How Much Does It Cost to Start a DME Company? A Financial Overview

Working with diagnostic medical equipment (DME) providers may feel a bit exhausting, so it's no surprise that some healthcare facilities decide to start their own. With the DME market in the U.S. worth $66.81 billion, it can be tempting for entrepreneurs, even those with little knowledge of DMEs, to want to join the field.

However, DME startup expenses can be significant, and there are a lot of licensing and regulations that go into starting a DME. Before jumping into a new business venture, it’s important to understand how much it costs to start a DME company. 

Fixed Startup Costs

The first thing to consider when looking at your DME startup expenses is the fixed costs. These are the costs that will remain the same, regardless of how much business you do or how well your business does. For DME companies, these include:

• Equipment: While you may choose to expand your equipment selection later, you’ll still need equipment to start, including beds, concentrators, and wheelchairs. These costs will depend on how much and what type of equipment you choose to stock.

• Facility or warehouse: You need a place to store your equipment and to operate out of. Consider whether you’re going to buy a building or rent a space. Costs can vary significantly by location.

• DME licensing and certification: There are several licensing requirements that DME companies need to adhere to, and each license or certification costs money. The cost for these depends on your state and specific Medicare compliance startup fees.

The specifics of these costs can vary significantly, especially depending on location. This is something you’ll need to factor into your overall business plan.

Variable and Operational Costs

Variable and operational costs are costs that can change based on the market and how your business is doing. As a result, they can be harder to predict. You’ll need to consider things like:

• Staffing: You’ll need to hire roles like admin staff, technicians, and delivery drivers. The amount will depend on the size of your business, and pay will depend on wages in your area.

• Logistics: To transport your DME, you need vehicles. You’ll also need to pay for gas and maintenance. Again, these costs can vary depending on several factors.

• Software: You’ll likely need a subscription for software, especially if you want EMR integrations and centralized reporting.

When working on your DME business plan, keep in mind that these costs can fluctuate from month to month. 

Hidden Costs Often Overlooked

In addition to the standard fixed and variable startup costs, there are some hidden costs associated with running a DME company.

One of the most important is equipment repairs and preventative maintenance. DME equipment requires routine maintenance and immediate repairs to keep working properly. Depending on the repairs, you may need to order new parts, which can also drive up your costs. Equipment that doesn’t work properly can have negative outcomes for patients. This, in turn, could lead to poor reviews and CAHPS scores, which could drive away customers.

Profitability Timeline

As part of your durable medical equipment business model, you’ll need to create cash flow projections and look at break-even periods. Cash flow refers to how much cash is going in and out of your business within a certain period. At the beginning, you’ll be in the negative as you pay for the startup costs, but you don’t have customers yet.

Break-even periods are times when you’re making about as much as you’re spending. This is common as businesses start to grow. Hopefully, as your business becomes more established, you’ll eventually be profiting. Good DME companies often have net profit margins of around 7-12%. 

When creating your timeline for profitability, you’ll need to have a strong idea of startup costs and an understanding of where those funds are coming from. You’ll also need to consider variable costs as well as things like marketing. All these costs will depend on the market where you live. 

Build vs. Partner Decision

Starting a DME company is a huge financial investment. As a result, many hospices opt for DME partners like Qualis instead. 

Why Qualis? Qualis gives you choice and peace of mind. Our robust DME vendor network gives you access to hundreds of vendors across the United States, so you’re never locked in to just one manufacturer. On top of that, our comprehensive business management services save you time so you can focus on your patients.

Qualis is more than a middleman. We work with you to not only provide the best DME for your patients, but also get it to you as soon as possible. As we’re not a direct supplier, we can also evaluate providers without bias and bring you better savings without reducing the quality of your supplies.

What’s Next?

So, how much does it cost to start a DME company? DME startup expenses can vary, but include things like equipment, a facility, licensing fees, staffing, logistics, and software. The final total will depend on the scale of your business and where you’re located.

Before you build, understand the numbers. Get a DME diagnostic from Qualis to compare options and contact us today to explore how we can help.