Don't be an unintentional not-for-profit practice
When you start a franchise, you get a book. A franchise bible that says, "Do it this way and no other way on pain of debilitating economic losses." Staff training is detailed and comprehensive with videos and testing requirements. You buy XYZ equipment at a pre-negotiated price and the equipment actually works the way it is supposed to work. The computers are even pre-programmed the right way the first time, which is unique today.
If you believe that the growing veterinary chains all operate this way, I have a bridge in Brooklyn, N.Y., that you might be interested in purchasing. Many of these chains are just buying groups with 27 problems arising out of the 20 unique personalities of the former owners and now franchisees. Only those that started from scratch have any hope of reaching the efficiency of a Dunkin' Donuts or a KFC franchise. That means standardized size, standardized equipment and standardized staff.McDonald's franchisees can tell you the labor cost per order of fries and the man hours per day in brewing coffee, and if you are off 10 percent, all hell will percolate. Watching Subway's portion control is an act of elegance. No waste, no excess and maximum profit.
Isn't profit what business is all about? Last I heard, there were very few veterinarians attempting to deliberately operate an official not-for-profit practice. Don't get me wrong, there are many non-profit practices, but I don't believe that was their original intention.
Why practices underperform
The No.1 reason why practices fail to produce sufficient profits is failure to charge appropriate fees—or fees that are high enough to produce a respectable bottom line yet are affordable to the local residents. I use the fee/complaint ratio, in which a higher fee based on local affordability can still produce little or no client dissatisfaction.
Colleague and fellow contributor Mark Opperman recently published a survey of 300 practices (available at http://dvm360.com/missedfees/) that he is associated with which demonstrates that many services (and fees) are missed on a regular basis. He showed that the average hospital missed four fecal examinations each week (for 50 weeks) with an average cost of $19 each for a loss of $3,800 per year.
I could not disagree more. My surveys show that clients will pay 61 percent of the exam fee for that service without complaint (that's the key) if it is more properly labeled on the invoice as an "intestinal parasite screen."
According to http://easidemographics.com/, the average family income in the United States in 2010 was $67,609. That calls for an affordable exam fee of $41.80. Sixty-one percent of that means the intestinal parasite screen fee should be $25.45, and with a loss of four each week, that computes to $5,090 in one year or a difference of $1,290. That is adding insult to injury, but as these practices missed those fees, it really does not matter because their bottom line will not notice the difference.
But, wait! What about the 1,000 intestinal parasite screens that were performed at a lower fee than the client was willing to pay? Mr. Opperman's average practice charged $19 when $25.45 was feasible and attainable. The $6.45 difference in a 1,000 procedures would bring $6,450 in pure profit to your bottom line.