Gary I. Glassman, CPA
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IS YOUR PRACTICE WIMPY? FLAT ABS MAY BE YOUR GOAL when you're doing crunches, but flat isn't so ideal when it comes to your
practice's growth. So if you've plateaued, it's time to whip those financials into shape.
The first step: Find the reasons for the stalled growth. Often it's largely due to a market saturation of veterinary practices
and a lack of marketing innovation.
Step two: Fix the problem.
Know your numbersRemember, the number of invoices you produce and the size of the average transaction are what drive practice income. So you
can run a diagnostic by using your veterinary software to track the number of invoices and the average invoice total on a
year-to-year basis.
Figure 1.
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It's important to look at both of these numbers; a practice that's seeing sales growth could still be stalling because it's
not attracting new clients or hanging on to the ones it has. For example, review the numbers for Loving Pet Animal Hospital,
a small-animal hospital in Durham, N.C., in Figure 1. In one year, the practice gained 325 new clients. This should mean that
the practice generated at least this many more invoices, if not even more than that. But that's not the case. The invoice
base grew only by 47 invoices for the entire year, suggesting that the practice had high client attrition, losing more total
clients than it added. These numbers tell us that most if not all of the practice growth came from an increase in the average
invoice and not from an increase in the volume of invoices.
Do you have time to do more?
Growth in the number of invoices or client visits is what builds long-term value for a practice. Short-term increases in the
average invoice generally don't build value but rather cover inflation-indexed expenses. Usually this jump comes from a fee
increase. However, a practice that's adding services may see more significant growth in the average invoice. So if your average
invoice jumped 5.5 percent, you've adjusted for inflation in your costs. If you saw a 10 percent increase, you probably added
new services.
To better understand hospital invoices, compare your practice to the industry benchmarks in companion-animal hospitals. Loving
Pet Animal Hospital employs two full-time equivalent (FTE) doctors. A general rule of thumb is 5,000 hospital invoices per
FTE veterinarian. Since the practice generates 10,098 invoices, it's likely near its capacity.
If you're in the same position, further growth might be possible with high-density scheduling and by leveraging your staff
more—if these strategies are a good fit for your practice. A look at Loving Pet's appointment book indicates that the schedule
is filled about 85 percent of the time, and appointments at the most convenient times—evenings and Saturdays—are always booked
one to two weeks out. Emergency slots are filled by 9 a.m., and routine surgeries are booked a week and a half out.
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