From No-lo Vet Practice To Profits In 7 Steps

Follow these steps to find yourself at the helm of a well-run, profitable practice.


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Deciding to retire was a tough decision for Dr. George.  He loved the profession. He loved his clients. He loved his patients. But it was time to say goodbye.

So Dr. George hired a management company to appraise his practice. That’s when reality suddenly hit: His practice wasn’t worth much. Yet he was counting on it to retire. Dr. George had a no-lo practice! A no-lo practice, as defined by the veterinary consultants organization Vet Partners (www.VetPartners.org), is a practice with no value or low value.

The management company sent Dr. George a consultant to help him turn his practice around. He agreed to share what he learned with VPN readers on condition that we not name him. Here are seven pearls to make your practice more efficient and profitable. 

1. Control inventory.

Inventory is an invisible, sneaky investment that sits on your shelves gathering dust. A smaller inventory means you will be able to move goods before they expire. If having fewer lotions and potions on your shelves makes you nervous, remember that most suppliers will ship products to you overnight—and at no charge.

Here are a few of the problems identified:

• Automatic food orders were still being placed for deceased patients.
• Inventory was "eyeballed” rather than systematically accounted for.
• Items were ordered without determining whether the clinic had them in stock.
• Expiration dates were overlooked, leading to wasted food and medications.
• Charges were often missed. So Dr. George had his staff bill all products through the computer-generated label maker, which automatically charges clients and deletes items from inventory.
• Duplication. Do you really need 20 brands of antibiotics or flea medications?

How much inventory should you have? The answer will depend on your clientele, your location and your needs. Dr. George now maintains an average of $38,000-$40,000 of inventory per full-time doctor. Simplify your inventory by agreeing on which medications you really need to keep on hand.

In addition, product turnover was too slow. Most items should be ordered 12 times per year.  Keeping only one month’s supply of product in your hospital is also a good way to respect expiration dates and keep waste to a minimum.

2. Keep a leash on accounting.

Here are a few of the issues that were discovered, and how they were resolved.

• Time cards were "physical” and employees’ hours were added manually. Rounding up was common because it was so much easier. Now, team members clock in and out on a computer, which conveniently adds hours automatically. Most management software offers this convenient option, which is a huge time and money saver.
• Excess cash was left in a checking account. Now, it sits in an interest-bearing savings account. Sure, it doesn’t pay much these days, but it’s better than nothing.
• Purchases were not always researched well. When printing paper was needed, a case of 10 reams was bought at the local office supply store without any price check. Now, office supplies are tracked and researched as well as medications.
• Missed charges were common and added up over time. Simplify your life by using a "travel sheet” and/or accounting software to track charges.
• The bookkeeper paid bills by check. Now specific, trusted suppliers can pay bills automatically from a credit card on file (Hello, frequent flier miles!).  This saves a significant amount of time writing checks, not to mention money saved on checks, envelopes, stamps and staff time.
• This doesn’t mean blindly trusting suppliers. You will need to match invoices and credit card statements. This small change, and a few others, made bookkeeping take from 20 to between 5 and 10 hours a week.
• Computer glitches or human error can lead to gross mistakes. By poring over financial statements, Dr. George realized with horror that his bookkeeper had blindly paid somebody else’s office supplies bills for the past year, while another clinic had paid his cleaning supplies bills.
• It may sound great in the short term, but the day you need to settle an entire year’s worth of back payments, watch out. Now, he balances bank and credit card statements to catch errors. In addition, bank accounts are linked to management software.
• Expenses were not tracked specifically enough. For example, drug purchases were lumped with cleaning supplies. This makes it difficult to track expenses and compare to national averages. One way to really study where the money goes is to follow AAHA’s Chart of Accounts. This is "a veterinary-specific detailed system for organizing your income, expenses, and balance sheet accounts.”
• Raises were given at the beginning of each year, pretty much automatically, and often out of Dr. George’s pocket. However raises should come out of revenue, not out of profits or the owner’s paycheck. So implement yearly fee increases, and give raises out of the extra money generated.

3. Manage Staff Time.

By looking into payroll, Dr. George realized that some of his employees had taken advantage of his generosity for years. Worse: employees with the longest tenure had acquired the most questionable habits. What appeared to be hard work sometimes turned out to be busywork, or a way to stay on the clock a bit longer.

For example, doing inventory, cabinet by cabinet, was often an excuse to be sheltered from "real” work. Meanwhile, another technician had to be hired to work "on the floor.”
Dr. George had a heart-to-heart discussion with his employees, individually or in small groups, to explain changes to come. Some team members did not appreciate the "revolution.” Some threatened to quit. A few did. It was a tough transition, but the team came out of it stronger.

4. Schedule Work.

Some employees plainly refused to work the evening shift. It was not convenient. It interfered with their personal lives. Their solution was to hire more technicians and receptionists. But Dr. George refused to give in. Now evening shifts are mandatory for all employees, on a rotating basis.

However, in order to decrease hours while cutting costs and improving everyone’s quality of life, the clinic now closes half an hour earlier on weeknights. There were no appointments on Saturdays, but a receptionist was present specifically to allow clients to pick up medications and pet food. Now, Saturday morning shifts have been cut out entirely.

5. Taking Care of Workers’ Pets.

"My generosity with discounts on employees’ pet care went a bit overboard,” Dr. George confesses. He used to offer free medical care for employees’ pets. Some had a couple … and some had more than 10. To be honest, some of these pets weren’t even theirs.

So he decided to restrict the number of pets he’d treat at a discount to two per employee. Those pets had to live with the employee more than 90 percent of the time. Discounts are limited to 20 percent.

6. Revamp the Fee Structure.

Dr. George’s consultant implemented a few changes in the fee structure.

• Technician appointments used to be courtesy exams. Now, there is a small charge to account for receptionist time, technician time, exam room use and cleaning supplies.
• Before, anesthesia fees for a Chihuahua were a fraction of those of a Mastiff. The reasoning is that, all things being equal, such as duration of anesthesia, a small dog will need less anesthetic gas than a giant breed.
• Now, those charges are the same. Anesthesia should be charged not only based on patient size and fixed costs, but as a service, or a procedure, based on time, and which requires the same technical knowledge from a doctor and a technician (or two).
• Equipment used for patient monitoring should be a separate charge.

7. Strategically Price Products & Services.

Dr. George was asked to look into his top 50 product and service sales. There should be fewer products and more services in this top 50. One reason is that the revenue generated by flea control medications may be drastically reduced if clients suddenly decide to buy them elsewhere.

But services, like dental cleanings and radiographs, are much tougher to purchase online. This strategy is a good way to protect your livelihood from competition.

It clearly takes courage to do what Dr. George did. Nobody likes to be told he’s made mistakes. Nobody likes to realize he’s been considered a generous "good ol’ boy” for years. 

Yet by going through this 18-month-long process, Dr. George is now at the helm of a well-run, profitable practice. He has found an enthusiastic buyer who will keep the tradition alive. Meanwhile, Dr. George can now contemplate retirement with serenity.

Dr. Phil Zeltzman is a mobile, board-certified surgeon in Allentown, Pa. His website is www.DrPhilZeltzman.com. He is the co-author of "Walk a Hound, Lose a Pound” (www.WalkaHound.com).

Katie Kegerise, a certified veterinary technician in Reading, Pa., contributed to this article.

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