off with an investment of around $30,000, you will put yourself in a position to pivot into the correct technology without a significant loss or additional cost. This flexibility is crucial once you have a better view of your target market and its response to your business.
2) Know the percentage concentration of skin types that will come through your door. Technicians will almost always say that they treat skin types one through six. That is rarely correct.
Every practice may see this wide range of skin types eventually, but there is always a specific concentration within that range. This concentration is the market you want to focus on when deciding which LIPLRF to purchase. Rather than aiming for mass appeal and trying to cater to every skin type, you need to become the best at treating the types of skin you will see most frequently in your practice. Greater efficacy for the majority of patients will lead to repeat business and customer retention. You cannot market (spend) your way to success. It has to come from happy and satisfied patient referrals.
3) Do one thing really well. One of the most common mistakes buyers make is trying to be all things to all customers. This is impossible for several reasons, but one very specific one: competition, and lots of it. Competition exists everywhere – around the corner, on TV, in the mail, online. Customers have choices and alternatives to everything you might offer. What they don’t have is the one best local option, so give them that. Start your business on that one thing that you can do better than anyone else. Then build from there.
4) Never buy something new, unless there is a very good business reason to buy it new. Before I cover the key reason not to buy new, let me address the few times you should buy new. For example:
- If you are providing hair removal services from 7am to 9pm seven days a week, you have several considerations that will affect your profitability. Labor costs, system uptime, rep rate, spot size, and service costs outside of a machine’s warranty period will all play a role in determining your ultimate margin. When you combine these factors with a significant patient flow, there is a business argument to buy new in this example.
Unless you are coming from a similar position, do not buy new. My reasons for advising this is depreciation.
Example: There are so many examples of systems that are sold new for $100,000 and then drop in value to $25,000 the moment the invoice has been paid in full. The Cynosure SmartLipo is a classic example of this. Since the start of the six watt, there have been seemingly endless revisions to that platform. Today, the SmartLipo TriPlex with Cellulase is the “big dog” in laser lyposis. No one really knows what this retails for, but we know that the Actual Sales Price (ASP) a customer pays is somewhere from $140,000 to $250,000. Even so, a day-old TriPlex with Cellulase would have a tough time selling on the secondary market for $50,000.
Can you imagine buying a car that depreciates from $140,000 to $50,000 the moment you drive it off the lot? How about a house? A boat? Your retail space? Anything at all? The argument is that the warranty makes it worth buying new – but how much service would you need to offset the $90,000 loss?
5) Never buy a system with an expensive consumable such as a tip or pad. These systems are great for the manufacturers but are rarely, if ever, good for the practitioner. Think about it: if it were good for the practitioner, why would a manufacturer create an expensive consumable? You cannot make enough on the treatment to cover the consumable cost. Initially, when the device is new and no one else in the marketplace has it, you might be able to make a profit. Once the fad wears off, you can no longer cover the cost of the consumable, let alone all of your other overhead related to the LIPLRF device.
In addition, most devices that have consumables will have an alternative device from a competitive manufacturer that does not have a consumable. For example, a Fraxel CO2 has a consumable. Do you really need to buy a Fraxel CO2 with a consumable when there are ten other options without one?
Any device with a consumable has little to no resale value. Manufacturers charge recertification fees of up to $35,000, and consumables are generally proprietary and locked. If you sell the system to a new owner, he or she would be required to pay these ridiculous fees just to buy and use the consumables. The result is little to no resale value. (We will tear down the manufacturer’s recertification fees in a subsequent article. Often, the manufacturer cloaks the need for this fee in patient safety reasoning. If it were truly about patient safety, they would charge a nominal fee to test the system. The recertification fees are truly about creating predatory monopolies for new device manufacturers. Until then, consider the logic of buying a new Lexus only to be told when you sell it that your new buyer needs to pay a $35,000 recertification fee to Lexus.)
6) Never prepay with a wire or check when buying an aesthetic device. There are many safer options. As we all know, just about anyone can process credit cards via a smart phone adapter these days. Getting approved as a merchant to process customer credit cards has never been easier. However, as a merchant of high priced capital equipment, getting a merchant account to process credit cards has never been harder. Why? Almost always, with online purchases credit card numbers are taken over the phone or through a web interface. The customer is rarely present at point of sale. This can lead to credit card fraud and ultimately to losses the merchant must absorb if he or she is faced with a fraudulent charge. If a merchant of capital equipment is running up hundreds of thousands of dollars a month in phone or internet charges, this creates significant risk to the credit card processor.
