What do Toys “R” Us, Sports Authority and Bed Bath and Beyond have in common? They are three respected brands that failed because they didn’t generate the profits necessary to stay in business. In fact, companies of all shapes and sizes fail. There were over 20,000 bankruptcies last year and 60% of new businesses fail within five years. Although corporations may prioritize profits more than a veterinary practice, maintaining an appropriate bottom line provides one of the greatest benefits, the ability to build an organization that represents their ideals and objectives. Although many veterinarians may consider caring for animals their top priority, a reasonable level of profits should rank high on the list. Here’s how veterinary practices can increase profitability and drive growth.

The Importance of Veterinary Practice Profitability

For veterinarians, profits are the financial benefit realized when the revenue a practice generates exceeds the expenses, costs, and taxes necessary to operate the practice. If revenues don’t exceed expenses, a practice will likely fail like the brands above.

What are those financial benefits? Readily available profits translate into increased opportunities for everyone. They allow you the flexibility to increase compensation, hire the best and brightest employees, purchase new equipment, finance a new building or remodel, expand your service offering, put more in your own pocket and more.

Further, profitability is a competitive advantage. If an expansion requires financing, a profitable practice has access to the cheapest capital. And for business owners nearing retirement and considering the sale of their practice, one that generates more profits translates into a business that’s worth more to a potential buyer.

Unfortunately, when profits are lacking, good employees leave, software and equipment upgrades are delayed and if the business stagnates, clients move on to other practices.

Veterinary Profits are Improving

According to the American Veterinary Medical Association (AVMA), veterinary practices have shown a significant recovery post-pandemic, with an average revenue increase of 15% in 2023 compared to the pre-pandemic era.

Adding new services such as virtual consultations and specialized services like pet behavioral therapy and telemedicine have gained prominence. These new revenue models have increased accessibility for pet owners and opened additional revenue streams for veterinary practices.

Veterinary Profit Margins

Depending upon the size and type of practice, typical profit margins vary widely, ranging from 10% to 25% with specialty and emergency services leading the way. But the post-pandemic recovery phase has introduced new dynamics. Small practices in urban areas have reported profit margins of up to 30% due to increased pet adoption rates, while rural practices have seen a modest 12% margin, highlighting the varied economic realities.

Profit Maximization Strategies

Optimizing resource allocation through better use of technology and staff management is crucial. Implementing practice management software can streamline operations, reduce administrative burden, and enhance client communication, leading to improved efficiency and profitability.

In addition, utilizing digital options including patient registration, appointment scheduling and online payment processing increases client convenience, saves staff time and reduces the associated expenses.

The Importance of Goal Setting and KPIs

Defining a north star, the purpose, services and customers a practice desires to pursue will help frame the big picture goals and ultimate profitability a practice strives to achieve. But to maximize the options you define, establishing key performance indicators (KPIs) is an essential next step.

For example, KPIs will differ depending on your financial objectives. For instance,

• Trying to maximize your financial returns
• Providing higher-than-average wages and benefits
• Delivering lower-priced services
• Donating time and services to support shelters

All result in different profit margin outcomes and should ultimately guide the financial goals a practice should strive to achieve.

As James Clear details in his book, Atomic Habits, there is a surprisingly narrow gap that separates the good performance from the great performance. And that narrow gap is separated by small habits and daily rituals. Establishing relevant KPIs and striving to achieve them brings attention to those tactics and makes it more likely you’ll achieve your profitability goals.

KPIs and Goal Setting

Effective management of a veterinary practice requires a focus on key performance indicators (KPIs). These metrics offer invaluable insights and benchmarks to guide informed decisions. Here are essential KPIs to track:

Financial KPIs

Total revenue, production by provider and number of active clients are important targets to track and reveal trends that help guide financial decisions. In addition, tracking inventory variations, billing cycle times, accounts receivable balances, and average patient payment amounts can guide both process improvement and cost-cutting opportunities.

Operational KPIs

Appointment wait times, client satisfaction, and the percentage of no-show appointments are important operational KPIs. They pinpoint areas for improvement in daily operations.

Quality KPIs

Start by tracking repeat visits and customer loyalty. One way to measure customer loyalty is by tracking the number of total clients and subtracting the amount of new clients. If you served 3,000 total clients monthly but 250 of those were new clients each month, loyalty may be an issue.

Modify KPIs as Your Practice Evolves

Further, make sure the KPIs you track evolve. Include digital engagement metrics (such as website traffic and social media interactions), and efficiency metrics for new technologies (like online appointment scheduling). Tracking these metrics can provide insights into client satisfaction and operational efficiency, guiding practices toward areas that need improvement.

Lastly, aligning goals with emerging veterinary trends, such as personalized pet care and sustainability, can drive profitability. For example, offering tailored wellness plans for pets and adopting eco-friendly practices not only attract environmentally conscious clients but also reduce operational costs.

