Striking a balance between profit and purpose

News
Article
dvm360dvm360 March 2024
Volume 55
Issue 3
Pages: 32

Use technology to become more efficient while having a positive impact on the community

Profits vs purpose

Image: erika8213/Adobe Stock

What is the most important factor in making a business decision: achieving profits or having a purpose? Despite what may seem like an easy choice (profits), it is becoming increasingly difficult to say that it is the only factor. For example, consider whether your practice should provide free or discounted veter­inary care to service animals. This offers societal benefits, but will it eat away at profits? Is it worthwhile to the business, or does it cause problems with workflow productivity?

Businesses have to decide whether to prioritize profits or purpose. The traditional view has long been that the primary goal of any business is to maximize profits. Although financial viability is undeniably critical for the survival and growth of the business, the paradigm is shifting toward a more nuanced approach—one that acknowledges the importance of purpose beyond the bottom line.

Profit-driven decision-making focuses on earning revenue that exceeds the costs of operation and other business activi­ties, which results in a positive financial outcome. On the other hand, purpose-driven decision-making involves considering the broader impact of business activities on society, the environ­ment, and all stakeholders involved. Lest you think it has to be one or the other, recognize that purpose and profits are not mutually exclusive; rather, they can complement each other.

Profits or purpose?

For many, the proverbial chicken or egg question started with their career choice. Their sense of purpose to improve the health and welfare of animals spurred them to seek education, certifications, and licenses to honor their purpose while working a job or owning a business. Profits or return on investment served as life’s reality check. Did the sense of purpose die under the demand for profit? Can a veterinary practice include purpose-driven activities without harming profits?

To answer that question, the practice owner and team must clearly understand how to balance profits and purpose. The first step is to assess the practice’s business operations because, let’s face it, if it isn’t profitable, it won’t be able to implement programs for the benefit of others, let alone provide patient care or take care of the team.

Strengthen operations for profitability

Before acting on a purpose-driven initiative, ensure business operations are in order by examining 4 key areas, as follows:

Efficiency

Is the team efficient in performing daily tasks? How do you know? One metric to monitor efficiency is the total team hours worked per transaction. An efficient level is 1.33 total hours (including doctors and support team) per transaction.1 Identify where the team can make improvements in performing daily tasks.

One of the most significant improvements that will help with efficiency is ensuring everyone works at the top of their license. Additionally, continual on-the-job training is critical to creating and maintaining a high-performance team. It is not uncommon to see a doctor working 36 to 38 hours a week with a well-trained, highly leveraged team produce $1.5 million a year: Efficiency matters.

Appropriate pricing

Having a pricing strategy that considers costs, client value, competitors' prices, and value proposition is key. Resources include the Veterinary Hospital Managers Association's Value- Based Strategic Pricing Tools and Resources2 and The Veterinary Fee Reference from the American Animal Hospital Association (AAHA),3 which breaks down fee pricing data. Taking it to another level, AAHA Benchmarking+ is a fee reference dashboard that allows a practice to compare prices with live industry averages.4

Besides dollars and cents, consider practical and ethical factors. The practical requires the practice to assess if the amount charged for a product or service covers costs (eg, product, equipment, training, and time involved). Ethical considerations are less straightforward: Are the owners and support team comfortable with the fees, and are they fair to the client and the business? Sometimes the ethical aspect can thwart a pricing strategy when there is a void in information communication or a perception of unfairness in the practice culture.

Technology

Use technology that helps your team provide excellent patient care and exceptional client service. Have a strategy, know the goals, and shop around. One technology type earning rave reviews is dictation/scribing apps. They save time in the exam room (allowing the doctor to focus on patient care instead of typing into a computer) and relieve the problem of after-hours medical record entries (a problem that can easily cause doctor stress and burnout, leading to turnover). Another emerging artificial intelligence tool is a virtual assistant to support the front office team. Other technologies allow for the creation of a remote/virtual team that works with the onsite team to enhance efficiency and productivity.

Of course, any new technology comes at a price, and it is important to balance the monthly cost of the technology versus the cost of not enabling a team member to perform at the top of their license, hiring another employee, or losing a valuable team member. Technology does not necessarily mean replacing patient care and client service.