So, what’s my point? Merchants of high priced capital equipment are vetted by credit card processors before they are allowed to run significant charges. If you know your merchant can accept a credit card for a $10,000+ sale, you can take some comfort in knowing that he or she has been financially screened by the credit card processor.
Another positive reason to use a credit card: your credit card company offers you protection against merchant fraud. If there is a problem with delivery, system completeness, operation, warranty support, or any other contractual commitments, you can engage your credit card company to initiate a charge back. You will need to prove that your claims are valid, but consumers usually prevail with chargebacks when contractually justified in filing their complaints.
There are many escrow services available these days; one of the most popular across markets is Escrow.com. Unlike an escrow service set up by and attorney or bank, Escrow.com is truly neutral. This protects both the buyer and the seller. The real benefit comes from the fact that only resellers who use Escrow.com can truly control or own the equipment they are selling. It eliminates the brokers that use your money to go buy the equipment they are selling you.
Another payment mechanism to protect the buyer is paying C.O.D. – cash on delivery. You can ask to pay once you have received and tested the item you’ve purchased. Some resellers will oblige but many resellers — even legitimate resellers — will not use C.O.D. Recently, a reseller shipped C.O.D. to a well-known, established clinic in California. When the item arrived, it was paid C.O.D. The problem surfaced when the payment was returned. Investigation showed that a fraudster had used the clinic’s name to receive the C.O.D. item. It turns out the clinic had not even ordered it.
7) Always get your LIPLRF installed. There has been some debate as to whether you should install IPLs and RFs. Regardless of what energy based device you are purchasing, you need to have it installed by a properly trained LIPLRF technician. These are high energy devices treating humans. They generate heat, light, infrared and many other invasive applications. If they are not properly installed, you are putting patients at risk. Checking the power at the outlet and the voltage out of the power supply, aligning the laser cavity along with the mirrors and fibers, and calibrating energies will put the system in peak operating condition. This maximizes both patient safety and treatment results. Moreover, the LIPLRF device will run longer without error.
8) Always get trained by someone who has trained hundreds of buyers.
- Check out your trainer. Like capital equipment resellers, there isn’t a “school” or an accredited body certifying trainers. It doesn’t matter if they have treated one or 100 patients; check out your trainers. Where did they get their experience? How long was the experience? Check their references. Call recent clients that have been trained on the specific system you are purchasing. Often times, a trainer might be a good trainer on one system but have limited experience on another.
- A good trainer will teach you both clinically and on the patients. A great trainer will teach you how to sell to patients, convert from one treatment to others, instruct on off-label uses for the device, and go over treatment pricing and off-manual techniques that will help maximize efficiency.
- Trainers will be a resource long after the training is complete. Training is never static, it’s ongoing. Having a training partner to answer questions after the initial training is critical.
9) Never buy equipment from a “medical equipment broker.” Say that out loud: medical equipment broker. Would you go to a doctor who works alone out of his house? It seems so obvious, yet this is the most common mistake buyers make. Just as you shouldn’t see a doctor who works out of his house without the proper infrastructure, you shouldn’t buy medical equipment from brokers or other people who work out of their homes, buying and selling equipment that ships from a seller’s location directly to yours.
Ask yourself these questions:
- How can a broker have the correct de-installation process necessary to properly prepare the LIPLRF for shipment?
- Does the broker have the right type of crating and packaging?
- How do they insure that all of the accessories are obtained from the seller?
- Most importantly, how is the LIPLRF tested and repaired prior to its shipment to you? Even if the system could be tested and repaired by the broker, does the agent the broker hired have the proper training, the correct testing equipment, the necessary parts, the alignment tooling, the service manuals, etc.?
- Furthermore, does the broker carry product liability insurance to protect you from their “spray and pray” business model? (“Spray with Windex and pray that it works by the time it arrives at your office.”)
- Keep in mind that most pre-owned systems are out of warranty, are out of calibration, have had no preventative maintenance for months (or maybe years), have not been inspected for safety or electrical issues, are not drained, and do not function to specification.
- How and why could a system be shipped from one location to another without first undergoing a refurbishment and repair process?
10) Buy a LIPLRF that is the right solution for you – not the device the salesperson promises will do everything and treat everyone. Someone once asked me, “Have you ever bought a system from a salesperson that was the second best device on the market?” Funny, but true. The world couldn’t operate without sales people, but like any profession, there are good ones and bad ones. Be aware of your business needs going into your purchase and don’t get swayed by sales pitches.
