As the economic downturn of 2008 continues to reverberate throughout the equine industry, many practices are on the rebound, while others still struggle to keep pace. As we head into 2017 on the cusp of many potential political and economic changes, you might be asking yourself whether it is time to expand, contract or keep your practice the same.
For insights into this question, EquiManagement turned to Susen Shields (who at the time this article was written was a veterinary practice management consultant working with Zoetis’ People First, and now she is the national sales manager for Boehringer Ingelheim), and to Jorge Colón, DVM, MBA, the owner of a solo ambulatory equine reproduction and neonatology practice based in Lexington, Kentucky, who also works as a veterinary business consultant.
Through Zoetis’ People First program (Growpeoplefirst.com), seven business solution managers offer fee-for-service business development and leadership training. PeopleFirst is in the business of helping practitioners take care of their businesses by meeting directly with them to understand goals and objectives and to identify where they need help. The advisors then matche resources to either help onsite or through group courses.
As one examines practice goals in 2017, Shields advised that it is important to take an inward look to determine how best to be competitive. She tells practitioners to ask themselves questions such as:
• Do I have the resources needed to stay competitive?
• How am I doing, and how do I know how I’m doing?
• Do I want to open another practice in another location?
• Do I need to add to or cut back on staffing?
• I’m on my fourth associate in two years, so what can I do to retain an associate?
Another line of personal inquiry focuses on potential goals for the long term. Do you want to have more time for family and a better life/work balance, or do you want to develop a mega-hospital situation with a large group of doctors, staff and the equipment needed to encompass both medical and surgical services?
Shields noted that some practitioners might be thinking, “I’m a guy/gal in a truck, and I don’t want to do this forever; so what might be a game plan to become a multi-doctor practice? How do I prepare for that?”
Beware of Growing Too Fast
One thing that Shields cautioned against is growing your business too fast. “Rapid growth without sufficient infrastructure is likely to lead to collapse,” she said. “While each person might feel they are unique in their situation, most practitioners have more of a common thread than differences. Many people are worried about risk of expansion and potential for failure. Many are worried about repercussions of firing a client.”
To prepare for expansion means that a practice owner should pursue an in-depth assessment of where the practice is and where it might be going, including whether there is sufficient capital and energy to branch out as a bigger entity.
Each assessment of every practice situation has to be individualized. Shields recommended that practitioners ask themselves, “What do I see myself doing in the next five years if there are no boundaries or limitations in my way?” If a practitioner feels overwhelmed by this question, then she suggested that the practitioners needs some kind of stress relief in order to focus on the business.
For a shorter-range view, practitioners might ask, “What do I see myself doing this time next year?” Shields emphasized that it is vital to think about business rather than just working in the business day after day with no planning.
As both a practicing equine veterinarian and a business management consultant to veterinarians, Colón also stressed that veterinarians need to start thinking differently: “Rather than thinking of oneself as a veterinarian taking care of horses, consider that you are in the business of providing veterinary medical care.”
Echoing Shields’ advice, Colón urged practitioners—owners and associates alike—to think of practice as a business. “Refrain from feeling bad about billing a client, not wanting to charge for poor results, or feeling obligated to leave a family function to go tend to a horse,” he advised. “Otherwise, this continues a culture that this industry has created over many decades: Clients have received what they want, when they want it, for so long that they are in charge of your time.”
Instead, he urged the development of a group/team effort between the client and the veterinarian—or even better, his or her practice, if it is a multi-vet business. In that way, it can be possible to avert burnout and to maximize your bottom line.
Individualizing Your Strategy
A recent AAEP survey indicated that 70% of equine practitioners work in single- to four-doctor practices, many of them ambulatory. An ambulatory vet can define more than a veterinarian in a truck; it could also be someone who has access to a haul-in facility, but is not in the business of hospitalizing horses (complicated cases are referred to a hospital facility).
Because each practice is so individual with regard to location, practice structure, client demographics and a variety of other environmental factors, there really can be no generalization as to the best approach.
Philosophically, a practitioner might just have a feeling that there needs to be a change. Above all, Colón reiterated that each veterinarian should treat his or her practice as a business, complete with consideration of different environmental pressures relative to where you live.
With regard to pricing of medications and services, Colón pointed out the simple fact that the small business practitioner cannot compete on price with a large-volume buyer such as a multi-doctor practice. Instead, he recommended that the solo practitioner address product provision as part of his or her service.
Colón advised vets to check on other competitors’ prices to best balance their fees. “If you try to compete based on pricing, you are transferring power to the consumer,” he remarked. “Then the client picks which veterinarian to use based on price, rather than on the service experience and the bundle of associated benefits from excellent service.
“It is best to spend a lot of time on increasing services and benefits for the client in order to develop excellent client satisfaction,” he continued.
