Better management techniques are the cure for economic doldrums

Article

I hear from 20 or more veterinarians every day, most of whom want to tell me about the economic downturn in their area and the fact that clients just are not coming in as frequently, so their revenues are down.

I hear from 20 or more veterinarians every day, most of whom want to tell me about the economic downturn in their area and the fact that clients just are not coming in as frequently, so their revenues are down.

The Message

The downturn in transaction numbers is running as high as 15 percent.

Most of the calls of anguish are from the colder states. That's because more of America's population is shifting to the South and West. (A positive exception is the Pacific Northwest. Negative exceptions predominate in the areas hit by Hurricane Katrina in 2005.)

I hear from practitioners who face losing some staff members and perhaps closing their doors. Many of them have adjustable-rate mortgages and now face 9.5 percent or higher interest payments alongside their transaction downturn.

For most of those suffering, the more-practitioners-fewer-pets phenomenon translates to 5 percent to 15 percent fewer transactions every month.

Still, there are few practices that could not recover from falling client transactions if they improved their management techniques.

Remember that the top 20 percent of clients provide 80 percent of profits, and these best clients are still coming in. It is the bottom 55 percent who are not coming in and paying for quality medicine given with excellent client and patient service.

Keep your average transaction increasing to counter any economic downturn. If you need to know the maximum or minimum level of fees that are sustainable in your neighborhood, you can ask us. If you need to find out whether you are overpaying or underpaying your paraprofessional staff, visit salary.com.

Management is more than measurement, but you cannot manage what you cannot measure. The average veterinarian is well below average ... as a business person. He or she is well-trained in medical skills, but so ill-trained in business it is amazing that some manage to feed themselves and their families.

It's ironic that, while no one wants to have the highest office-visit fee in their town, everyone competes with each other to be inferior.

The only thing worse than a declining gross is a declining net. It is hard to face that shrinking bottom line, when every dollar less means eight cents out of your pocket.

Many will have to sit down with their accountant to have the term "break-even point" fully explained to them.

It means that in a solo practice, the first $400,000 is only about 5 percent profit. That's right, only $20,000! Each additional $100,000 gross — assuming relatively less payroll and overhead — means about $60,000 additional profit. Look at this simple chart:

It is worse on the down side. Along with additional profits have come ultrasounds, bigger and better in-house laboratories, digital radiology, etc., most of which have lease payments that were created in the optimism of growth. Now we are dependent on the newer technology. However, when the gross staggers or slides, the expenses continue, and the 60 percent-profit dollars come up short.

This puts many practices in crisis mode, but in the earlier stages of any perceived crisis there usually is the opportunity to re-evaluate your profitability and review your staffing. Payroll is always the expense most veterinarians have the most difficulty keeping in line. Payroll is unforgiving and supported by the highest offices of the U.S. government!

Now is the time to streamline our practices by giving troublesome or ineffective employees the opportunity to expand their work experience at another facility. You might feel that removing certain individuals from the gene pool might improve the human race but, because that is not an option without consequences, relocating them outside your practice is less drastic but effective. Keep only those outstanding staff members who enhance client service and therefore your bottom line.

Most veterinarians are or should be paid on a percentage of their production, so their salary is tied to the gross, but the ones on straight salary with declining appointments may be experiencing some major changes in their employment prospects. Even if the associates are on percentage compensation, it is our paraprofessional staff that costs us the most when clients aren't coming in.

Studies have shown that veterinary students' self-esteem decreases with each year of veterinary education.

Am I being negative or just realistic? Seriously, if every veterinarian worked full time, the situation would be much worse. It is only the obvious fact that so many colleagues work only half time — so they can spend more time with their families — that has prevented the collapse of more practices.

I'm busier than ever as more colleagues seek help in many ways.

In many cases, the best way to turn around the economic future of a declining practice is to turn around the worst medical habits many have acquired since leaving their alma mater.

How many urinalyses did you perform today? How many prostate exams? How many pets had dental-disclosing solutions applied in front of their owners? How many had a really good history taken and a really thorough examination that would pass your professors' standards in clinical medicine?

Think about it.

Gerald Snyder

Dr. Snyder, a well-known consultant, publishes Veterinary Productivity, a newsletter for practice productivity. He can be reached at 17842 Meadow Bottom Road, Charlotte NC 28277; (800) 292-7995; vetprod@bellsouth.net fax: (866) 908-6986.

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