Practices can take steps to protect revenue during lean periods.
The job market for new associates may shrink in 2009, and many practices will see little to no growth, according to a report by veterinary consulting and accounting firm Burzenski & Co. in East Haven, Conn.
Gary Glassman, a Veterinary Economics Editorial Advisory Board member and principal with Burzenski, says a recent nationwide study his firm performed on financials from 64 veterinary practices showed:
• an increase in overall veterinary practice sales
• an increase in the average invoice amount
• a downturn in the total number of invoices.
These findings match those from other recent reports, including a recently released study from the National Commission on Veterinary Economic Issues.
Glassman notes that downturns in the numbers from his survey were more pronounced in September and October than in the previous months of 2008-and that the outlook for 2009 is further decline. He says he does not expect increases in the average invoice to continue at the same pace as in the first nine months of the year and that invoices will continue to fall.
“Our best guess for 2009 is that practices will not see revenue growth,” Glassman said in a Nov. 10 memo to Burzenski's veterinary clients. “The average invoice will provide the support for maintaining sales and invoices will continue to modestly decline.”
Glassman says with a no-growth sales projection and continued cost increases, profit margins may be squeezed. With that in mind, he suggests taking the following measures to weather the storm:
• Build strong relationships with your client base so price is not an issue. Tough economic times will give clients who are on the fence with your practice a reason to find a new and maybe less expensive provider-unless you provide a reason to stay. Click here for an audio clip on creating value for clients.
• Don't change your medical protocols based on economic conditions. Continue to offer exceptional care and make clients tell you they cannot afford the best care before offering alternatives.
• Shore up your reminder systems so you don't miss an opportunity. Track those clients who are responding to first, second, and third reminders. For nonresponders, consider a phone call or a personal letter explaining why it is still extremely important to continue the yearly visit. Owners of the practice should personally sign the letters.
• Watch out for missed charges. Conduct daily chart audits and compare them to the charges on client invoices. Use automation to assist you in this process.
• Shop for products and services the hospital purchases to make sure you are paying the appropriate amount. Competitively bid for best price where you can.
• Keep a reserve of cash to handle at least 30 days of expenses. If possible, keep an open line of credit at the bank to handle any cash flow issues. With the recent credit freeze, it's important to talk to your banker about what can and cannot be done. Having the line in place before you need it is crucial.
• Review your staff scheduling and cut out unnecessary overtime. Use payroll budgets to assist with monthly scheduling of hours for each payroll area (e.g., technicians, receptionists, animal handlers, and so on).
• Consider more external marketing to maintain solid new client numbers. It's important to determine where new clients are coming from and what type of marketing works in your practice. Have your staff prepare a report each month to determine what works.
Although the results of the survey might be discouraging, Glassman says that the newly elected leadership in Washington will be a factor to what the future holds.
“The election is now over and we will have a new administration to reset the direction of our economy with a Democratic focus,” he wrote on Nov. 10. “I would tend to believe there will still be major tax changes in 2009 and beyond (but) any changes will take time to implement. In the meantime, we have seen and felt the results of changes in the credit markets on the business side. How these will impact consumers has yet to be determined.”
The associate job market
Glassman further clarified what the temporary slowdown will mean in terms of job growth for the sector. “I don't think anyone will cut current associate positions,” he says. “But people tend to react to short-term situations, so some may think twice about hiring a new associate. I've seen a clinic that had an opening but reconsidered hiring anyone to fill the spot because they're going through a really slow period.”
The demand for associates has traditionally been high, with new graduates receiving four or five offers of employment. Glassman says he believes that strong demand will continue in the long term, but potential loss of revenue growth could cause practices to hold back on hiring new associates temporarily. And while the current job market for associates is still good, he said no one knows what the future holds.
“The recession might last one to two years,” he says. “But my crystal ball isn't any better than the ones the newspapers have.”