Expense or Investment- Medical Liquid Oxygen Delivery

If you pay $2000 more for a new 210 gallon liquid oxygen delivery vessel than you might pay for a reconditioned, used 190 gallon vessel is that an expense or an investment?

Of course, it depends. The dependent factors center around Opportunity Costs. If you have all the capacity you need to fill all your clients each delivery day and have no opportunity to for growth or efficiency improvement then a larger tank is just an expense. This would be especially true if you pay more for the larger vessel.

On the other hand, what about the client who fills his current 190s six times a week to go fill Nursing Home and other group clients? This drivers for this company are regularly (almost daily) showing up at sites, filling, and leaving without having completed filling of all empty vessels. Now they are adding trucks and trying to decide. For this client, the additional $2000 they might spend would be fairly easy to justify. Currently, all the expense of getting to the client has been incurred, but they are leaving money behind when they leave. With a slightly larger vessel the driver would have the opportunity each day to increase billing by $25 to $100 without incurring any additional incremental expense. In this case, the total time to recover the additional capital invested would be from one to three months. They would then keep making money on that investment for years to come. It is no real wonder that there are so many smaller vessels showing up in the used equipment market.

Jay Levinson pointed out in Guerilla Marketing that one of the greatest failures is the Failure to Exploit. Hmmmm……..