Incorporating New Technologies

There are a variety of time and cost-saving technologies that a veterinary practice may consider implementing. For example,

AI Tools

For almost every industry, including veterinary practices, there’s an AI tool that will make your operation more efficient. Although not every AI application fits this description, some do.

AI Chatbot

An AI chat-bot can streamline workflows and help manage client communications. These platforms offer automated features to assist clients with booking appointments, getting answers to common questions, messaging with the veterinary team, refilling prescriptions and more.

AI-based Dictation Software

Rather than waiting until the end of the workday to record examination findings, AI-based dictation software allows veterinarians to recite them as they go. Then the software can simultaneously record them in the appropriate record. Like most AI tools at this stage of development, it is essential to review the generated record for accuracy.

AI Diagnostics Tools

Artificial intelligence diagnostic tools can be used to detect, delineate, or classify certain features in radiograph, ultrasound, CT, and MRI images and aid in diagnosing a patient.

Online Appointment Systems

Implementing online appointment systems can streamline the booking process, reduce no-shows, and improve client satisfaction. Clients appreciate the convenience of booking appointments online, and practices benefit from automated reminders and better schedule management.

Client Retention Techniques

Pull out your phone, type in a few characters, and within seconds you can search and find the information you need. And when you are looking for a veterinary service, our connected world makes it easier than ever to find multiple options. This puts a veterinary practice at the intersection of convenience and competition.

On the one hand, it’s easy for potential clients to find you. But on the other hand, specialized services such as dermatology, dentistry, emergency care, oncology centers, behavioral medicine and more, put general veterinary practices at risk of losing business to these niche providers. It’s one of many reasons why client retention programs are vital to long-term practice success.

Although no veterinary practice can retain all of its patients, creating a lasting impression, through interactions that are warm, compassionate, and professional are proven steps that reduce churn. In addition, adding services can increase retention and expand revenue opportunities. Examples of programs that veterinary practices are incorporating include:

• Personalized Pet Care - Offering personalized pet care programs tailored to individual pets’ needs can enhance client loyalty. These programs can include regular health check-ups, customized diet plans, and wellness packages.
• Loyalty Rewards - Implementing a loyalty rewards program can incentivize repeat visits. Rewards can range from discounts on services to free treatments after a certain number of visits.
• Telemedicine - Providing telemedicine services can enhance animal care and client relationships by facilitating communication, diagnostics, treatments, client education, scheduling, and other tasks. Laws and regulations do vary by state which may limit diagnosing or treating patients.
• Mobile Vet Services - Providing mobile veterinary services can attract clients who prefer the convenience of at-home care. This service is especially appealing to pet owners with multiple pets or those with transportation challenges.

The Importance of Veterinary Staff Training

A highly trained and knowledgeable staff delivers a variety of benefits. Labor expenses are the single largest cost area for a practice, representing approximately 40% of total expenditures. Providing tools that veterinarians and the clinical services team, hospital managers, administrative staff, kennel workers and more, need to perform their job in the most effective manner will enrich their job and lead to productivity improvements.

This is especially important given staffing challenges that include both staffing shortages and wage increases that ranged between 8% to 12% in 2023.

In addition, consistent and continuous training will help all employees fine-tune their on-job and customer service skills which are essential to serving current clients, attracting new patients and ensuring the practice thrives.

The Importance of Having an Online Presence

When looking to engage with a company or service for the first time, how often do you connect with that business without first visiting their website? In fact, websites are usually the first place a potential client will learn about your practice. A well-designed website that provides details about your services and staff and includes customer reviews and testimonials, makes it more likely that a prospect will engage with your practice.

In addition, adding regular blog content that showcases your practice and covers issues in pet care and veterinary medicine further personalizes your business and allows you to connect with existing and prospective clients.

But having a website isn’t enough, it must be maintained. An outdated, slow-loading site that doesn’t work properly on a mobile device are primary reasons prospective clients leave a website and look elsewhere. Their next stop…probably your competitor.

Keep Track of Spending

Inventory represents the second largest expense next to labor for any practice. Maintaining supplies of:

• Pharmaceutical drugs
• Medicines and ointments
• Shampoos, flea and tick treatments
• Pet food

...not only result in a substantial financial outlay but when not managed properly, generate unnecessary costs. These items represent significant revenue opportunities so you can’t afford to run out but too much inventory, some of which may have passed an expiration date, is like lighting money on fire.

In fact, the largest supply expenditures for most veterinary practices are medications, including pharmaceuticals and over-the-counter drugs and pet food. Managing these higher expense areas is essential. But a common challenge for nearly all practices is managing the other 20% of expenditures, commonly known as “tail spend.” “Tail spend” is the perceived low-value spend that receives minimal attention. Implementing processes to address these lower volume purchases may identify additional cost savings opportunities.