Excellence in service helps to expand a practice via word of mouth from one client to a friend/acquaintance. Colón said that being financially conscientious about a client’s pocketbook encourages that client’s trust by not spending his or her funds unnecessarily; when funds are truly needed, those clients will happily spend whatever is necessary for their horses’ health.
As Colón counseled, “Service provision is an intangible—you cannot build it, store it or sell it later; it is something that occurs at the time of each client interaction.”
Shields pointed out a practical truth: “Until horses come to you with wallets strapped to their halters, you are still in the people business.”
The AAEP Touch survey of clients identified top expectations of clients from their veterinarians. One of the main requests was for clear communications. Good communication skills, in combination with tactical thinking, are essential to developing a practice of excellence. Such skills save time, decrease conflict and increase efficiency and client satisfaction.
One example Shields gave of the critical role of communication is the stair-step process you can provide by explaining your diagnosis, treatment and expected outcome. Not only will your client appreciate your expertise and communication skills, but also you will likely obtain a better outcome if the client understands the instructions and the reasoning behind the therapeutic approach.
Two other key expectations by clients are that their veterinarians are effective lameness diagnosticians and that they are available 24/7. The latter expectation is difficult for every equine practitioner, and especially problematic for those with solo practices. This might be the real reason that some practitioners wish to expand and hire new associates—simply to improve work/life balance by sharing emergency duty.
Maximizing the Bottom Line
Whether you are planning to expand, contract or keep things moving along the same with your business, there are ways to improve your bottom line.
Improved profitability could modify how one views making a change to a practice. Perhaps, with strategic management policies, you might find that your practice is just right if you can bring in more profit for the same amount of work output.
Colón emphasized the importance of “lean management.” He said that if you manage your practice better by reducing waste, then you don’t need to generate more income to have more left over to pay yourself. This strategy—to decrease waste of time and goods—becomes a mentality and the basis of the culture of your business. He noted several common areas of waste:
• inappropriate pricing (Colón said it is best not to base price on your competition, but rather on your provision of service and benefits.)
• lack of inventory control
• inappropriate and inefficient scheduling of farm calls
• overuse of utilities—as, for example, employees not turning off lights and air conditioning
Colón suggested that there are two ways to achieve lean management:
1) through revenue—i.e., appropriate pricing and billing for services performed
2) by tailoring expenses to maximize income
The second strategy—tailoring expenses—is something that every practice is able to achieve. Cutting down on expense wastage puts money in your pocket. Inventory control is one essential strategy to accomplish this. Colón said, “A vet should develop the ability to create a system that keeps only what medications and supplies you need on hand, rather than having items sitting on the shelf. This influences cash flow. Also, you lose money with shelved inventory due to shrinkage, breakage, spoilage or out-dating.”
He said it is easier to remember what you have dispensed when you only have a limited amount on hand.
He further recommended seeking out manufacturers’ promotions and specials with price reductions, looking for rebates and asking about delayed billing. This maximizes cash flow to net down the end cost of a product. “Every dollar spent, or that you fail to bill for, is a dollar that you need to bill and collect to just come out even,” he explained.
Another bit of practical advice for tailoring expenses is to have more than one pharmaceutical distributor, so you can price-shop at various sources for price differences.
In addition to the tailoring of expenses, another key concept to a successful business practice is to consider the “happiness” and satisfaction of your employees. Colón remarked that it is possible to obtain greater performance from a staff member receiving a slightly better hourly wage than the performance you might receive when cutting wages to a slim margin to save some dollars. “A happy employee is loyal and works hard,” he commented.
He suggested that empowering employees with added responsibilities—such as inventory control and scheduling—will reap benefits for your business, such as an improvement in your clients’ experiences, as well as employees taking pride in their work and helping you to the best of their abilities. This could have a measured influence on your business plans going forward.
For those who wish to expand their practices, Shields recommended laying out a plan to sustain the business and its competitive advantages. She said that often the impetus to change something—even when things are going well—has to do with a “burn in the belly” that means “I have a lot to offer.”
Another impetus to change is the thought that one practitioner voiced: “If I don’t change, then I will be an old person before my time.”
One question to ask, Shields said, is “Do I need to expand services and offer more wellness programs and advertise my services?” Shields urged practitioners to think about all the “what ifs” and how well you are positioned to grow at a rate you can enjoy and support.
Colón suggested that there were several ways for a practice to expand:
• Provide the same service to more people to increase your market share.
• Provide new services to existing clients (although he noted that this might dilute your proficiencies).
• Provide new services to new clients.
He cautioned that as you grow your practice, you might need to hire new staff members/associates. When you are turning cases over to a new associate, it becomes important to educate that client on how that new veterinarian can provide what he or she has received from you.
