The cost of expanding

Q. My group practice is thinking of adding a doctor, but we're worried that it could cost more in additional overhead than he or she will produce. What should we do?

Understanding the relationship between revenue produced and the compensation and benefits paid for each doctor is critical to expanding wisely, says Lorraine Monheiser List, CPA, Summit Veterinary Advisors, LLC, in Littleton, Colo. "Hiring a full-time associate at $65,000, for example, requires that this new doctor ultimately produce somewhere between $260,000 and $325,000 per year, without reducing the other doctors' combined production." While that likely won't happen the first year, she says you should plan on covering at least your direct costs: the new doctor's salary, benefits, payroll taxes, and the incremental costs for drugs and supplies. "If you need additional support staff members, you should be able to cover those costs as well," she says.

If all that doesn't seem possible in the first 12 months, List suggests considering alternatives such as hiring a part-time associate or additional technicians and veterinary assistants to allow your existing doctors to work more efficiently. If you'd still like to hire an associate, consider taking these steps to increase practice revenue and support the addition:

• Improve client compliance with better follow-up.

• Generate more senior care programs or dentals.

• Do a better job of charging for all work done.

• Step up your marketing program in anticipation of hiring a new associate.

• Institute a reward program for existing clients who refer friends and neighbors to your practice, preferably without offering discounts.

Lorraine Monheiser List