The veterinary business wheel needs to keep turning


How your veterinary practice compares to success in other industries-and why you should pay attention

Is your veterinary practice struggling? Do you need to boost revenue? Or does your practice just need a little more sparkle or pop to keep clients coming in your door? If you answered yes to any of those questions, I've outlined some strategies this month to help.

In the business world there are drivers of income. In the manufacturing industry, they include the building and sale of new products like cars, cell phones, toys and even houses. In the service industry, the income drivers are the creation and sale of insurance policies, health policies, banking services, health-care services and veterinary services.

In manufacturing, the need to create new and innovative devices is constant. The laptop computer made a splash with its debut. The cell phone came next. Smartphones are now overtaking the mobile market, and we're seeing major growth in tablet computers. The Apple iPad is a fantastic example. Sales of iPads are expected to triple next year.

We can learn from these successes. All businesses go through these continuous cycles of innovation. Either you launch new products and services to grow the market or you try to build market share.

Case in point? The fast-food industry. To boost sales, the various vendors need to "steal" customers from the competition or create a new segment of the business. In this category, McDonald's created a new "pop" by introducing a breakfast menu.

As we all know, small animal veterinary medicine is also a mature business. There are very few really innovative ideas that will bring a surge of new purchases and revenue. In fact, some market segments in the veterinary profession have been in decline.

Equine veterinarians lost their tube worming business. Food animal practitioners lost their pharmacy sales. Both groups of practitioners needed to find alternate methods to collect fees for professional services. They adapted.

For small-animal veterinarians, wellness programs and the average client transaction (ACT) are linked. If you raise wellness program prices too much, customers resist—and client visits decline.

The next "pop" in veterinary medicine may well be oncology. Fifty percent of dogs over 10 years of age are expected to succumb to cancer. This segment of the market should be watched closely. In fact, you should track this metric by monitoring the annual services per pet (ASPP) at your practice. (For more on this topic, see DVM Newsmagazine's "The King is Dead, Long Live the King," Sept. 2010, or read it online at

What brings in new revenue begins with cash, as illustrated with a Business Wheel like the one above.

In the manufacturing sector, the Business Wheel might look like this:

> A capital investment (cash) is made.

> The Cash is put into new equipment.

> The facility starts making widgets.

> Widget manufacturing leads to new inventory.

> Inventory heads to the market and generates sales.

> Accounts receivable leads back to cash.

In veterinary medicine, and related service industries, the Business Wheel looks like this:

> Cash is invested in veterinarians' education and development of academic knowledge and medical skills.

> Cash is invested in medical supplies and equipment to offer new services. (These veterinary services are considered the inventory.)

> The practice offers those services to the pet-owning public.

> Sale of these services leads to accounts receivable.

> Accounts receivable leads back to cash.

In some industries, once a 60-day inventory is built up, the factory slows and workers are sent home or furloughed. This layoff affects the workers and drives down variable costs—but does not impact sales.

In veterinary medicine, when we lay off skilled staffers, we're actually cutting down the available inventory of sellable services, which does impact sales because it decreases inventory.

In a mature manufacturing or services industry, it becomes harder and harder to keep the wheel spinning because poachers (competitive businesses) are trying to take market share. In the wellness veterinary services area, the number of available animals, including pets, is pretty stable. Practices can see a decline in sales of these services as an increasing number of veterinarians, online and brick-and-mortar pharmacies, niche wellness practices and retail pet stores offer what used to be exclusively available at the local neighborhood general veterinary practice.

These pressures siphon off sales from a practice along with consumers' decreasing belief in the necessity or value of preventive care.

So wellness-oriented practices can do one of three things:

1. Adjust the business plan to allow for flat or declining revenue.

2. Improve the penetration of the market with those services or expand into other areas of the veterinary services sector with new and better service and a wider variety of services.

3. Spend money on development: training, equipment, marketing and sales.

New growth in today's business climate requires diagnostics—to increase the identification of disease processes earlier—and new skill development to address these health-related problems.

In recent history, expanding dental services was one of the first "big" new and emerging segments in veterinary services. It required an investment in equipment, training and marketing at each practice. Ultrasound also opened a new door to internal medicine, especially cardiology and oncology, much as dental radiography opened the door to expanded dental-care service. Improved attention to diagnostics also leads to expanded soft-tissue surgery skills that are ripe for development.

So in the spirit of growth, the solution is to look at your Business Wheel and plan accordingly. Look to the "development of sellable skills" to add to your service inventory.

Diagnostics is the place to start. Start by looking at your laboratory's catalog to see what's offered. Do you offer that service too? Why not? Look to radiology, ultrasound and total laboratory fees as keys to new services.

Seek to drive up your DR (diagnostic ratio). Each year more and more of your sales should come from radiology, ultrasound and labs—especially feline and exotic practices.

Dr. Riegger, dipl. ABVP, can be reached at,, and as a guest lecturer at Iowa State University at 505-898-1491.

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