Balancing care with capital

News
Article
dvm360dvm360 May 2024
Volume 55
Issue 5
Pages: 38

Navigating financial conversations in veterinary practice

Balancing profit vs care

Photo: StudioGraphic/Adobe Stock

In the world of veterinary practice, where the love for animals meets the demands of running a business, understanding finances becomes crucial. The focus of veterinarians is the well-being of patients and the humans who care for them. However, caring for animals and providing treatments can push discussions about money to the back seat. The discomfort around these talks usually comes from the genuine passion for putting patient care above everything else. After all, most veterinarians chose this profession to heal animals, not to deal with budgets and numbers.

However, avoiding financial conversations can have consequences. It’s not just practice owners; even associate veterinarians stand to benefit from a good understanding of practice finances to ensure the long-term success of the clinic. Every decision we make within the practice—from setting service prices to managing expenses and investing in equipment—has financial implications. Without a solid grasp of these financial intricacies, we risk compromising the very foundation that allows us to provide top-notch care to our patients.

Below are 3 specific scenarios where financial discussions can get uncomfortable in veterinary practice. Shedding light on these situations and offering practical strategies to manage them may empower veterinarians to create balance between compassion for animals and the financial realities of running a practice.

Where does the money go?

Before delving into the examples, it’s essential to understand the framework of practice revenue allocation. Every dollar generated by the practice ends up in 1 of 5 major categories (we’ll call these the 5 buckets), including the following:

  • Cost of goods sold (anything related directly to veterinary services, such as medications or sutures)
  • Operating expenses (business expenses not related to veterinary services, such as rent)
  • Veterinarian labor
  • Other labor
  • Profit

Every decision made within the practice—from equipment purchases to staff compensation—has implications for these buckets and ultimately affects the bottom line. Importantly, 4 of these buckets are expense categories, each removing money from the practice. The last bucket, profit, is the money that’s left for the practice owner as a return on the investments made and risks taken to set up the practice, and it is money that can be reinvested into the business.

If revenue stays the same, every dollar in the practice gets allocated to a bucket. If you want to give the team raises or hire new staff, without an increase in revenue, this will reduce the amount of money available for operating expenses, or it needs to come out of profit. If there’s no profit, the flexibility around spending decisions becomes much harder.

Uncomfortable financial conversations

In my work with early-career veterinarians in the Ready, Vet, Go community and mentorship program, I commonly hear about how difficult it is to navigate certain financial situations in veterinary practice. There are many themes that come up time and again, but below are 3 very common ones.

Passing along discounts

One common scenario is the reluctance to charge clients or an inclination to pass along discounts for certain procedures deemed “quick” or “inexpensive” by veterinarians. This not only undervalues veterinarians and their expertise, but it also has a huge effect on the 5 buckets. For example, the case of a $40 skin cytology being waived or discounted under the guise of being a simple procedure. I do a lot of skin and ear cytology in my practice, and it helps me know how to best treat my patients.

Additionally, follow-up cytology after treatment helps me feel confident that the problem has been resolved, or it makes me change my treatment plan if the problem persists. Cytology can also generate a significant amount of revenue for the practice (if we do 5 per week, that is $10,400 in revenue for the year). We often forget how much is involved in performing this simple procedure, things like materials, equipment, staff time, and training and expertise.

Veterinarians can see that the true cost of performing this cytology extends beyond the nominal fee, encompassing labor, skill, equipment, and overhead expenses. By not charging for this service, veterinarians are not only losing revenue, but they are also costing the clinic money. By failing to charge for such procedures, veterinarians unknowingly chip away at the 5 buckets, jeopardizing the financial stability of the practice. If you discount or waive this fee 50% of the time, that is a loss of $5000.

Asking for a raise

Many veterinarians approach the topic of raises without fully grasping the financial implications for the practice. I hear this all the time from the early-career veterinarians I work with—they want a raise and feel they deserve one but may not have considered the implications of that raise and what it takes to provide it.

Let’s say you make $100,000 annually and you want to make $120,000. If you ask your boss for that $20,000 raise, they need to figure out where it’s going to come from. I posed this question to Martin Traub-Werner, founder and CEO of VetBooks, and he said, “Let’s say you have a $1 million practice—that money is already divided up into the 5 buckets. If I were the practice owner, I either have to take $20,000 from somewhere, such as letting another employee go, which is a zero-sum game, or you can grow the pie.”

Growing the pie might involve seeing more patients, increasing fees, or doing more procedures—and charging for them. Suddenly, that discount provided to the cytology carries more weight. Without a clear plan to boost revenue, any increase in wages directly impacts the 5 buckets, potentially leading to financial strain for the practice.

Advocating for new equipment

Veterinarians returning from conferences or continuing education events often come armed with innovative ideas to enhance patient care. They quickly run into the manager’s office, asking for new equipment, medications, and gadgets. However, requesting new equipment without understanding the associated costs can strain the practice’s financial resources.

Let’s consider the example of an end-tidal carbon dioxide monitor for anesthesia monitoring. Although this is invaluable for patient safety, this equipment comes with significant up-front costs, including the machine itself, staff training, and ongoing maintenance. After considering the costs, think about how utilizing this new equipment will increase revenue. How much can you charge for this? How often will you use it? How soon will the equipment be paid off? Once it’s paid off, it’s even more profitable for the practice. You will be much more likely to get buy-in for the new end-tidal carbon dioxide monitor if you have a well-thought-out plan to present to your manager that addresses the costs and financial benefits.

The compassion vs capital dilemma

Amid these financial considerations, veterinarians grapple with the tension between providing excellent care for patients and managing practice finances. It’s a delicate balance, where deep compassion for animals and the humans who love them intersects with the realities of running a successful business. Many veterinarians, like me, went to veterinary school because we love animals and want to help them, not because we love business. Understanding the financial implications of our decisions empowers us to make informed choices that benefit both our patients and our practices.

In her copy of Dr. Seuss’ My Book About Me, then-4-year-old Dani Rabwin, DVM, wrote that she wanted to be a trapeze artist or animal doctor. She decided against the circus, and today Rabwin is a veterinarian, communication coach, and mentor. She is the founder of Ready, Vet, Go, a remote veterinary mentorship program and community that supports new and early veterinarians, and complements the clinical mentorship that practices provide to their new associates. She graduated from University of California, Davis, and completed an internship at Michigan Veterinary Specialists. She feels privileged to be able to help veterinarians thrive in this profession that she loves so much.

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