Good news: Veterinary sales trends are heading upward
“Jobless claims hit lowest level since 2008,” says a recent headline in the Wall Street Journal. What’s more, housing starts are up 10 percent from a year ago and the Dow has neared four-year highs. While the recent economic trends look good, can we say definitively that we’re out of the woods? Well, not definitively, but the impact for veterinary medicine looks positive based on the last four months.
Burzenski and Co.’s veterinary market division, led by Veterinary Economics Editorial Advisory Board member Gary Glassman, CPA, collects monthly companion animal statistical information from about 100 veterinary practices nationwide. The data for 2011 indicates that the average veterinary hospital was up 3.13 percent in sales compared with 2010. The average invoice had an increase of 3.28 percent, though the invoice volume in most veterinary hospitals was still falling at a very small rate.
The main driver of the higher average invoices is still price increases. One possible reason for the stagnation in invoice volume: most veterinary hospitals rely on a client response reminder system. When a client doesn’t comply with a reminder for an office visit and vaccines, the next year’s reminder isn’t delivered. If hospitals aren’t proactive in maintaining their active client base with current reminders, compliance for yearly preventive care exams and vaccines will drop dramatically, and clients won’t come into the clinic until their pets are sick and overdue on vaccines.
While the 2011 results indicate some sales growth, it’s been challenging for veterinary practices to see growth in the number of invoices and new clients. But a look at the last three months of 2011 points to more positive changes, likely due to current economic factors. A survey of hospitals for the last three months of 2011 over 2010 indicates sales growth of 5.15 percent with a positive growth in the number of invoices at 1.75 percent and a growth in the average invoice of 3.34 percent.
What’s more, January 2012 results indicate average sales growth of 9.71 percent over 2011. This occurred with an increase in invoice volume at 7.24 percent and a continued increase in the average invoice at 2.31 percent. While the January results are significant, they may be influenced by weather: The East Coast experienced harsh winters in 2010 and 2011, while in 2012 weather patterns were more mild.
“We now have four months of data that indicate a positive trend in sales and a positive trend in the number of additional invoices. The importance of a positive change in invoice volume can’t be over-emphasized,” Glassman says. “A strength in invoices leads to a strength in client base. An increase in client base leads to busier practices and adds long-term growth for practices, which builds on their value.”
Glassman also indicates that veterinary practices' awareness of the recent Bayer Veterinary Care Usage Study has had an impact on the level of invoices generated, but recent economic trends are probably a more significant factor. (Do you agree? Weigh in here.) All of these things together have the ability to set the stage for a better financial outlook for 2012, so keep doing your research and looking for ways to grow your practice.
Burzenski & Co. is a full-service accounting firm providing financial management guidance, accounting, and tax assistance to the veterinary profession. Gary Glassman, CPA, has worked exclusively with veterinarians for more than 25 years.