We Should Have Learned These Lessons Before

Everyone has learned that “What goes up must come down.”

Everyone learned that “What goes up must come down.”  Anyone with money in the stock market in late 2008 saw accounts drop seemingly by half almost overnight. 

Real estate values went down and the banks became unstable. As a result of the economic meltdown, the Gross National Product fell and the unemployment rate rose. 

All in all, not a good time for most people from 2008 through 2010. 

The specific numbers are still being crunched, but the veterinary profession was not as affected as most other business sectors. Most veterinarians felt lucky they were not automobile dealers, real estate salespeople, bankers or stock brokers. 

Were veterinarians hurt? Absolutely, but not to the extent many others were hit. The specific effect depended on your practice location, practice type and your attitude about the recession. In most cases, veterinary practices were somewhat resistant to the recession, although not recession-proof.

From various surveys done by AAHA, AVMA and NCVEI, reported gross revenues vary from being up 10-15 percent to being down 25-30 percent.  As Dr. Karen Felsted, CEO of NCVEI, has said many times, “Flat is the new up.”  

Some practices on both coasts of the U.S. were affected more than practices in the middle of the country. This may have been due to more volatility in real estate on both coasts and the location of manufacturing businesses.

It would appear that specialty, emergency, equine and larger companion animal practices may have been affected more than small companion animal practices. There are always exceptions, even in the most severely affected areas where unemployment is up, real estate foreclosures are up, and the local quality companion animal practice has a gross income that is down 8 percent but the net is up 5 percent.

One’s attitude was also important to the overall success of your practice. Some practitioners decided to “not participate” in the recession.  They continued to run their practices by expanding services and improving the bottom line.

The specifics concerning where the profession stands today are not yet available, but we know in general that transactions are down, revenue is flat or up slightly, average transaction fees are up, and net income is usually up. Why is the bottom line hanging on in many practices? The answers must be found in the way we are managing the business side.

Have we really learned anything during the Great Recession?

We really have learned a number of lessons that have helped us through this difficult period and now that information can be used into the future. We should have been doing these things all along, but have now been forced into doing them to survive. 
In the long run, the profession will do a better job of cost containment, increasing efficiency and charging for all of our services as a result of the recession.

When the bottom line shrinks, most people think first about cutting expenses.  Keeping expenses in check is very important, but is not the only thing we can or should do. Most veterinarians cannot cut expenses extensively because most are very conservative in the first place. 

Most practice owners cannot save themselves to profitability.  To be most effective in slow economic times, a combination of income growth (marketing) and expense control works best. Sometimes we forget about the growth potential in the income side of the business when times get tough.

Potential growth in our revenue has been recently pointed out in the 2010 Bayer-Brakke -NCVEI study released in January, 2011. This study revealed several possible solutions to declining transactions in veterinary practices. 

Solutions included developing and promoting an industry standard for providing quality patient care; communicating the value of regular treatment; improving appointment scheduling; making practices more “cat friendly”; and providing improved pricing strategies and finance options. 

Most of these recommendations can be summed up as improved communication with our clients about the services and options we can offer.

One example of improved communication would be to explain to clients why regular evaluations and treatments by the veterinarian are in the best interest of the patient and client. If we are regularly evaluating and looking at each patient once or twice per year, we are more likely to find early dental disease, cancer, skin disease, heart disease, ear infections and eye diseases. 

When you stop and think about the fact that 85 percent of all dogs and cats have some form of dental disease by the time they reach age 3, how often would you not be able to find something clinically significant in almost every patient examined? 
When you find a health issue, this is your chance to put your “teacher” hat on and explain your findings–and why it is important to detect this early   and how you should manage these findings.

Other ways to better communicate with your clients include  improved websites, updated facility signage, use of social media and updating the public areas of your facility to demonstrate to the client that you are up-to-date. 

The hottest method of communication is through your website. Most practices would benefit from using the professional service of a veterinary website company.  By using professionals, the website will be more user friendly and “pop up” more often when potential clients use search engines to locate veterinary services. 
More and more people are turning to the Internet to find services and information.

