Monitoring your practice in today's economy
Paying attention to demographics, finances, diagnostics yields benefits.
Nov 01, 2008
Rising gasoline and food prices are radiating through every aspect of our economy. People are driving less and eating at home more often.
Restaurants, florists — and veterinarians — are feeling this difference. Attendance at local continuing-education meetings, always proportional to air and hotel costs, is booming.Diners are choosing basic fare as often as your clients are asking for less-expensive alternatives of treatment. Nationally, dentistry is off 30 percent or more. This is a disaster when you consider that only three percent of dogs and only one percent of cats ever get dental care when 35 percent need it.
Yet, the real problem has never been the economy.
In past recessions, veterinarians did well enough that survival was not a problem. Now, talking with my management and consulting colleagues, it appears to be a consensus that some 15 percent of practices may cease to exist in the next half decade.
Why? Well, it's a bit like our national bank problem. Too many investments in insecure hands. Too much false optimism in a reality-based market. Too many practitioners opened with their eyes propped wide with optimism in otherwise crowded markets.
They did not do their homework.
Opening a practice because the neighborhood "looks good" sometimes works. However, old Doc Behindthetimes, the competing practitioner who had to retire soon, couldn't sell his practice because his profits were just enough to give him $50,000 a year, and nobody in their right mind would make that purchase. His clients were not available to the new practice, and the population of the entire state is declining as more and more (50 million people) tend to move to the South and West.
You need 1,400 active and able clients to open a practice, and that calls for 3,000 families earning $50,000 or more. It calls for a population of 10,000 for each veterinarian. A community of 40,000 will support four — and only four — veterinarians. The fifth will kill the profits for the others.
Even those original four are going to have to sharpen their monitoring skills in today's slowdown or recession.
I find it amazing that we spend thousands of dollars to monitor a single patient at crucial times but fail to monitor our own livelihoods in a tough economy.
The single worst number to keep track of in veterinary practice is gross revenues, yet for most practices it is the single number monitored.
The least-examined document in veterinary practice is the profit & loss statement. The accountant prepares it, and fewer than five percent of practice owners review it. Being an accountant to a veterinary practice is like having Picasso paint the outside of your building.
Honestly, I have long ago given up on the ability of a veterinarian to act in his or her own best interests. The altruism of our profession ranks way, way higher than any school of diplomacy could produce. We give away our future for our client's present needs.
However, having said that, I am not sure that the tools needed to prevent the loss of retirement security has ever been presented in past veterinary curricula. As 9/11 taught us, the price of our liberty is eternal vigilance.
In past columns, I have detailed medical-history and physical-examination forms that force us to open our eyes to the detailed needs of our patients. It is no different than what our alma mater required of us to attain our degrees, yet, for so many, it's discarded in the rush to expedience. These forms are available free at (800) 634-1876.
Check out the form that I use to monitor so many practices that I have managed to put back on their feet and eliminate the red ink from their books (Table 1).