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Turning expenses into profits

Managing key aspects in your veterinary clinic can help you build a sustainable, profitable practice.

Pet ownership has surged during the current COVID-19 pandemic and vets are poised to benefit from the flow-on effects of this. Transformative periods like this present an excellent opportunity for practice owners to stop and take stock. You can then make the necessary changes for your practice to capitalise on new trends and technology. Simple yet effective changes now could improve efficiencies and drive down expenses ultimately improving the profitability of the practice in the long run.

Veterinary clinics tend to operate with higher costs and lower margins than other medical practices, so managing your costs is a smart strategy. There are only so many puppies you can vaccinate in a day, but you could get a better return by focusing on the following key areas.

Make the most of your Practice Management Software

Using your Practice Management Software (PMS) effectively can help you really understand what is going on in your practice.

Your PMS software can help you analyse your client-to-staff ratio, wages as a percentage of revenue, and whether you’re gaining or losing clients. Understanding the different levers in your business can really help you make strategic decisions around investment or marketing.

Check key metrics monthly

Looking at key metrics monthly, at a minimum, is considered best practice. For example if the number of vaccinations you provide drops off and that’s only measured annually, it will take a year before any new strategies are put into place to rectify it. Measuring monthly means any issues can be identified and corrected sooner.

Remember sales start on the phone

The way people live and shop is in transition. Social distancing, restrictions, lockdowns and curfews are forcing people to buy online or by phone, rather than in person. For veterinary clinics, that makes an incoming phone call even more precious.

A call from a price shopper is the perfect opportunity to convert an enquiry into a sale. If someone rings a practice asking for a price on a service, have staff answering that can communicate the value rather than just the cost.

Each phone call is a chance to start a relationship with a potential client by engaging with them; listening and asking questions so the prospective client hangs up with a clear impression of what you can offer that other similar practices can’t.

Invest in inventory management

Inventory can be one of the largest expenses in a veterinary practice and it is critical to manage this effectively.

Good inventory management strikes the delicate balance between what is enough stock and too much. If a practice can’t treat an animal for some reason or doesn’t have a particular product, it’s a good reason for the client to go somewhere else.

So the medications, pet foods and ointments are not only a profit centre contributing significantly to income, they also help build and cement relationships with clients.

An inventory management system will track and maintain stock and can be linked to accounting or other management systems, so all operations work together to reduce costs and maximise profit.

Pay rent to yourself

Rent is a significant cost in any veterinary clinic. Given many practices want to choose a place to settle and work from for a long period of time, it makes sense to be paying that rent to yourself, rather than paying off someone else’s mortgage.

While the cost of a commercial property may seem eye-wateringly high at first, there are financial solutions available that may make it advantageous. For example, you can borrow to buy your practice premises through a self-managed super fund, which offers a combination of security of tenure (you’re unlikely to evict yourself out of your own premises), and may offer a number of tax benefits. What’s more, some lending institutions will lend up to 100% to acquire owner occupied premises as well as assist with funding to make the premises fit for purpose.

Build a relationship with suppliers

There are advantages to getting to know your suppliers and what they have to offer. Suppliers will often offer discounts for repeat business and in tight times, will be grateful for your loyalty.

Attending conferences and continuing professional development (CPD) courses is also a great way to build your network and take advantage of suppliers offering special promotions, like a 10 percent discount for new clients.

Also, be sure to carefully weigh up the costs and benefits of new versus second-hand goods. New equipment may cost more upfront but allow greater productivity or utility than older equipment. The cost may be mitigated, however, if second-hand equipment is significantly cheaper and has been well maintained.

In general, the path to profitability and growth for a veterinary practice is as much about managing costs as it is about retaining existing and attracting new clients. It’s important that you take a long term view during these busy times to ensure you are building a sustainable, profitable practice.

 

Click here to see how a vet achieved her practice ownership goals using finance through her SMSF. Contact one of our financial specialists on 1300 131 141 to discuss the options available to you.

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