Managing the top line

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As has been well publicised in the media for a number of months, economic conditions are very uncertain at this moment in time.  Generally most veterinary practices found that up until the end of October trading conditions were still reasonably good, however a number have reported a slow down since this time.  A few months do not make a meaningful trend, and we are sure that if we surveyed all practices across the country there would be a huge variance.  However there is no doubt that now is a good time to think about planning ahead as we face more uncertain times. 

The majority of practices have maturing client numbers and it becomes essential therefore to take a proactive approach with clients and make sure you are able to offer the best service possible to generate the maximum return from the clients that you have.  Practices that have been doing this for a number of years are already well placed but there are still likely to be opportunities to continue to improve matters. 

It does not take “a rocket scientist” to work out that improvement in performance is likely to either come from growth of the top line i.e. sales, better control of costs or a combination of both.  This publication focuses upon the top line, identifying opportunities to continue to potentially grow sales.  Future publications will look at cost saving ideas etc.  At the end of the day, the key is cash flow, generating a sufficient return from the business in order to ensure that the lifestyle of the owners is maintained and at the same time the business has sufficient financial resources to continue moving forwards.

For many practices, continued success will depend upon making small changes in certain areas as opposed to a wholesale change in the way they do business.  The important fact is that actions are agreed and implemented in order to make this happen.  Management time (owners and practice managers) is critical in order for this to happen. 

Veterinary Philosophy

Turnover is not everything, however many veterinary practices have relatively fixed costs, and turnover is therefore an important measure.

In order to continue to grow the top line, it is very important that the practice has a clear philosophy about how it wishes to approach veterinary medicine.  Forward thinking practices see themselves as “healthcare” driven, taking a proactive approach with animals rather than waiting for owners to engage with the vet as and when they perceive it is necessary.  This might be from the introduction of a new puppy, the purchase of a pony or a visit to a farm.  Clearly, not all clients will wish to engage with the practice in this way, however if you do not offer clients the choice then it is they who will drive the relationship.  This involves investing time and energy into people, premises and resources.  It is important therefore that the pricing strategy matches the practice’s philosophy and quality of veterinary services on offer. 

Pricing Strategy

Veterinary practices have always benefitted from a dual source of income i.e. fees and drugs.  However for a long time fees have been charged at too low a level as practices relied heavily on drug income.  With the rearrangements in the market place that have taken place over the past few years many practices have still not redressed the balance.  Proactive practices have been ensuring that fee levels have been adjusted to appropriate levels, and drug mark ups maintained or reduced over the last few years in anticipation of the changes.  However, one always has to accept that there are certain services that are seen by clients as routine, where market prices might well dictate and these will need to be kept at a sensible level e.g. vaccinations.  Despite being tougher trading times, now is still a good time to review pricing strategies.  This will include market prices e.g. vaccinations etc as well as other areas where the client perceives higher value e.g. operations / advice.  If the pricing structure is poor then performance is likely to suffer.

Charging Sensibly

It is, however, not just about pricing, but also charging correctly.  Many practices still undercharge for services such as specialist input or theatre work.  The issue of undercharging is a common theme in veterinary practices.  Whilst the practice pricing strategy might be correct it is very common to see that this is not implemented by the staff at the practice.  The impact of this can be significant in terms of profitability and cash flow.  To demonstrate the impact of poor pricing and / or undercharging a simple example has been set out in the table, using a small animal practice.  Clearly the issues are just as relevant for equine and large animal practices. 

Actions to Overcome Charging Problems

Pricing issues can be resolved quickly by adjusting them to appropriate rates, however undercharging can be more complex to overcome.  There are a number of matters to consider and for ease some of these have been listed below:

• Lead by example.  If as an owner you are one of the worst offenders in terms of charging, then others will follow your lead.  It remains particularly difficult to motivate and ensure others within the practice charge properly if you are not doing this yourselves.
• Sharing financial information.  You need to decide what financial information you wish to share with your staff and how this will be used to set expectations of performance.  You could, for instance, provide confidential performance data to each of your vets.
• Using data effectively.  It is important as owners that you understand the individual performance of each member of fee earning staff, ideally broken down into their fee and drug work.  Many practices take this a stage further and look at the individual parts of the fee and drug income.
• Identify key areas to target.  Owners should start by obtaining key print outs from their vet system to highlight areas of undercharging.  These might include the daily operations in small animal or chargeable time per day for equine and large animal.  Whether you chose to review matters for instance daily in small animal or invoices at the month end in equine and large animal, the important fact is that you start the process and follow it through rather than stopping after say the first month.  Consistency is the key.  We suggest, though, that you manage by exception, so as not to get into information overload.
• Use meetings effectively.  Staff meetings can help here to discuss relevant issues and get staff buy in.  Why not ask all vets to diagnose a case and compare clinical approach and fees?  This might improve your clinical protocols as well. 
• Utilising IT.  Many IT systems have the ability for staff to override the prices or perhaps charge a half fee.  Such procedures can often be either stopped completely or exception reports run to identify where this has happened.  
• Simplifying Pricing.  Many practices set up a very complicated pricing structure whereby the vet / nurse / receptionist who is pricing up the work has to remember a considerable number of inputs in order to ensure that the item has been charged correctly.  Where possible, practices should look to simplify the approach to minimise the “clicks” on the computer whilst at the same time providing transparent pricing to the client.  This might also include reducing the number of options available to the staff.  
• Communication.  Clear, concise communication is essential throughout the practice.  This might be in terms of a clinical diagnosis, a fee estimate or further veterinary work that is required.  The practice needs to ensure consistency in its clinical methods / protocols so that clients fully understand the services being offered.
  This will include:
• Face to face meetings with clients
• Marketing material
• Web site
• Press releases

• Training staff.  It is so important for owners to have the time available to train staff.  Too often owners are “head down” fee earning rather than spending sufficient time with staff.  If you have 5 vets working for you,  training all of them can have a multiplier effect of 5.  If each generates more revenue it is likely to be greater than the owner working harder / longer hours.
• Appraisals.  Consider including “hard” data in your appraisal approach.

The above are issues to consider from a practice perspective.  However, there will also be specific issues that are relevant to the various disciplines.  We have set out in the following pages issues to consider for small animal, equine and large animal.  The details will not be exhaustive but will hopefully stimulate some ideas.  Clearly, there are many other aspects to some practices e.g. referral, specialist work, but there is insufficient space to cover everything.

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