Solve expense problems in veterinary practice by tackling revenue
Denise Tumblin, CPA, is president and owner of Wutchiett Tumblin and Associates, a Columbus, Ohio, firm offering management advice as well as valuation and acquisition services to equine and companion-animal practices. Tumblin merges her business skills, farm background, and personal interest in companion, equine, and food animals to assist clients in achieving their goals.
We asked Denise Tumblin, CPA, president and owner of WTA Consultants in Columbus, Ohio, about revenue and expense KPIs in Well-Managed Practices (aka, those with better expense management and revenue generation). Since she (in addition to her consulting work) is a featured CVC speaker, a Veterinary Economics Editorial Advisory Board member and directs the annual Benchmarks Study of Well-Managed Practices, she knows a thing or two about what you can do to take your practice up to the level of a Well-Managed Practice. Take it away!
No time to watch? Let's break it down.
If you want to be one of the best, there's no need to dream it up yourself.
You spend all kinds of time and energy healing animals and keeping clients happy. But you know you need to focus on those other feel-good things ... like increased revenue, better leadership and a practice that runs smoothly.
And you think you have to figure that out all by yourself.
Guess what, dear reader? You don't. You get your hands on Benchmarks 2016: A Study of Well-Managed Practices. And you let those all-star practices-the ones that provide top-notch animal care while making serious bank-show you the way.
Benchmarks 2016 has action steps to ...
> increase profits (and client and patient benefits through communication)
> fuse leadership and management (for a team-based culture with empowered employees)
> take advantage of technology (developing your goals and mapping out a strategy)
> get ready for transition (by prepping yourself, your practice and your buyer to ensure your practice's legacy)
The top two expense KPIs that practices need to pay attention to (and the two areas that set Well-Managed Practices apart from the rest) are …
>Inventory (drugs and medical supplies, laboratory expense, etc). Tumblin says you're aiming for 23 to 25 percent of gross revenue, and some Well-Managed Practices even get that down to 22 percent. In many companion animal practices, those numbers can be as high as 30 percent. That's a whole lotta bank tied up in inventory.
>Staff costs. The benchmark ranges between 22 and 25 percent. You can keep that lower-no, not by firing people-by having a super-productive staff. The more your staff contributes, the more productive your practice, which helps bring staff costs down as a percentage of revenue.
Which brings us to … revenue KPIs!
The top revenue KPIs to pay attention to are …
> Medical services and medical product revenue. Tumblin recommends a target of $580,000 to 600,000 of medical revenue per full-time doctor. Pay attention to those average-doctor-transactions!
> Client and patient numbers. How many new clients and patients are coming in? How many active clients and patients do you have? And one step further: How many lapsed patients do you have, those who represent an opportunity to reactivate?
Tumblin's takeaway? Solve an expense issue by tackling the revenue side of your practice. Genius.