The veterinary business wheel needs to keep turning - DVM
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The veterinary business wheel needs to keep turning
How your practice compares to success in other industries—and why you should pay attention


DVM360 MAGAZINE


Is your veterinary practice struggling? Do you need to boost revenue? Or does your practice just need a little more sparkle or pop to keep clients coming in your door? If you answered yes to any of those questions, I've outlined some strategies this month to help.

In the business world there are drivers of income. In the manufacturing industry, they include the building and sale of new products like cars, cell phones, toys and even houses. In the service industry, the income drivers are the creation and sale of insurance policies, health policies, banking services, health-care services and veterinary services.

In manufacturing, the need to create new and innovative devices is constant. The laptop computer made a splash with its debut. The cell phone came next. Smartphones are now overtaking the mobile market, and we're seeing major growth in tablet computers. The Apple iPad is a fantastic example. Sales of iPads are expected to triple next year.

We can learn from these successes. All businesses go through these continuous cycles of innovation. Either you launch new products and services to grow the market or you try to build market share.

Case in point? The fast-food industry. To boost sales, the various vendors need to "steal" customers from the competition or create a new segment of the business. In this category, McDonald's created a new "pop" by introducing a breakfast menu.

As we all know, small animal veterinary medicine is also a mature business. There are very few really innovative ideas that will bring a surge of new purchases and revenue. In fact, some market segments in the veterinary profession have been in decline.

Equine veterinarians lost their tube worming business. Food animal practitioners lost their pharmacy sales. Both groups of practitioners needed to find alternate methods to collect fees for professional services. They adapted.

For small-animal veterinarians, wellness programs and the average client transaction (ACT) are linked. If you raise wellness program prices too much, customers resist—and client visits decline.

The next "pop" in veterinary medicine may well be oncology. Fifty percent of dogs over 10 years of age are expected to succumb to cancer. This segment of the market should be watched closely. In fact, you should track this metric by monitoring the annual services per pet (ASPP) at your practice. (For more on this topic, see DVM Newsmagazine's "The King is Dead, Long Live the King," Sept. 2010, or read it online at http://dvm360.com/aspp.)

What brings in new revenue begins with cash, as illustrated with a Business Wheel like the one above.

In the manufacturing sector, the Business Wheel might look like this:

> A capital investment (cash) is made.

> The Cash is put into new equipment.

> The facility starts making widgets.

> Widget manufacturing leads to new inventory.

> Inventory heads to the market and generates sales.

> Accounts receivable leads back to cash.

In veterinary medicine, and related service industries, the Business Wheel looks like this:

> Cash is invested in veterinarians' education and development of academic knowledge and medical skills.

> Cash is invested in medical supplies and equipment to offer new services. (These veterinary services are considered the inventory.)

> The practice offers those services to the pet-owning public.

> Sale of these services leads to accounts receivable.

> Accounts receivable leads back to cash.

In some industries, once a 60-day inventory is built up, the factory slows and workers are sent home or furloughed. This layoff affects the workers and drives down variable costs—but does not impact sales.


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Source: DVM360 MAGAZINE,
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