The Self-Made MBA
The Self-Made MBA
There’s a gaping hole in veterinary education, and it’s being felt more acutely than ever before as the economy drives down Thoroughbred values and horse owners struggle with even the most basic costs of care.
To thrive in this environment, it is increasingly incumbent on equine practitioners to get a handle on inventory and personnel costs, develop effective marketing and communications skills and strategize for an uncertain future. Unfortunately, the vast majority lack the skills to tackle any of these tasks, because most veterinary programs don’t even offer a cursory accounting class.
“Veterinarians have historically not been known as good business managers,” says Carter Metcalf, DVM, co-owner of the Arizona-based Casa Grande Animal Hospital. “In veterinary school, you get no business classes—they’re too busy teaching you medicine and surgery. You’re left to develop that on your own.”
Those skills are sorely missed when a vet tries to open a practice.
“If you don’t run an optimal practice, and the staff or clients aren’t happy, how will you operate a business in this economic environment?” asks Mike Pownall, DVM, of Mckee-Pownall Equine Services in Toronto, Ontario.
Pownall, who opened his own practice soon after graduation from veterinary school, developed his business management skills through years of continuing education programs and several widely-available seminars teaching everything from human resources management to using Internet social media for marketing. It wasn’t easy, he acknowledges.
“Some of the extra time my classmates spent learning medicine I had to sacrifice by learning to run the practice, but it’s a sacrifice you or a partner in your practice need to make to get better client incomes, provide better patient care and offer the most optimal medicine you can,” he says. “You invested $250,000 in vet school, so you should really do it right.”
Thanks to the economic downturn, the major shift of pharmaceutical sales to the Internet and increasing consolidation by major industry players, these skills are more important than ever for the survival of practices.
“Markets are having a severe contraction and people are doing fewer things with their horses, so right now, we have to stay afloat by controlling our costs,” says Andrew R. Clark, DVM, MBA, the chief executive officer of Hagyard Equine Medical Institute in Lexington, Kentucky.
The biggest expenses for veterinary practices are drugs, supplies and people. Effectively managing those costs requires accounting, inventory and human resources skills, Clark says. For instance, a practice manager who knows his or her practice’s client payment collection schedule could then negotiate better terms with pharmaceutical suppliers, “so you’ve used, charged and received payment for the services before you have to pay for the supplies.”
Unfortunately, he says, “You’ll never hear any of these things in vet school; business education there is woefully inadequate.”
Fortunately, there is a wealth of opportunities for veterinarians to gain these skills, ranging from a do-it-yourself perusal of local community college business class offerings to courses and seminars tailored specifically for veterinarians. These programs are offered by universities, industry associations and private companies. Costs and approaches vary, but ultimately, most such programs focus on four main subjects: accounting and finance, human resources, marketing and business strategy.
Building a Budget
When diagnosing a patient, veterinarians are trained to look at lab results and compare them to what is considered “normal.” But the same professionals, for one reason or another, are often too intimidated to look at data from their own practice. “Financial statements are just like a lab result,” Clark says, but to find “normal” for an individual practice, they must be examined over a long period. “You have to figure out your own ‘normal,’ ” he says.
Once that baseline is established, a practice manager can create a budget that helps anticipate seasonal costs and other issues before they happen, rather than just waiting until the end of the year and seeing how you did.
“Lots of practices are working without a budget; it’s probably well into the 90 percent range. Everyone is managing through the rear-view mirror,” Clark says. “If you’re not working with a budget, you’re just being reactive.”
Metcalf puts accounting and finance skills at the top of the priority list for a successful business.
A good veterinary practice manager, he says, will go beyond simply understanding the balance sheet and get familiar with tax codes, lending costs and investments. He or she will then consider all of these factors when evaluating equipment purchases, new hires or other expenditures.
“When they first get out of school, [vets are] just doing the best they can to stay above water,” Metcalf says. “But as they catch their breath—and this goes for anyone—they really need to learn about the business world or hire someone else do it for them.”
Pownall, of Toronto’s McKee-Pownall, says he built a framework of business skills by attending a seminar offered annually in Wisconsin by Equine Business Management Strategies (www.equinebusinessmanagement.com), one of several privately-operated programs nationwide.
At one of the seminars, he and his staff “had a great discussion on how to have a difficult conversation,” he recalls. This was something he and his employees had tended to avoid. “We don’t like conflict,” he explains. “But I started realizing these things were very important.”
Human resources management (hiring and firing, offering raises and developing effective performance review procedures) is key to the harmonious and profitable operation of a veterinary practice.
Furthermore, says Clark, understanding the costs associated with employees can go a long way toward reining in expenses and improving profitability. “Veterinarians keep a lot of people at work overtime because they’re unorganized,” he notes. “Consequently, they’re paying for 10 hours of work that could have been done in eight. You need the right number of people to work the right number of hours.”
Managing the Message
The burgeoning availability of cheap animal pharmaceuticals on the Internet is driving an industry paradigm shift that could weed out practices that lack marketing savvy, says John Mitchell, DVM, a Pompano Beach, Florida, veterinarian who is currently vice president of the American Association of Equine Practitioners.
Unlike human medicine, in which drug sales are separate from physician visits, the sale of medicines for animals has traditionally been done by the veterinarians themselves.
“Veterinarians, notoriously, are kind of soft-hearted; they’d look at your horse for nothing, then sell you medication for the horse with a little markup on the medication,” Mitchell says. “That worked because the medications were very cheap, plus they weren’t available anywhere but from the veterinarian.”
