Financial considerations critical component to successful merchandising - DVM
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Financial considerations critical component to successful merchandising


DVM Best Practices


Compensation issues Regularly review how staff is being paid. In the current world of veterinary economics, doctors are often paid a percentage of productivity. Before productivity can be rewarded, it is important to understand what it comprises. Often, merchandise items are added over time, and included in a particular doctor's provider account code. Because of the lower markup on these items, the percentage paid for doctor time with a higher portion of revenues generated for merchandising compounds the problematic aspects of lower profit margin inherent in merchandising.

Staff wages and compensation may also be an issue. Some practices reward staff on an incentive basis for product sales made. In such a bonus plan, staff belief in the merits of wellness care, prophylactic dentistry, and veterinary procedures must be reinforced.

If incentives are only based on selling product, a danger exists that attention to comprehensive health care will be weakened.

Pricing Pricing is one of the most crucial issues to consider when merchandising in the context of professional practice. Pricing strategies must be based on cognizance of intra-practice subsidy. Some product lines can generate a higher profit than others. Ear and eye medications, generic drugs and medications prescribed as part of a treatment plan may allow a higher markup than other items that are more routinely shopped. Heartworm preventatives, flea products and pet supplies easily found via the internet or catalogue sales are good examples.

Typical markup spans anywhere from 40 percent to 300 percent. The general rule of thumb is that a 2.5 to 3 times multiplier should be applied if doctors are paid on a production basis for a portion of the sale. Anything less than a 40 percent markup in the veterinary hospital setting (and not included in doctor production) is likely lower than breakeven.

Keep staff aware of the fact that merchandising is only a supplement to excellent veterinary care. The primary purpose in any veterinary hospital should be the provision of excellent services. Charge well for them. Doctor time, consultation, and treatment should take precedence to the shopkeeper's mentality.

Merchandising can be a strong addition to the practice bottom line when handled in a business-like manner. Be wary that a casual approach to managing merchandise in the veterinary setting results in a less economically rewarding practice situation.

Failure in these situations results from veterinarian discomfort with charging for a knowledge base. Are you comfortable with what you know and does your current knowledge base represent a good return to your clients? If you can answer yes to this question, then keep your fees commensurate with that responsibility. Merchandising at all levels then becomes a supplement, providing your clients with the convenience of everything they need for excellent pet care.

Referrals and practice growth will come not from the fact of merchandise on your shelves, but because of the reputation the practice enjoys through the efforts of its professional staff.


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