Veterinary Practice Growth: What You Need to Know
Veterinary practice owners have many business concerns. Their foremost worry is typically making sure their clinics are delivering compassionate, medically-excellent care to their patients and convenience and value to their owners. They must manage, often with the assistance of a dedicated practice manager, all aspects of their clinic’s operations and finances. Focusing on the day-to-day management of a practice can be “all consuming.” As a result, animal hospital owners often neglect to focus on the strategic things they need to do to grow their practices.
In this post we will present, based upon our experience and perspective as a financial advisor, various ways veterinary practice owners can grow their businesses. Growth, in turn, can lead to increasing enterprise value. Increasing practice enterprise value can help practice owners both invest more in their practice’s continued success and achieve their long-term personal financial goals.
Adding a Doctor Can Immediately Lead to Growth
In today’s market, where customer demand outpaces the ability to serve that demand, the best way to grow your practice is to add another doctor. Easier said than done, in today’s doctor-starved marketplace. However, additional doctors enable you to convert more of your unmet customer demand for your services into practice revenue. For small practices, including one-doctor clinics, adding an experienced doctor can often lead to a significant amount of new revenue. This can really enhance your practice’s enterprise value.
Adding associate doctors makes your practice more attractive to potential corporate buyers, as well. Corporate consolidators of veterinary practices look for practices that will have a continuity of medical staff once the owner leaves. Knowing that practice operations can smoothly move on after an owner retires or departs typically means additional value for the selling owner.
How Space Limitations Can Impact Growth
Physical space limitations can often cap grow as well. Veterinary hospitals without adequate examination rooms and other clinical facilities cannot accommodate additional patient visits regardless of the number of doctors in the practice. Fortunately, there are a number of real estate options available to veterinary practice owners that can solve this issue. Animal hospitals, given their strong business characteristics, are viewed as great tenants by landlords and as attractive borrowers to banks.
Practice Systems and Procedures that Can Lead to Growth
Certain savvy practice owners we have worked with have developed clinical systems and best practices that allow existing doctors to use their professional time more efficiently. These processes and procedures often involve the use of a greater number of clinical staff per doctor. Staff members perform many basic clinical services and treatments often done by veterinarians in other practices. This frees up the doctors to focus their time on the most medically important (and profitable) aspects of the patients’ care.
These clinics also employ standardization, information and/or protocols that provide greater transparency and predictability to pet owners. Such procedures reduce the amount of time that the doctor needs to spend with each pet owner per office visit, enabling the doctor to see more pets each day and generate greater revenue per working hour.
Growth Through the Addition of Advanced Treatments and/or Services
A recent survey by Morgan Stanley has reconfirmed what we all see everyday in our work — that pet owners are more invested than ever in their pet’s welfare and care. These current and potential clients are more willing to consider treatments that might in the past have been considered too involved or expensive. This changing attitude toward companion animals should allow clinics to offer more value-added services and charge accordingly.
Procedures like ultrasound, laser therapy, and micro chipping are non-traditional services that require special medical equipment and training. Clinics can – and should – reinvest profits into the practice to provide even better care. Thus, practice owners can create a virtuous cycle of investment in people and equipment, increased customer satisfaction, increased market share and growing profitability, providing the financial strength to be able to reinvest in the excellence of the practice.
The Impact of Higher Fees
Practice owners can also proactively raise prices of their services as permitted by their respective markets. Many clinic owners have not increased what they charge for their services, despite the fact that their markets would easily absorb the higher fees. We speak to practice owners all the time that have more demand than they can meet and still have not raised prices over the past year or more. Basic economics tells you that when demand is greater than supply raising prices will bring the market into equilibrium. Clinic owners and managers need to look carefully at whether their current fee structure is appropriate in their competitive landscape, and then make any appropriate adjustments. Increasing prices means growing revenues and increasing practice enterprise value.
Pet Wellness Programs
Healthy pet programs can also be used to increase revenues. These are typically preventative care programs that help cover the cost of routine office visits. They are designed to help pet owners keep their animals as healthy as possible.
They often involved periodic exams and testing designed to identify and address any problems early. Covered procedures and treatments can include:
- Routine blood work
- Wellness exams
- Parasite prevention
Pet owners who sign up for these plans have been shown to access additional veterinary care more often than owners who do not. This willingness to visit a veterinarian can increase the demand for office visits. More office visits typically lead to higher revenues.
Why Growth Matters
Many clinic owners may ask why growth matters? Growth relative to the growth in the underlying market you serve, is the yardstick by which you can measure customer satisfaction. Care, convenience and positive medical results will bring people back and build word of mouth. It’s nice to hear what people say about your practice, but the real test is do they come back. Do they tell their friends, who then start coming in? These are the things that show up in your practice’s growth. Practice growth indicates practice health. Whether you intend to sell your practice this year or operate it independently for another decade or more, you want a healthy, growing practice.