But that’s changing, thanks to the rising cost of pharmaceutical research and the downward pressure on drug prices due to the availability of wholesale pricing information–and even the drugs themselves–on the Internet. As a result, veterinarians need to begin charging for routine service and re-educating customers about the fact that they’re paying for up-to-date expertise and top-quality diagnostic equipment–something that takes good marketing skills.
“So what we’re trying to do with the veterinary business model is to switch to having clients realize that expertise is what’s important to them,” Mitchell says. “It’s a difficult change; people say, ‘You never charged me for this before.’ But if the vet practice can’t survive on routine work, it won’t be there for emergency work.”
A carefully considered marketing plan will address every potential source for new business, from the animal owners themselves to referring veterinarians. Additionally, marketing methods are changing every day, and veterinarians are starting to look beyond traditional Yellow Pages and magazine ads to blogging and social networking websites.
“We’ve recently been much more perceptive and aware of the impact of branding and marketing, and we’re hugely using Facebook, Twitter, blogs and YouTube,” Pownall says (see Web 2.0, page 10).
Planning for the Future
So you’ve improved your marketing and tracked your business’ income, client numbers and employee hours for long enough to make some projections. What comes next? How will you ensure the continued success of your practice? Will you add more specializations? Hire more veterinarians and add space? Seek a new client niche? Casa Grande’s Metcalf notes that thinking about growing a practice can be one of the industry’s most challenging tasks.
His Arizona practice is currently expanding from 3,000 to 6,000 square feet of space to meet growing customer demand despite the recession—something he attributes to “paying attention to money.” His skills, he acknowledges, were self-taught through reading and experience serving on the board of directors of a local bank.
“My exposure with the bank made me a lot more savvy on these kinds of business dealings,” he says. “You really have to understand the ‘time value’ of money—how much it costs to borrow—and how much financing you really need to get lined up before ground is broken.”
Chart Your Crash Course
Equine veterinarians are traditionally busy; between late-night emergency calls and routine work, there’s not much time to read a business book, much less pursue an MBA. So how can a practice manager gain these skills? Actually, there are lots of options. From weekend seminars to conventions to night classes, there’s likely to be one that fits your schedule. Here are a few:
• A “mini-MBA” tailored to veterinarians, such as that offered by the American Animal Hospital Association (AAHA) Veterinary Management Institute (VMI), which is conducted as four weekend modules over an 18-month period through Purdue University’s Krannert School in West Lafayette, Indiana. Though focused primarily on companion-animal veterinary medicine, “a lot of the concepts and principles we cover apply, whether you’re companion or equine,” says Logan Jordan. Ph.D., an associate dean at the Krannert School who teaches the strategic management component of the VMI program. Each of the modules, which run Friday through Sunday, is focused on one of four core disciplines: financial management, human resource management, marketing management and strategic planning. The Veterinary Management Institute boasts more than 1,000 alumni from around the world. Occasionally, veterinary medicine students from Purdue sit in on the courses, Jordan says, but most are already in the profession. For more information, visit http://www.krannert.purdue.edu/programs/masters/NonDegree_Programs/vmi/.
• A privately-operated, industry-specific business management seminar program such as Equine Business Management Strategies, created by Robert Magnus, DVM, of the Oconomowoc, Wisconsin-based Wisconsin Equine Clinic and Hospital. Held annually in Delafield, Wisconsin, this weekend series of seminars, which is led by industry professionals, covers human resources, improving profitability, marketing, financing and business strategy. It also offers many opportunities to network with equine practitioners and share best-practice information. “This program was instrumental in my knowledge,” Pownall says. “By the end of the first day, I felt like I had received the full value.” For more information, visit www.equinebusinessmangement.com.
• The American Association of Equine Practitioners’ evolving slate of business education programs. These include entry-level and expert practice management seminars offered during the AAEP’s annual convention in December and designed to complement the convention’s continuing education medical topics. There is also a special Friday-Saturday seminar offered in November that is dedicated solely to the business aspect of managing and building an equine practice. This event includes small-group sessions with practice managers as well as keynote speakers on marketing and profitability, inventory management, jump-starting a stagnant practice and other topics. Future plans call for merging the business management symposiums with continuing medical-education events, so a practice could send several key personnel at one time for different programs, AAEP’s Mitchell says. For more information, visit http://www.aaep.org/continuing_edu.htm.
• An organized mentoring program such as that offered by Veterinary Study Groups Inc. (www.veterinarystudygroups.com). These programs match groups of 20 or so practice-managing veterinarians from around the country for twice-yearly facilitated meetings. The meetings give participants a chance to compare business success, costs and strategies with one another and a seasoned practice management professional. “These are very worthwhile programs,” says Clark. “It’s very effective to have a mentor and be surrounded by people who are self-selected to be there.”
• Your local community college or university almost certainly offers classes on business management, accounting, computer software and other pertinent subjects. While not necessarily directed at veterinary practice, they present an effective, cheap and flexible option for busy veterinarians.
In recent years, veterinary schools have come under increased pressure to offer at least some opportunity for developing business skill sets. Additionally, students at many schools have taken it into their own hands by forming business management clubs and attending classes on their own. The Veterinary Business Management Association is a national, student-managed association offering networking opportunities, business classes and certificate programs to veterinary medicine students. Pownall urges veterinary medicine students to seek out these opportunities. “It’s not only good for someone who wants to eventually run their own practice, it’s a good skill for a young vet to know if the practice they’re going to work for is a good practice,” he says. “A well-run practice is going to make it easier to optimize medical care, and a new associate will want to work for one where they know they’ll be treated well, that will have the best diagnostic equipment and good marketing. They want all those things, not just a job.”
Andrew Webb is a freelance writer and researcher based in Albuquerque, New Mexico.