Manage for profit—even in a recession

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Manage for profit—even in a recession

Pay attention to these key factors to protect—and boost—your bottom line.
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Sep 01, 2009

You don't need to participate in this recession. Sure, you may not be able to prevent some negative effects, but if you manage your practice properly, your bottom line won't dwindle—and may even grow. To maintain or increase your bottom line during the recession (and to protect your practice value), you'll need to be proactive and manage the variables that affect profit. Here's how.

MAINTAIN PATIENT COUNTS

The number of clients and patients you see is one of the most important nonfinancial variables in your practice. If each doctor in your practice sees at least 10 to 15 patients per day, then your financial variables—cost of goods, cost of labor, and your fees—are relatively easy to manage in order to maintain or increase profit. So keep those patient counts healthy by educating clients thoroughly, sending reminders, and calling clients to encourage them to come in for needed care.

UPHOLD YOUR MEDICAL STANDARDS

The doctors in your practice must also maintain the quality of medicine provided—even when clients are requesting more services for less expense. This means dividing up work over a client's pay periods if necessary. It also means providing itemized invoices to reflect the value you provide. It doesn't mean omitting diagnostics.

HOLD DOWN COSTS

The costs of goods used and sold at your practice needs to stay at 15 percent to 18 percent of gross revenue, depending on how much pet food you sell. (If you sell a lot of food, you'll be at the higher end of the range.) Likewise, you need to control staff labor costs—excluding management and some marketing costs—at 15 percent to 18 percent of gross revenue before taxes and benefits. Neither cost should exceed 20 percent of gross revenue.

ADJUST YOUR FEES QUARTERLY

Like every other veterinary business, your practice has its own set of fixed and variable costs that directly affect whether you can pay staff, cover expenses, be compensated for your veterinary work (preferably on a production basis), and take home 15 to 18 percent of gross revenue before taxes as a return on your investment. (This take-home percentage is calculated on a cash basis before any practicepurchase, mortgage, or equipment payments have been made.) If you're going to cover your operational costs and keep seeing a return on investment, you'll need to raise your fees every quarter, especially if you're seeing a dip in client and patient counts.

Of course, you won't raise prices on popularly shopped services such as spays, neuters, and vaccinations. To get an idea of where to start with fee setting, refer to Benchmarks 2009: A Study of Well-Managed Practices by Veterinary Economics and Wutchiett Tumblin and Associates, to AVMA and AAHA surveys, or to the frequently updated information at http://ncvei.org/.

Don't let the recession stop you from serving clients well, raising fees appropriately, paying yourself and your team a livable wage, and seeing a return on your investment. If you manage your practice according to these principles, your profits can go up even when your gross revenue is declining.

Veterinary Economics Editorial Advisory Board member Dr. Karl Salzsieder, JD, is a consultant with Salzsieder Consulting and Legal Services in Longview, Wash. Please send questions or comments to

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