Give your veterinary practice a physical exam

You give pets physical exams every day, but now it's time to get up close and personal with your practice. What's the pulse of your income? Are there abnormalities in your client numbers? Let's look at some specific indicators and get an idea of how truly healthy or unhealthy your practice is.

No. 1—Bonding rate

One key indicator of your practice's health is how deeply your clients are bonded to your practice. A good way to benchmark this is the percentage of clients who've returned in the past 18 months. Most veterinary software programs have a criteria search-and-sort function that can provide you with this information. The average bonding rate for veterinary hospitals is 60 percent, which means you see six out of 10 clients return within 18 months. If your bonding rate is below 60 percent, it's time for some further investigation. How satisfied are your clients? Do you use client questionnaires to evaluate client satisfaction? Review the records of clients who haven't been back to see what the circumstances were or call them to ask why they haven't come back—and if there's anything you can do.

No. 2—New clients

How many new clients per full-time-equivalent (FTE) doctor do you have coming in a month? Benchmarks 2013: A Study of Well-Managed Practices, from Veterinary Economics and Wutchiett Tumblin and Associates, found an average of 18.5 new clients per month per FTE veterinarian. In addition to benchmarking your practice against high-functioning peers, compare your practice to how well you did 12 months ago. Are your new-client numbers up or down? If they're down, have you tried any initiatives to drive more new clients to your hospital? Were they successful? If you spent money on a new website or social media, did you get a return on that investment? If the number of new clients is low or dropping in your practice, don't just accept that—fight back! Start with the receptionist—does your front-desk team offer to send a hospital brochure and answer any questions for telephone shoppers? Phone shoppers respond well to attentive receptionists; they've already called other practices and yours will likely be the only one that offered to send information.

No. 3—Client satisfaction

If you want to know how well you're serving clients, consider using a mystery shopper (visit dvm360.com/mystery to get a sample mystery shopper form). One simple way to do this is to arrange with another veterinary practice (not local) for one of their employees to visit your practice as a client. That person then reports back and can help determine how good or bad your customer service is.

Another option for assessing client satisfaction is a survey. I've seen success at veterinary practices with a free survey app for iPads called QuickTapSurvey. You create a series of client questions then hand off the iPad to clients at the end of their visits to complete. It takes them just a minute or two, and results are automatically tabulated. It's a great way to keep your finger on the pulse of your clients. For a sample client satisfaction survey, go to dvm360.com/clientsatisfaction.

No. 4—Your transactions

Hospitals in Benchmarks 2013 reported generating 450 invoices per month, or 5,405 per year, per FTE veterinarian. That included invoices for food and refill prescriptions. Don't forget to check whether your total number of invoices are up or down from last year. The same holds true with your practice's average invoice and each doctor's average client transaction. Many practices are seeing a decreased number of transactions, but an increase in the average client transaction. If this is you, you might depend on a dwindling number of clients to sustain your veterinary practice. Are you OK with this, or would you like to work on attracting more new clients into your hospital? If your number of transactions is going down, look at the services you provide. Are there new ones you can offer to bring in some clients—alternative medicine, exotic pet services, etc.?

No. 5—Revenue sources

Where is your practice revenue coming from, and how has that changed over the year? Some practices are increasingly dependent on ancillary services such as boarding and grooming. Other practices have seen a significant decrease in their flea, tick and heartworm preventive income. One example of this might be pharmacy income. Is your pharmacy income going down, and have you figured out why? Internet pharmacies are big business because they're so convenient. Do you have an online pharmacy on your website? If not, you'll lose some of this income in the future.

No. 6—Net revenue

You may be generating less income but bringing home more. You may be generating more income and taking home less. You won't know until you check. How much revenue do you receive out of your practice in dollars and benefits? Compare your practice to various industry benchmarks and see how you compare to last year. In my experience, the two most critical expense areas are inventory costs and support staff costs. If your bottom line has been depleting, focus on these two expense areas of your practice.

When you're finished looking for signs of trouble in the financial benchmarks above, you might see success—your practice is doing a little better, your income is going up and you've got money in the checkbook at the end of the month. But when things are good, you still need to watch these half-dozen numbers to ensure future success. For a sample checklist to evaluate your clinic's health, visit dvm360.com/clinicchecklist. Don't be lulled into a false sense of security. Take a long look at your practice to prevent future problems the same way a good physical exam catches signs of potential disease down the road. Now is the time to make adjustments, cultivate better financial habits and make better decisions—not next year, when your income is down and you start seeing fewer clients coming in the door.

Mark Opperman, CVPM, is owner of VMC Inc., a veterinary consulting firm based in Evergreen, Colo.