Expense monitoring

A veterinary practice’s 2 most significant expenses, wages and inventory, should be monitored. According to the 2023 Veterinary Industry Benchmark Report by iVET360, in 2022, the total labor expense was 39.6% of total revenue, and the cost of goods was 24.1%.5 For any practice manager, knowing where the business stands in relation to industry benchmarks is a key starting point for implementing improvements.

Additional inventory metrics include the percentages of total revenue for specific profit centers and income-to-expense ratios. Using income-to-expense ratios can help management identify strengths and weaknesses in pricing strategy and purchasing. To improve labor metrics, look at efficiency metrics and explore the use of technology—both can positively impact labor metrics. Although raising prices may make the labor percentage and inventory metrics appear better, there is a point where clients become sensitive to price.

Explore purpose-driven initiatives

Now that the financial side has been assessed and firmed up, consider purpose-driven initiatives. Richard Branson, CEO of Virgin, offers some advice on this issue. He said in a 2012 interview with NPR’s Marketplace, “I think if the people who work for a business are proud of the business they work for, they’ll work that much harder, and therefore, I think turning your business into a real force for good is good business sense as well.”6

What can a veterinary practice do to encourage the team to be proud of the business they work for? Is it enough to do good medicine, or are there other things that promote a sense of purpose for the greater good of others or the community? Determining a business’s purpose involves a thoughtful and intro­spective process that considers the organization’s values and vision. A well-de­fined purpose can contribute to the practice’s long-term success and positive impact on the team and society.

Can being purpose-driven benefit the business? According to Deloitte, consumers make decisions based on how a company or brand treats their employees and the environment and how a company supports the local commu­nity.7 Creating a workplace that instills a sense of purpose in the team ultimately leads to increased morale, productivity, and job satisfaction. It can also increase client loyalty and improve the practice’s reputation in the community.

Takeaways

Balancing purpose and profitability requires a thoughtful and strategic approach to ensure that the purpose-driven program enhances the overall sustainability and success of the business. To succeed, a purpose-driven program should align with the company’s overall strategic goals, avoid negatively affecting workplace efficiency, comply with laws and regulations, and be monitored to ensure its success and impact on the business.

If systems are in place to support the success of the business, then purpose-driven programs can also benefit from those systems, and finding balance will be easier. Make purpose a pillar of your veterinary business and enjoy the rewards of balancing profits and purpose.

About the author: Louise Dunn is the owner of Snowgoose Veterinary Management Consulting in Winston-Salem, North Carolina, and a former practice owner. She has taught practice management workshops at 10 veterinary schools and publishes and speaks nationally. She is a founding member of VetPartners and a member of other professional organizations.

References

  1. What is thoughtput time? (with benefits and formula). Indeed Career Guide. February 3, 2023. Accessed February 13, 2024. https://www.indeed.com/career-advice/career-development/what-is-throughput-time
  2. Value-based strategic pricing tools and resources. Veterinary Hospital Managers Association. Accessed February 13, 2024. https://www.vhma.org/resources/value-basedstrategicpricing
  3. American Animal Hospital Association. The Veterinary Fee Reference, 11th Ed. American Animal Hospital Association Press; 2021. https://test.aaha.org/aaha-publications/aaha-press/
  4. AAHA benchmarking: veterinary metrics that make sense. American Animal Hospital Association. September 13, 2022. Accessed February 13, 2024. https://www.aaha.org/about-aaha/media-room/press-release-list/american-animal-hospital-association-and-petabyte-technology-unveil-aaha-benchmarking/
  5. 2023 Veterinary Industry Benchmark Report. iVET360. Accessed February 9, 2024. https://ivet360.com/vibr/?utm_source=reportdownload&utm_medium=email&utm_campaign=reports#download
  6. Hobson J. Sir Richard Branson: the full interview. Marketplace. April 27, 2012. Accessed February 12, 2024. https://www.marketplace.org/2012/04/27/sir-richard-branson-full-interview/
  7. O’Brien D, Main A, Kounkel S, Stephan AR. Purpose is everything. Deloitte Insights. October 15, 2019. Accessed February 9, 2024. https://www2.deloitte.com/us/en/insights/topics/marketing-and-sales-operations/global-marketing-trends/2020/purpose-driven-companies.html

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