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One Equation for Decision Making

As leaders in veterinary medicine, it’s easy to feel overwhelmed. Whether it is the case load, clients, profit loss statements, or management of our colleagues and staff we have a lot of work to do with little time to make plans or decisions for the hospital’s growth! That is why I wanted to share a simple way to help make decisions for your hospital based on an equation.

The Equation:

Average Client Transaction (ACT) x Number of Transactions - Expenses = Revenue

I have utilized this equation with teams in my role as a clinic coach with Southwest Veterinary Solutions. I like to start with this equation because it helps all members of the hospital team get on the same page of where we are today. We then talk about what our goals are for the hospital. After that, we then start to evaluate each part of this equation to identify areas of opportunities and potential threats to our clinic's health. Using your clinic's numbers, we can then identify Key Performance Indicators (KPIs) and use industry benchmarks to evaluate the numbers together to help us make the best decisions for your clinic.

KPIs and Benchmarks

Key Performance Indicators

Key Performance Indicators (KPIs) are quantifiable metrics that can provide insight into the health of our business. We can use various metrics to help us gauge our clinics health such as appointments/dvm/day or ACT per DVM appointment to make decisions on where we have the greatest opportunity to improve your hospital. These can be customizable and identified with each hospital team on which areas we want to focus on to make sure we can achieve your Goals.

Benchmarks

Benchmarking, or using benchmarks, typically use metrics from multiple clinics to make judgements on how our clinic stands when compared to other clinics. There are several various metrics that are published and available for reference, but it's important to identify which ones matter to you and your team.

Now we're going to take a look at each part of the equation and areas of focus for your clinic. There are several areas within each part that can help improve the numbers and the performance of your team. I have included bullet points to help you and your team start the discussions along with some industry benchmarks to help guide your team.

The ACT:

  • Price evaluation
    • Expense ratios commonly used for markups in each area
    • Prescription diets: 1.5 x costs
    • Over the counter products: 2.0 x costs
    • Pharmacy: 2-3.5 x costs
    • Labs: 3.5-5 x costs
  • Improving medicine and preventative care offering
    • Blood work screening
    • Flea/tick/heartworm prevention
    • Vaccine/wellness programs
    • Urgent care/same day appointments
  • Communication training with all team members on presenting treatment plans
  • Standardized processes for the entire team to ensure consistency and efficiency
  • Focus on your strengths (personal, professional, and hospital)
  • Technician utilization (Dr:Tech ratio)
  • Dental and surgery suite utilization (when, where, how much, etc)
  • Benchmarks (dependent on location and type of practice)
    • Per DVM: 200-250/transaction
    • Per DVM year: $650-$900k/year
    • Average client transactions (ACT): $175-$225

The Number of Transactions (total invoices and patient visits)

  • Marketing Strategy
  • Lapsed clients and bringing them back to the clinic
  • Full-time DVMs on staff
  • Number of appointments available and type of appointments
  • Workflow evaluation
  • Technician appointments and using them to fullest extent of your state's practice act
    • Benchmarks
      • Active invoices/year per Full-time Equilievent (FTE) DVM 4-4.5K
      • New clients= 25-30 per FTE DVM per month
      • Average client per FTE DVM= 1,400-1,800

Expenses

  • Benchmark
    • Cost of Goods Sold (COGS) 20-24% of Revenue
    • Payroll 40-45% of Revenue
      • DVM salary 20-22% of Revenue
  • PayrollManagement of staff hours and full utilization of the team
  • Pharmacy efficiency and pricing

Revenue

  • Benchmarks
    • Goal 14-18% profitability (10-12% average)

There is nothing in business or medicine that is absolute. That also applies to this equation. The equation is a tool to align team members and bring topics to light that may help better the financial standing of the hospital and bring teams together under a unified goal.

After an area and topic of focus are identified, meet with your team to discuss how to improve it. I highly suggest an off site meeting with structured time for brainstorming and an agenda for your team to bring ideas to the table. Once a plan is made, write it down! Then create SMART goals to accomplish the desired outcome. Finally, share it with your whole team.

Interested in learning more about implementing the use of this equation or seeking professional assistance to help your team achieve its goal? Visit Southwest Veterinary Solutions at www.southwestveterinarysolutions.com to get started.