Consider how to make it easier for clients to make appointments. One way would be for them to make appointments online through the website. You might consider offering a small incentive (say a $5 credit) to clients who choose to schedule their own appointments.

Another way to fill the appointment book is not letting any client leave the practice without scheduling another appointment. This method has been used for years by physicians and dentists. 

Clients will fall into one of these appointment types: 

  • Medical progress exam (re-check),
  • Re-evaluation or
  • Health maintenance exam. Making the appointment is the first step and must be followed by appointment reminders before the appointment to assure the client’s return to your practice.

Technology today is a great help in increasing client awareness of our services, but will never replace face-to-face communication between client and veterinarian.

Continuing emphasis must be placed on communication skills, both body language and verbal. Body language is about 75 percent of communication and includes eye contact, appearance and facial expression, while the actual words spoken contribute about 20-25 percent. Therefore, attitude and appearance are extremely important in the communication process. If the staff looks, acts and sounds professional, then the client will usually treat them that way.

Don’t forget that you are also communicating with your client through the appearance of your facility.

We know that cat visits to the veterinarian are down and one reason may be that we do not always have a “cat friendly” facility.  Do we have a separate reception area for cats, condos for keeping cats, pictures of cats in the examination rooms, padded examination tables for cats and available cat carriers for clients to use to transport cats to and from the practice?

Another method of increasing revenue through communications is to explain all costs of services by using  a treatment plan, formerly called the fee estimate, so the emphasis is placed on treatment and not fees. 

We must charge and collect fees to stay in business, but do not give the perception that money is more important than the care of the patient. 

Going along with assessing and collecting fees is the use of third-party payment plans for client convenience.  Use of both pet insurance and medical credit cards will help clients afford service that they may not be able to pay in full today. Many clients still do not know that both medical credit cards and pet insurance are available.

Using better communication and marketing skills will allow us to increase revenue.  The other side of improving net profits would be to reduce expenses where possible. 

The two largest expense items in most businesses are personnel and inventory.  The approximate personnel expenses in a companion animal practice should be no more than 40-43 percent of the gross revenue while the inventory (drugs and supplies) should be no more than 15-18 percent of gross revenues.

Some of the things we learned during this recession were that in tough times we often were able to operate with fewer staff (both part-time and full-time). In some cases, the practice reduced the number of veterinarians or hours worked by veterinarians.  When staff left the practice, some were not replaced or a hiring freeze was imposed. 

The reduction of staff and/or veterinarians can only work if we do not have enough cases coming into the practice.

Another way to stretch staff is to become more efficient in the day to day operation of the practice. This could be accomplished by cross training, careful scheduling and eliminating overtime. The benefits package needs to be reviewed as the cost of health insurance has increased to the level where many businesses are now reducing the amount of coverage.

Considering the inventory expenses and net profit, one must consider the advisability of carrying several brands of the same product, whether it’s  shampoo, pet food, vaccines or NSAIDs.  Consolidate by carrying only one brand of a product if possible. We obviously need several antibiotics. 

If we can reduce the number of brands we will increase turnover, which will in turn increase profit. Coke, Pepsi and restaurateurs figured this out many years ago.  You can have either a Coke or Pepsi in the restaurant or refreshment business, not both.

Another important factor in controlling inventory is to order only what is needed. By reviewing computer usage data, one can determine the usage per month of various items.  Inventory turnover should be used to determine the amount and frequency of orders. 
We do not need three months’ supply of an item that can be restocked within a few days. If we can function with a 30-day supply, then we do not need a 60-day supply on the shelf.

In summary, we have learned the veterinary profession is resistant to recession, but not recession-proof. 

When revenues become flat or decline, we should look to both increase revenues and decrease expenses. 

Revenue increases can be best accomplished by using technology and increasing communication and education skills.  Expense reductions can be achieved through focus on personnel needs and inventory control. 

We have also learned we should have been doing these things long before the Great Recession.

Dennis M. McCurnin, DVM, MS, Dipl. ACVS, is a professor of surgery and management at the Louisiana State University School of Veterinary Medicine.

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