Preparing Used Equipment to Sell: Best Practices
Doug FischerThe sale or trading in of legacy equipment is a critical aspect of the acquisition of new imaging technology, providing facilities with capital and/or leverage to help offset the cost of the new device. Properly readying used equipment for sale, however, is an often-overlooked component of the process, according to Doug Fischer, CEO of Imaging Acquisitions, Tulsa, Oklahoma. “Most facilities will spend their time focusing on the new equipment,” he says. “They won’t be focusing on the old equipment until a month or less prior to the new system being delivered. This really limits the value they can get on that legacy system.” Fischer’s company aims to facilitate the process of finding a buyer for previously owned equipment; therefore, he frequently advises facilities on how to maximize the value of their old equipment leading up to the installation of a new system. Fischer recommends five best practices for selling preowned equipment at the best possible rate. First, don’t deinstall equipment before selling. If a piece of equipment has been decommissioned prior to its sale, this can signal to potential buyers that something is wrong with it, Fischer explains. “When equipment is deinstalled, there’s no way for the buyer to see it in clinical use, which could mean it doesn’t work,” he says. For decommissioned equipment, buyers will typically bid about a third of what they would bid for equipment in clinical use, which is perceived as being ready for immediate use. Although it is possible to stage a scan with deinstalled equipment to demonstrate its functionality, Fischer warns that this is not ideal for potential buyers. “Equipment that’s been sitting around tends to have more issues,” he says. “Dust can accumulate in the machine. Even something as simple as a bug getting in the machine can cause problems.” Buyers know that equipment in clinical use is operating at peak efficiency. Fischer says, “Everything that needs to be warm is warm, everything that needs to be cool is cool, and you have up-to-date maintenance records to show it’s not a problem machine. For those reasons, it’s just not recommended to buy stored equipment.” Second, start looking for a buyer early. The penalties of a quick sale of used equipment can be harsher than most people realize, Fischer notes. His experience has indicated that negotiating a sale price three months prior to deinstallation can mean 50% to 75% more value for the seller. “Facilities need to understand that preowned equipment is a commodity,” he says. “If a facility tries to sell quickly, it may not have an end user in the market for the equipment, or may not be able to find a buyer who can sell it that quickly. Buyers purchasing on short notice will pay about a third of what they will pay when they already have an end user in place.” The financial penalty of selling equipment quickly can range from $20,000 to $100,000 or more, Fischer warns. “There’s a substantial saving that comes from negotiating the sale in advance,” he says. Third, as with used automobiles, cash offers are preferable to trade-in value. OEMs will usually offer a discount on new equipment to a facility that it trading in its legacy device, but this might not afford the facility the best possible value, Fischer notes. “When a manufacturer is selling a new piece of equipment, it will discount the list price in return for the used equipment,” he says, “but the price that it is effectively offering for the equipment will be below market value. If a hospital can sell that equipment for the same price or more, it has additional flexibility to negotiate a discount.” Again, the potential savings for facilities are substantial. Fischer says, “If they take a cash offer, they could double the value they would be getting from the trade-in discount.” Fourth, know your buyers. Sellers of used equipment should always request references from potential buyers in order to protect themselves from contract issues, Fischer advises. “If they can’t produce other facilities they’ve purchased from, then they are either conveying to you that they have never done this before or that they have cheated a lot of people,” he says. “Always require your buyers to provide a list of references, and be sure you check them.” Fischer also recommends that sellers require a nonrefundable deposit, followed by payment in full prior to system deinstallation. “I require the people I sell to to pay me 100% up front, and I pay end users 100% before I send anyone over to deinstall the equipment,” he says. “This best practice helps avoid losses due to contracts not being fulfilled.” Fischer advises the seller to require that the system be purchased as is (and where it is), as well as to request proof of insurance from the buyer. “If a buyer breaks it when deinstalling it, that should be the buyer’s problem,” he says. “You want to make sure the buyer’s insured to deinstall it, so if there is any damage done to your facility in the process, you’re not left with a big expense.” Fifth, help your buyer know you. To provide buyers with the same security—and enable them to offer the best possible price for the used equipment—Fischer recommends that sellers give buyers the opportunity to inspect the equipment prior to the sale. “The buyer should have an engineer take a look, so the buyer knows it’s what it wants,” he says. In keeping with this transparency, sellers should also provide buyers with as much of the following information as possible:
  • the original purchase agreement (with the dollar amount);
  • current pictures of the system;
  • maintenance records;
  • the OEM service contract;
  • the system’s manufacturer, model, series, and serial number;
  • site identification, along with whether the system is mobile or fixed;
  • the date of manufacture;
  • the software version;
  • dates of the last preventive maintenance service call and the last tube replacement;
  • the gantry count;
  • the tube count, type, and serial numbers; and
  • the computer, administrative console, and other included equipment (such as injectors, printers, and workstations).
If you, as a seller, are missing some of this information, “just get what you can,” Fischer advises. “For instance, if you don’t have the maintenance records, but the equipment is under a service contract, the person doing the service can give you the records. It’s not a perfect world, but all this information helps considerably in getting you the highest possible offer.” Cat Vasko is editor of and associate editor of Radiology Business Journal.