Sustainability Practices

While the environmental impact of veterinary medicine is generally smaller than human healthcare, focusing on a few key areas can still make a meaningful difference. Modifying resource management practices can reduce material waste, minimize emissions of greenhouse gasses, and help fight antimicrobial resistance.

Limiting Material Waste

Pet hospitals generate waste from medical products, cleaning products and activities, pet food, packaging, and record-keeping and communication. Applying the 3Rs, - reduce, reuse, recycle - can help reduce a practice's environmental impacts.

Reduce

• Use water distillers for autoclaving
• Assemble surgical or exam kits with only needed items
• Use exam gloves only when necessary
• Choose refillable containers instead of disposable ones
• Lessen greenhouse gasses from anesthesia using alternatives to inhaled alternatives when feasible

Reuse

• Sharps containers
• Textiles including gowns, kennel mats, warming blankets, scrub hats and more

Recycle

• Waste including paper, cardboard, metal, glass and some plastics

Curbing Antimicrobial Resistance

Antimicrobial agents play a critical role in treating infectious diseases. Unfortunately, there is a growing resistance among microorganisms that poses a serious threat to human, animal, and environmental health. Communicating with clients about responsible antibiotic use and the importance of treatment plan compliance is vital to maintaining their effectiveness and ensuring optimal health outcomes.

Outsourcing

Hiring a third party to perform certain tasks can be a cost-effective way to keep your practice running smoothly and increase your focus on delivering the best possible patient care. But, before outsourcing any function, consider these points:

Is it mission-critical and/or complex? The more critical the business function, the higher the risk it is to turn it over to a third party. Is it client-facing? Your clients are the lifeblood of your practice. Do you trust a third party to handle scheduling, follow up or other client interactions?

If outsourcing is the right option for you, incorporate appropriate safety measures. For IT or accounting services, it’s imperative that client information remains closely guarded. Make sure the partner you choose has the guardrails in place to prevent a data breach. And don’t forget flexibility. The right decision for your practice today might not be the right decision a few years from now so build in provisions that adapt to potential changing demands.

Strategies for Negotiating Better Supply Purchase

Effective supply chain management is another lever that veterinary practices can use to reduce costs.

Bulk Purchasing

By consolidating orders and buying in larger quantities, practices can often secure discounts. For example, reserving an entire year of a product will result in volume discounts. You can pre-schedule shipments throughout the year with billing only occurring after each individual shipment. Plus, you conserve storage space while benefiting from volume pricing.

Leverage GPO Contracts

Consider joining a group purchasing organization (GPO) that pools the buying power of multiple practices to negotiate even better deals with suppliers. These organizations can often provide access to discounts and terms that would be unattainable for a single practice negotiating on its own. VMG is a GPO that supports independent practice owners for a variety of products and services. Learn more about UAL’s medical label program with VMG here.

Enhanced Focus on Labeling Efficiency

Although they represent a small amount of total expenditures, a veterinary practice can’t operate safely or effectively without veterinary labels. From dispensing medication to guiding post-operative care, they impact various processes which makes it essential to use them efficiently.

Labeling Solutions Designed For Veterinary Applications

Applied to syringes and vials for medication identification and medical devices detailing maintenance information, labels must withstand challenging conditions to operate effectively.

For example, plastics contained in dispensing vials, IV bags and medication containers can create labeling challenges. The smoothness/roughness, porosity and flexibility of the container and outgassing, a process that occurs when plastic is exposed to heat or sunlight, can all cause labels to peel or fall off.

In addition, veterinary practices use cleansers to minimize the presence of bacteria. Label materials not designed for chemical exposure will cause it to detach from the item or deface, making the information unreadable. Similar to chemicals, moisture can cause a label to detach or deface if you don’t choose the proper adhesive.

Selecting the proper label materials and adhesives is crucial to ensuring labels perform their intended function properly.

Role of Labels in Regulatory Compliance

Labels assist veterinary practices in complying with regulatory requirements, such as those related to drug storage, handling, and dispensing. Adhering to these regulations is critical for maintaining the practice’s license, avoiding legal issues and enhancing medication safety in veterinary practices.

Label Formats for Common Applications

Zebra, DYMO and popular thermal and laser printers have print-ready format options that fit common office applications including:

• Prescriptions and medications
• Mailing and shipping
• Files and binders
• Badges
• Assets and barcoding

Using formats designed for those specific applications saves time and money.

Custom Label Applications

Although stock labels meet the needs for many veterinary practice applications, a custom solution can improve efficiency and accuracy in a busy practice. For example,

• Internal processes and protocols may require unique formats, colors, data points and more
• With different caregivers, changing shifts and animals progressing through treatment regimens, board and care or treatment room labels help communicate proper care
• A label with your logo and contact information including office hours and an emergency number keeps your practice visible to your clients

United Ad Label

With over 60 years of label experience, United Ad Label provides cost-effective products that allow you to minimize costs regardless of economic conditions. Veterinary practices can save money using UAL services. Contact us to learn more.