What Makes a 'Financially Efficient' Practice?
Revealing insights from a practice management consultant — and Veterinarian’s Money Digest® Editorial Advisory Board member — who has been in the business for 45 years.
“You usually don’t get into veterinary medicine for the big bucks or the great hours,” said Louise S. Dunn, during a recent interview with Veterinarian’s Money Digest®.
Even so, the longtime business veterinary practice consultant sees excellence in the profession and, today, lots of opportunity. But only if the veterinarian can understand what makes for a “financially efficient” practice. Sadly, most don’t.
Dunn, the founder and owner of Snowgoose Veterinary Management Consulting in Pfafftown, North Carolina, said the majority of companion animal veterinary practices across the county fall into the “no-lo” value area (she estimates 60 percent), meaning the practice has little or no value as a business.
Growing up with five dogs and two cats, Dunn said, “I always thought I wanted to be a veterinarian.” She end up working in a veterinary hospital for over 20 years and fell in love with “the business end of it.”
Above all, she said, “veterinarians must realize they’re in the service business and the service is veterinary medicine. It’s not just about the patient care, it’s the client care, too.”
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As far as running an effective and efficient practice, Dunn said it begins with properly measuring the numbers. “In this day and age with all the financial software out there — QuickBooks, Peachtree and many more — practices need to be able to find the numbers that truly matter. What should they look at and trust? And numbers can be so overwhelming for the busy veterinarian — do you celebrate with the team or do you say we need to do better?"
When it comes to a veterinary practice’s number one expense, payroll costs, Dunn believes that the number must be kept within 38 percent of the practice’s gross annual revenue. And overall profitably must been in the 18 to 20 percent range (of the practice’s gross annual revenue) — “so there’s money to reinvest in the business and get a good ROI on it,” she explained.
“Veterinary practices spend a lot of money on training, or what they call training, because they usually don’t have very good training programs to begin with,” she explained. “Turnover is so expensive. Veterinarians must be better at recruiting and retaining key people.”
This is where good leadership comes into play. “Having the ability to inspire a team is vital to success in veterinary medicine,” Dunn said.
Veterinary practices also need to be better at inventory control. “This is their second biggest expense — the cost of goods sold,” Dunn explained. “They mostly don’t do it well.”
Her advice for veterinarians coming out of school with big debts is to retain the “poor student” lifestyle for a while longer. They also need to look for jobs with a salary and an incentive/bonus opportunity so they can produce more. Dunn also recommended a second job. “Seek out opportunities for shifts at local animal hospitals that need an emergency veterinarian,” she said. “Use that side money to pay down education debt.”
In business for over 40 years as an advisor, author, educator, and national and international speaker, Dunn works with veterinarians who want to develop a strategic plan for their practice that continually produces real results. “It’s the most amazing profession in the world,” she said.
After working with hundreds of practices over her career, Dunn sees a positive future for veterinary medicine. It’s because “people loves their animals — they’ve become part of the family and they want to do what’s best for them.”