11) Do not fall for the “demo” sale. Manufacturers make demonstration equipment and will often sell it at a discount. Yes, there are demonstration units, but consider what is required to make a demo. Take a new unit. Then, call it a demo. The LIPLRF space is known for putting out incredibly high Suggested Retail Pricing – and then discount severely. The LIPLRF manufacturers are trying to see how much gross profit they can make by keeping the true Actual Sales Price (ASP) hidden from the public. One trick they use to discount from Suggested Retail Price is to create “demos,” which give the buyer the impression he or she is getting a deal. In fact, the manufacturer can create endless demos.
12) When is a multi-parameter platform the right platform? Almost every LIPLRF manufacturer has a multi-parameter platform. The pros of buying into this are obvious: you can treat many different parameters. The cons aren’t as obvious, and are rarely discussed. Consider the following:
- You’re putting all of your eggs in one basket. If the system fails, you have to treat other parameters and/or offer discounted services to patients you can’t treat due to the multi-parameter platform failure.
- You cannot treat two patients at the same time.
- You’re not actually saving money. The cost of two to three individual systems is about the same as one multi-parameter platform with two to three handpieces.
- Customer efficacy suffers. Typically, the single platform system that has a focused and unique parameter will always be more effective at its focused treatment in comparison to a multi-parameter platform.
13) Think about service after the sale. There is no perfect solution, but when there is a problem, the market will find one shortly thereafter. For now, you have a few options:
- The manufacturer — (This is not the best option.) Typically, manufacturers do core exchanges and not component repair. When the power supply fails, the manufacturer will replace the entire power supply (the core). This is more expensive for you in comparison to identifying and repairing the part that has failed.
- Field-based technicians — There are thousands out there, but finding them is the tough part – and finding a good one is even tougher. In the next few months, there will be several online marketplaces launching that will allow you to locate and vet technicians. For now, word-of-mouth and colleague recommendations are your best bet.
- Depot repair – In the past five to seven years, more and more manufacturers have started to manufacture devices that can be shipped to their facilities (depot) for repair. In some cases, these manufacturers have completely eliminated their field-based service technicians. Depot repair can be both faster and less expensive than field-based repair. Often times, field-based techs need to come back more than once in order to truly repair a machine, or they need to spend a night (at a cost to you) while parts are ordered. Lastly, field-based repairs rarely have a Quality Control Process (QC or QCP) that burns in the device in order to assure the repairs are completed.
14) You can refurbish most lasers, IPLs, and their fibers and handpieces. Truly! Very few manufacturers of LIPLSF make their own parts. This is true of most industries such as computers, automotive, etc. Typically, a manufacturer is called an Original Equipment Manufacturer (OEM). The ones who make the parts for the OEM are the Original, Original Equipment Manufacturers (OOEMs). These parts from the OOEMs are available to repair facilities. There is a significant legal precedent stemming from the replaceable ink cartridge industry allowing repair facilities to reset or recharge shot counters once a fiber or handpiece has reached its limit. You can pay a lot less for LIPLRF fiber and handpiece repair and reset – as with anything not done by the OEM.
15) Be aware of the fallacy of the warranty that comes with a new system. When buying a new device, the buyer believes he or she is safe when considering the warranty. Unless (as I stated earlier) there is a good argument to buy new equipment, the following generally applies. Typically, with any new LIPLRF purchased, you will be offered a one-year warranty. Good, right? Not so much.
Think about it this way: How long does it take a new system to become fully integrated into your practice? Three months? Six months? A year? By the time you are fully engaging the system, the one-year warranty has probably expired. Once it expires, you have the same warranty options as you do when considering a pre-owned device: use the manufacturer and pay extremely high prices or go with an outside service provider. You will face this decision in a relatively short period of time, regardless of whether you have purchased new or pre-owned.
16) What do dermatologists and plastic surgeons who have been using LIPLRFs for twenty years know that you don’t? Many, if not all, have opted to buy pre-owned over new for the reasons cited above.
As you head out into the market to buy a LIPLRF, please keep these final points in mind.
- There are no capital equipment emergencies. Put simply: when you are feeling pressure to buy, do not.
- Most pre-owned LIPLRFs are sold because they failed at the hands of others. Think about it: if the LIPLRF were making the practice money, would they sell it?
- Light is light. Granted, it can be pulsed, bent, increased, decreased, and morphed seemingly into infinity. However, in the end it’s all light and heat. Just because a manufacturer comes up with a really cool name to call a new technique for bending light doesn’t mean it will be much better than the last one that bent light.
Take your time and do your homework. When it is right for you, you will know.