You've put it off long enough. Make time to check your numbers so you can make smart financial decisions for your practice.
"DEVELOP A BUDGET FOR MY PRACTICE." IT WAS ONE of your New Year's resolutions, but you just haven't gotten around to it. Don't worry. The year's only a quarter done, and you've got plenty of time to sit down with your books and take an honest look at your revenue and expenses with the help of consultant Nikki L. Quenette, CPA, of Quenette Veterinary Consulting in Fargo, N.D. She's helped equine practitioners get a handle on their financial realities, and her tips can help you too.
You'll base your 2007 budget on profit and loss statements from the past few years. Last year is your best benchmark, but looking back at a few years can help you identify trends and any nonrecurring expenses you won't have this year, like an associate buy-in.
Theory into practice
In addition to expenses, watch for jumps in revenue that can mess up your numbers if you're not careful. For instance, let's say you hired an associate last June, so revenue jumped in July through December. Don't use last year's January through June revenue for your new benchmark.
Once you've closely examined month-by-month, year-by-year spending and income, you're ready to think about your future numbers. Start with revenue, says Quenette.
"When people start with expenses and all the things they want this year, they sometimes overestimate the future revenue to cover these expenses and result in the profit they're looking for," she says. Instead, be realistic about the money coming in before you earmark for expenses.
If you think revenue is going to go up, why or how will it happen? Be specific: Are you instituting a fee increase? Are you adding a new service? Will you market to new customers? Will you add a new doctor?
Quarterly budget as management tool
Most important, your new budget should mesh with your strategic plan. So think about your present and future customer base, equipment, and staffing. What steps will you take to make today's practice match your vision for tomorrow? Will those changes affect your costs or revenue?
You may have already gone a few months without a budget, so you know you can run your practice without one. But if you take the time to check the numbers once a month, or at least quarterly, you'll recognize revenue drops and expense hikes faster. Quenette tells the story of one of her clients who was shocked at the monthly check-in.
"The owner's staffing expenses were skyrocketing as a percentage of revenue," she says. "She added staff members faster than the practice generated new revenue." It's true that new technicians can help doctors produce more income. But this practice owner discovered after she examined her budget that she didn't have systems in place to fully utilize the entire staff.
Take a close look at any areas where your actual results don't match your budget, and think about why you're seeing a discrepancy. Here are some examples:
Quenette recommends you focus on the big categories: cost of professional services, staffing, and your vehicle. Any other expense—other than rent, which is fixed—is typically about 2 percent of your budget.
The old saw "You've got to spend money to make money" holds true for your business. You can plan on an annual increase in fees, but if you want more business, you'll need to find more clients. And don't forget to include the cost of that search in your new budget expenses.
Equine Practice Annual Budget
"Make a list of the elements you'd like to include in a marketing campaign, and budget for that," says Quenette. You may want to send extra mailings or run ads, for example. You might also budget for a demographic study to get a feel for how many more horse owners you can find in your area.
"Here in Fargo, the equine market is pretty open," she says. "But in Kentucky, you're going to fight with other equine veterinarians for business. Is the pie getting bigger—are horse owners moving to the area or are more residents buying horses? Or are you just trying to increase your slice of the pie?"
Quenette recommends that new practice owners or practitioners stick with conservative client-growth estimates. You want achievable targets so that you don't set yourself up for disappointment. It's easy to start out overly optimistic. For established practice owners, Quenette says it's OK to try for more clients and more growth. "My clients say, 'We didn't think we'd ever reach these revenue numbers, but we did,'" she says. "At the beginning of the year, they're skeptical. People just need to be pushed a little and it's amazing what they can accomplish."
A budget can help you get to where you want to go. It can make your long-term vision for your practice a reality. Want to make more money? Want to spend smart? Want to help more clients? A budget can help you realize your potential.