An investment in new medical equipment will have a financial impact on your medical practice for many years. You need to determine the value of the new equipment by comparing its revenue returns with its total costs. The return on investment financial calculation is a common method to value a new business purchase. By calculating the return on investment on a piece of medical equipment, you can better compare investment options for your practice.
Estimate the total increase in revenue that the new equipment will give to your practice. For example, you predict your business will add 20 customers because you have a piece of equipment many other practices do not. Add all revenues over the life of the equipment to find its total return. If a piece of equipment will increase revenues by $20,000 for 10 years, its total return is $200,000.
Estimate the total cost of the equipment. Include all operating costs such as electricity and maintenance. Do not just use the purchase price.
Subtract the total cost of the investment from the total return of the investment. Divide the difference by the total cost of the investment to calculate the return on investment.
Example: A new piece of medical equipment costs $100,000 to purchase and will cost $20,000 in electricity and maintenance while in use. You estimate $200,000 in income from the new equipment. What is the return on investment?
ROI = (gain from investment - total cost of investment) / total cost of investment = ($200,000 - $120,000)/ $120,000 = $80,000/ $120,000 = 0.6667 = 66.67 percent