Another consideration with regard to expansion focuses on the true costs of hiring a new associate. Colón defined activitybased costing as the cost and expenses based on the amount of resources a product or service consumes; in this case, a new associate is a significant added expense.
It is also important to review how much of the associate’s work is a transfer from your workload versus the generation of new work and clients. When you transfer your services to another practitioner, business income might decrease—or, at the very least, not change. This might be a reasonable trade-off if you want to retire or need more family and personal time. If you purposefully contract your business, then you are accepting an exchange of working less to making less income.
It goes without saying that practices with high fixed expenses—hospitals, in-house facilities—have to continually expand because the fixed bills that don’t go away need to be paid before there is money left for one’s own salary.
Business Tools to Determine Your Strategy
Shields suggested that practitioners looking to modify their practices might benefit from using a practice management consultant. Research has demonstrated that organizations with strategic plans in place are 12% more profitable.
Many veterinary management practices are available around the country. One respected resource is the Zoetis service Profit Solver (zoetisus.com/profit-solver), which analyzes the net profit by service based on a practice’s own intrinsic costs, rather than using benchmarks averaged through the regional or national equine industry.
Profit Solver examines 70-100 services in a practice and fleshes out the most profitable services and loss leaders. Shields noted that if you choose to offer a lowprofit service, go into it with your eyes open and include a discussion of additional options with the horse owner or trainer. Such a discussion might counterbalance the “loss” by enabling you to add in other services and to make adjustments based on how the loss impacts to your bottom line.
The software of Profit Solver also can identify profit leaks, as well as running pro forma scenarios. For instance, if you add a new veterinarian to your practice, increase the salary of a staff member or buy digital X-ray equipment, how much must you charge to recapture those investments? Shields noted, “This service models scenarios and is an overlay into overall business evaluation and assessment of ‘Am I the right size?’ ”
Another business tool offered by Zoetis is a SWOT analysis with metrics to anticipate whether you will still be competitive in three to five years. SWOT analysis looks at four different quadrants:
a) Strength should be examined from an internal view—as, for example, “What do I do well?” or “I have a good reputation for what?”
b) Weaknesses are vulnerabilities. Shields advised, “Look at economic trends that might rock your boat.” For example, if competitive practices move into an area, what is your strategy to maintain your business? “Complacency may mask vulnerability, and once competition occurs, you’ll need to be more important to and involved with your clients,” she said. This could be a reason to consider expansion of a practice.
c) Opportunities are the external components of what is out there as a market for your services. For example, is there a new breeder in town or a new horse show facility? Is there a new subdivision development, which could be either a threat from loss of land for horse facilities or an opportunity from real estate increase? Is there a big snowbird population moving into your area of people wanting to ride year-around?
d) Threat is also looked at from an external viewpoint.
Is being a solo practitioner a strength or a weakness? Shields said, “The strength is that you are very agile; you can make changes and adaptations very quickly. The weakness or threat is the obligation to 24/7 care based on client expectations.” Being a solo practitioner located in an area with a high population of veterinarians could also be perceived as a strength (sharing emergency duty, access to referral hospital) or a threat (excess competition).
“Often, it is helpful to have an objective consultant sort through your practice and provide guidance for what steps to follow to maximize your bottom line,” said Shields. Sometimes the obvious may not be so obvious, because you are in the middle of this yourself.”
Part of the examination process should look at the relationship between practice owners and colleagues/associates. She explained that with some example questions: “Is there a counterbalance between practitioners that is cohesive and constructive? What about capitalizing on your skill set? For example, if your skill set is primarily reproduction, but local economics dictates that reproductive practice isn’t currently active, then is your skill set matching up with a sustainable opportunity?”
By taking a good hard look at yourself and your practice and applying the SWOT evaluation, you might be able to uncover layers that can be modified to improve your practice environment.
Shields asked, “How are you set up? Where are you set up? Does this match your objectives?”
There will be regional and local differences, differences in equestrian disciplines and specialty differences. She recommended asking yourself, “What are you good at? Not so good at? Are there signs of positive growth in your area? Are financial markets feeling stronger? As an example, many East Coast horse investments are tied into the health of the stock market.”
From Colón’s perspective, Kentucky is still feeling the economic effects of 2008. While the economy has improved, money available from clients of the middle-class Thoroughbred industry has not bounced back. Without that expansion within the Thoroughbred environment, there are not as many horses for a practitioner to pick up as patients, while at the same time there is fierce competition from other local practitioners.
In such a case, a veterinarian either needs more clients or needs current clients to get new horses or use more services. He said it is hard for an equine veterinarian to expand in such an economic climate.
No matter the state of the economy going forward, like Colón, Shields stressed, “Work on the business, not just in the business.” It takes conscious reflection on where you are in your practice and how to best manage your bottom line while offering the best service. This self-analysis will help determine whether you wish to expand, contract or stay the same with your practice.