Roadside service for your veterinary practice

Roadside service for your veterinary practice

Look to associate compensation and location for the reasons your practice has a flat (revenue)
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Oct 01, 2011

In the simplest sense, I've spent the past 25 years of my career as roadside service for Dog and Cat Repair Centers throughout America. And I see a similarity between the economics of the auto industry and veterinary medicine.

In the auto world, superior manufacturing processes have made tire blowouts rare events, but flat tires are becoming more common as road maintenance falls in the wake of municipal budget constraints. In veterinary medicine, practice bankruptcies—unheard of until 2008—are sharply rising while flat veterinary production is rampant. The fault is not hard to guess at: a profound lack of preventive maintenance. Few would buy a Ferrari and put used retreads on before hitting the road, but so many have put Taj Mahal veterinary hospitals in locations incapable of supporting them when the going gets tough. The moral is: Practice owners must never neglect market share. Building into a saturated demographic is usually fatal.

Our innovation ends with medicine

We veterinarians are among the most stubborn of professionals. Sometimes we think we're CPAs and management gurus, too, and make decisions with reckless abandon. Of course, we also think we're experts in interior design, electrical connections, carpentry, roofing, and plumbing. Why not, we take animals apart and fix them—what's so different?

But while we are incredibly innovative in our practice of medicine, we tend to follow the beaten path with regard to economic management issues. A real practice management guru, Bob Levoy, once wrote, "What was good enough, ain't good enough anymore." And in the words of former president Clinton, "The deepest wounds are self inflicted."

The status quo doesn't work. If you're not growing your practice, you're killing it. If your gross revenue is flat compared to last year, you're losing money. Many have cut overhead to the bone, letting that savings prop up their take-home pay. Inflation, though, will continue to spin off a whole new crop of practice failures. Don't fall into that trap!

One too many associates

A proper workload for a veterinarian is 15 to 18 outpatients per day per veterinarian. Do the math—that's 100 transactions a week, 5,000 a year. If you have three veterinarians and only 10,000 transactions, you have an unhealthy bottom line. Just because you have more associates in your practice doesn't mean you have more clients.

If you have three doctors with just 30 outpatients per day, you have one associate too many. Other business owners don't seem to mind laying off a single person to solve their revenue problems. We veterinarians, though, seem to adopt associates for life, irrespective of annual contracts. Cutting back on hours worked seldom works well. My most frequent consulting involves how to compensate associates when there's not enough business to pay them.

How you pay is a problem

Percentage compensation helps, but some practice owners make the mistake of using a minimum base, predicated on 20 percent to 30 percent more transactions and the extra dollars available. So a 22 percent compensation rate with a $108,000 minimum still means paying out $9,000 a month when the 22 percent alone would have produced $79,000, or $6,600 a month. The extra $2,400 that month comes right out of the bottom line. Minimum bases are for the first year or two only, as a new hire gets on his or her feet.

The ranks of associates looking for relief work are swelling as are the number of new graduates unable to find positions. Of course, this is most true in the northern United States. Down south, in places like Texas and Louisiana, population is soaring. Some practices experience 10 percent to 15 percent growth there, while some northern states are shrinking in population daily.

That brings me to the crucial factor: location, location, location.