LAUSR

A break-even analysis (BEA) is often used in the business world to determine exactly when the business will be able to cover all of its expenses and generate profit. A BEA can be particularly useful when contemplating expansion and new purchases. Without consulting services, practitioners who utilize lasers can often find the notion of strategic planning and financial considerations overwhelming and not part of their acquired skillsets. However, with the increasingly competitive laser market, it is critical that a laser practitioner equip himself/herself with the basic business knowledge to be able to make an informed decision with respect to a major laser purchase. Here we detail the critical ingredients of a BEA for a fractional ablative laser device, specifically a 10,600nm ablative fractional CO2 laser, in order to educate practitioners on the financial considerations of laser acquisition. In order to perform a BEA as an educational tool for laser acquisition financial planning, we selected one publicly trading company that generated an annual revenue greater than $50million. The company provided its pro forma return on investment (ROI) projection for its 10,600nm fractional ablative CO2 laser. Laser device has been replaced with generic terminology to comply with ACCME guidelines. Break-even point (BEP) is the point in time in which total costs and total revenue are equal and one is able to generate profit thereafter. Laser revenue (R) is equivalent to the procedure fee (P) for each laser treatmentmultiplied by unit sales (X) (number of procedures performed for that particular laser treatment). Total costs include fixed costs (FC) and variable costs (VC). Fixed costs (FC) do not change with the volume of patients treated (laser purchase price, warranty, cost of operation such as overhead and cost of staff time, leasing, maintenance of certification). After a fixed warranty period is over (typically 1–2 years), practitioners often proceed with an annual maintenance contract (AMC) which generally includes all parts and maintenance and is estimated to be 22% of the invoice value [1]. Variable costs (VC) fluctuate with the number of patients treated and laser activity (cost of consumables/disposables (tips), and occasionally marketing expenses). Variable costs depend on each individual practice (academic vs. private), but can be estimated as approximately 10% of total revenue. Another useful concept in a BEA is contribution margin, which is essentially revenue minus variable costs. See Table 1 for our BEA for our selected 10,600 nm fractional ablative CO2 laser. Of note, the procedure fee in this example is the company’s “estimated fee” assuming a full-face fractional ablative treatment session. Procedure fees vary widely from practice to practice and between geographic locations and are driven by local and regional competition. BEA can be tremendously useful for laser practitioners in determining the number of treatment sessions needed to begin generating profit. AlthoughROI pro forma templates from companies are helpful in identifying several critical components of a BEA (in particular cost of ownership), each analysis will differ based on cost of operation (overhead and cost of staff time); therefore, fixed and variable costs will differ depending on the clinical context, the device utilized, and the indications being treated. We hope that this laser acquisition example illustrates the feasibility for practitioners to perform a BEA and make financially sound decisions with respect to purchase of a laser device. Lance W. Chapman MD, MBA Katherine Ferris MD Christopher Zachary MBBS, FRCP Department of Dermatology, UC Irvine Medical Center, Irvine, California