Profitability is the critical success factor for every veterinary practice as it is the accurate measure of the practice’s financial health. Implementing and aligning strategies to measure profitability and growth doesn’t have to be complicated.
Many veterinary practices have had a banner year in 2021 so now is the perfect time to be thinking about how to improve profitability and drive long-term growth with these 8 key strategies.
As a veterinary practice owner, one of the ways to challenge yourself is to determine what your goals are for 2022. What do you need to move your practice forward? What do you need to improve? What’s holding you back? Reflect on these questions and then set 3 goals/metrics to achieve in 2022.
Develop a plan on how to achieve your goals and metrics. How are you going to get there? Utilize benchmarks and checkpoints at the 90-day mark to determine your progress. Don’t forget to get your staff involved. Employees thrive on the team concept, and they appreciate the transparency of where the practice is going and how they can help be a part of that journey.
It’s important to monitor and reassess your goal progress at the end of each quarter. If you have a strategic advisor, they can help hold you accountable. Schedule recurring meetings every 90 days with your advisor to ensure you are on track towards your goals.
Review your fee schedule. Are your prices competitive? Do they reflect the level of service provided? In this tight market where costs are increasing, make sure your fees not only reflect your market, but they also reflect the value you're providing to your patients.
Start by analyzing the ten top service codes you're providing the most often. Determine where they are and where they should be compared to the market in your geographical area. If you find your fees are not in line with the market, develop a timeline to get them up to fair market value. Instead of increasing prices overnight, you might want to implement a more modest increase periodically two or three times a year.
Another consideration is write-offs. A key concept for any business of any type is customer incentives. What are you giving away for free? Over time this can amount to a large sum that could have been brought in as revenue. Review these write-offs to ensure you are not giving too much away.
As 2021 has proven, if fees are increased to align with the market, it bypasses overhead and falls right to the bottom line, which then increases your profitability. The amount of fee increase depends on where you are currently and if you are already high or low. But generally, if you're normally at a 3-5% increase, based on the cost of labor and supplies, it more than likely should be in the 5-7% range for a fee increase in 2022.
If you look at your practice and you have cash to invest, what's the next step? There are a few areas where you can invest and expand your practice.
In regards to financial statements, there are three big categories that break down your income statement. It’s important to know these numbers in your practice.
It’s important to analyze your overhead and look at some of the big-dollar items that make up your income statement to see if you can reduce the cost in some way.
Key Performance Indicators (KPIs) are quantifiable measures of performance over time for a specific objective. They provide targets for your practice to strive for, milestones to gauge progress, and insights that help you make better decisions. Important KPIs to evaluate include:
Reviewing staffing can affect a practice’s profitability and help to drive future growth. Look to potentially add an associate. With the current labor market, it may be tough to find one, but if you can find a good one, it can build out your practice.
Are there tasks you or your staff complete that are taking time away from seeing patients, and thus affecting your revenue? If the answer is yes, can you outsource these items (i.e., cleaning, payroll, bookkeeping, etc.)? The more time you have to generate production, the more it helps your practice grow.
Could continuing education for your staff expand their skill set and increase flexibility? By offering additional education or incentivizing employees to earn additional certifications, there is the potential to offer your customers extra services which can help your bottom line.
Make sure everyone is in the right seat. Do you have your most talented people in the roles that best suit them? If not, is there potential to move them to a different role within your organization? Is it possible to give them additional responsibilities? These are considerations that can help alleviate the bottleneck of staffing.
Culture now matters more than ever as it's one of the biggest things that can help with employee retention. Keeping a good, efficient employee is much cheaper than trying to hire and train a new employee.
Take a look at your staff benefits and talk to your staff to see if there are specific benefits they may be interested in that you don't currently offer. If you're consistently hearing some pain points from them, see what you can do to address those items.
The most common benefits offered are health insurance, 401(k), and dental insurance, but there are even simple benefits such as offering flexible scheduling or an education assistance program. Not only are these great for the employee, but they also offer some tax benefits for you as the practice owner as well.
As we begin 2022, here are a couple strategies to adopt as we move forward:
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