In times of economic hardship, some practitioners might be asking if fee schedules need to be adjusted to ease the financial burden on clients, but there's no reason to start discounting based on media hype or isolated incidents. Instead, focus on developing smart, short-term business practices that will keep your revenue stream flowing and strengthen your bond with clients.
Increasing news reports on the rise of unemployment and commercial bankruptcies might have some business owners a little spooked. In the equine world, news of irresponsible owners turning horses loose to fend for themselves is downright scary. In times of economic hardship, some practitioners might be asking if fee schedules need to be adjusted to ease the financial burden on clients, but there's no reason to start discounting based on media hype or isolated incidents. Instead, focus on developing smart, short-term business practices that will keep your revenue stream flowing and strengthen your bond with clients.
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The media projects the illusion that another Great Depression is upon us to garner ratings and sell newspapers—but things may not be as bad as they seem. According to the U.S. Department of Labor statistics, the number of people working in November 2008 was only 2 percent lower than in November 2007. Gary I. Glassman, CPA, principal of Burzenski's Veterinary Financial Management Services arm, says to some extent, the negative attitude surrounding the state of the economy is hype. "We read about what the press wants us to, but that doesn't mean it's a reality for everyone," says Glassman. "The question is: How is it affecting your practice, location, and geographic area?"
The first step in determining the status of your business is to evaluate your practice. Compare the total number of invoices you receive from month to month. Has there been a decline? Are you seeing a consistent pattern? If so, then it might be time for a change. Mark Baus, DVM, managing partner of Fairfield Equine Associates in Newtown, Conn., says that laying off staff or discounting fees are last-ditch efforts. "Those are regressive moves that are hard to undo," he says. "There are other things you can cut before going there."
Most equine practitioners are ambulatory, so their main expenses relate to the field. Glassman says now is a good time to shop around for more competitive rates on general business and truck insurance, supplies, and cell phone service. "The businesses that provide these services know that many people are having financial issues," he says. "Their main priority is to get a sale, no matter how low it is. But you won't know how low you can bargain for if you don't ask." If you can negotiate lower terms on these fixed expenses, it directly increases profit.
Keep up with markups
Dr. Baus says inventory control is crucial when cutting back on variable expenses. Install strict controls by limiting access of how items are checked in and out and keeping as little on the shelf as possible. Divide drugs into two categories—highly-shopped with a low margin (drugs that people would commonly buy on an internet pharmacy) and drugs that are used at the point of services (steroids, nerve block solutions, etc.). "Stop purchasing the highly-shopped drugs and lock down the pharmacy," Baus says. "There's a lot of shrinkage that goes on, and it can bleed you to death."
Finally, if you have to reduce staffing expense, put a freeze on wage increases, reduce the hours worked each week, and place strict controls on overtime before resorting to layoffs.
You might think discounting will help you develop an emotional bond with clients, make them more loyal, and help you sustain your client base. But if you offer discounts now, your clients may expect you to continue discounting in the future as well. If clients can't pay right away, extend credit and draw up a signed payment agreement, Glassman says. Bill each client on a monthly basis. Six months should be enough for payment in full—but tell clients it's due in three. "If you tell people six months, they'll really be thinking 12 months," Glassman says. "Whatever you tell them, stick with it. If the six-month collection deadline runs out, start a letter writing campaign followed by small claims court. There is a possibility that you'll lose, but at least it will close the issue."
As with discounting, giving away services for free is another sure way to flush money down the drain. You might think not charging for a follow-up exam isn't a big deal, but Dr. Baus says stepping on to that slippery slope is dangerous. "Our normal profit margins are low enough as it is," he says. "When you give away services you have a difficult time supporting that standard of care—on top of the fact that you're carving away at your profit margin." The only exception to the discounting rule might be the stable call, he says. "If you're going to be late or if you fall short of doing your best, then it's OK to discount. But I wouldn't necessarily do that during a normal economic period. Again, it's back to that low profit margin we have to deal with."
Providing life-saving care is a privilege for clients, so in times like these, some will be faced with hard decisions. Dr. Baus says that sometimes a horse gets so sick that the care required is more than the client can afford. In those times, it is appropriate to talk about euthanasia. "Obviously nobody wants to do that," he says, "but I think the client needs to know that you would support that decision and appreciate it as another option for them. I think veterinarians are seen as judgmental when that decision is made prematurely. Some think we should do nothing but continue to offer more and more solutions (to keep the patient alive). Sometimes that isn't realistic."
Never assume that a client can't pay or take out credit, even if they've hinted at it, advises Dr. Baus. "You don't want to judge anybody's pocket book," he says. "Continue to promote preventive care and wellness exams. As a practitioner, you need to offer the best you can do and let the client tell you what they can handle."
"Wow, I wish I had time to...." How many times a day does that thought enter your mind? Five? Ten? Glassman says down time should be just as productive as any other time of the work day, and taking advantage of it can actually increase revenue. "It's a perfect time to have those all-important, in-depth conversations with clients that you usually don't have time for on a busy day," he says. "You should also put some educational seminars together and shore up your relationships with others in the profession, like tack shops and farriers. They can recommend your services to others. Clients are the same way—never be afraid to ask your top 50 clients if they know of someone who has a horse or would like to hear about your services. More often than not it pays off."
Although marketing is an effective way to reach out to potential clients, Dr. Baus says he would not encourage it with the current state of the economy. "Again, our profit margin is so low that it may not be worth it right now," he says. "It makes more sense to continue controlling expenses and developing new services and collection processes. Concentrate on marketing when things come back up."
All the talking and planning in the world won't change the books if the situation is dire enough. If you have no other choice than to lay off staff, do it with care and caution. Good people are hard to do without—and very hard to replace later.
Dr. Baus says that seniority or level of management responsibility shouldn't be a factor when making layoffs. Instead, conduct performance reviews quarterly to determine whom you should make the most effort to keep. "Most of the time performance reviews are a one-hour, once-a-year session," he says. "We should be doing it quarterly so we can identify our weaker members and find out if they've met their yearly goals. If they haven't, maybe they aren't suited for that position."
Your capacity for patience and understanding is why you are a successful equine practitioner. And faith in your abilities and clients can help you maintain perspective when you hear about doom and gloom. This isn't the end of western civilization as we know it—but rather an opportunity to fine tune your practice to flourish in any environment.
Nick Dupont is an associate editor for Custom Veterinary Media in Lenexa, Kan.