Practice survival: More strategies for a down economy
The classic, knee-jerk reaction when the economy slows is to cut prices. Look around. Stores are slashing prices 60 percent to 80 percent and everyone expects a deal.
But have you noticed the growing number of empty storefronts and going-out-of-business signs that are popping up, too? Both are a common consequence of aggressive price-cutting.
It appears most veterinarians are proceeding with caution when it comes to price cutting. The National Commission on Veterinary Economic Issues (NCVEI) reported that veterinary practitioners saw a slowdown in the last quarter of 2008. The number of transactions was down but revenue stayed relatively flat. This implies practices either were doing more for each patient or raised their fees to compensate for decreased volume — or a combination of the two.A carefully calculated fee increase is good strategy in this kind of environment.
Information gathered at the Economic Crisis Symposium at the North American Veterinary Conference (NAVC) in January suggests that veterinary practices plan to continue at least modest fee increases in 2009. Some 55 percent of audience participants at the symposium said they plan an increase of less than 5 percent, while 34 percent expect to raise fees 5 percent or more. Only 6 percent said they don't plan to hike fees in 2009, and 1 percent said they might reduce some fees.
The following 10 ideas can help you implement smart strategies to protect your practice and promote your services:
1. Establish a modest fee increase now if you haven't already.
You will need profit to build cash reserves to cover leaner months and help with cash flow. Summer months, for instance, usually are busier than winter.
Being a good steward of the practice means setting fees to provide a fair profit. The profit is a ROI to the owner on the money he or she invested in the practice, and it can be used to fund a cash reserve to carry the practice if business slumps or if there are unexpected expenses.
2. Raise fees carefully throughout the year to ensure that you are covering your costs.
Your suppliers are doing the same. Keep close tabs on inventory, energy and other costs so that you can pass those along to your clients and not hurt the practice.
3. Offer clients package prices.
Consider a "package fee" for a health exam and vaccinations. If clients know what to expect, it encourages them to take advantage of the offer and come in rather than delay visits because they fear they cannot afford them. Angel Venegoni, practice administrator at Webster Groves Animal Hospital in Webster Groves, Mo., says clients appreciate it, and that their hospital has had success with a set package price for exam and vaccination visits.
4. Give only smart, strategic discounts.
If your practice is slower in the early spring, perhaps offer clients an incentive to get their pets' teeth cleaned during February and March as part of the "Pets Need Dentistry, Too" campaign. Be careful about the amount of discount, though. A rule of thumb is that for every 5 percent discount, you will have to work 20 percent harder to make up the loss of profit. Carefully think through the amount you are willing to give away. Put a time limit on the offer to encourage clients to act during your slow period.
5. Offer frequent-buyer programs on products.
It's better for pets if clients purchase their flea, tick, heartworm, NSAIDs, veterinary diets and other prescription products through you. When they do, you can help remind them to give the medication appropriately, help them work through problems, ensure that their pets are getting authentic products and send reminders to help keep their pets protected. To remain competitive with the Internet and retain product business, you may need to offer product deals. Consider working with your pharmaceutical and pet-food representatives to develop loyalty programs. These encourage clients to purchase more products from you, and they build repeat visits. A loyalty program also encourages a partnership between you and the manufacturer that benefits everyone.