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    • Taking Stock of Your Practice's Most Valuable Assets - 11th in Series

      Feb 17, 2016
      Editor’s note: This is the 11th in a series of monthly articles that discusses the insightful viewpoints of four of the most respected and well-known financial experts in the veterinary business today, who came together in late 2014 and 2015 at the invitation of Henry Schein Animal Health, Ceva, Elanco, Merck, Merial, Purina, and Virbac to share their expertise and informed opinions in the areas of pharmacy, nutrition and data.

      They are: Dr. Karen E. Felsted, CPA, MS, DVM, CVPM, CVA of PantheraT Veterinary Management Consulting; Gary I. Glassman, CPA of Burzenski & Company, P.C.; Dr. Marsha L. Heinke, DVM, EA, CPA, CVPM of Marsha L. Heinke, CPA, Inc.; and Fritz Wood, CPA, CFP, HF of Wood Consulting. The mission of the “Veterinary Pharmacy Diets and Data Solutions Workshop” is bringing expert advice and actionable business solutions to increase the practice success of the veterinary customers we serve while reinforcing the veterinarian to the pet owner as the best source of healthcare and product choices for longer healthier lives of the pet family member. Be sure to visit henryscheinvet.com/betterbusiness to watch live video clips excerpted from the workshop that accompany each monthly article.

      Best practices in managing your pharmacy inventory

      Just because you occasionally hand over a prescription for heartworm medication to your client doesn’t mean you have to hand over your business to a big box retailer or internet competitor. And yes, you can compete with them on price for pharmacy items like heartworm and flea preventatives if you’re willing to exchange higher margins for potentially more lucrative higher volume sales.

      It is possible to think like your behemoth competitors while maintaining the professionalism your clients have trusted all these years. Consider: Big box retailers have long known that customers waiting for an in-store pharmacy to fill their prescription are likely to browse and buy other items. Take a look at the inventory closest to the pharmacy windows. What’s near your practice’s pharmacy window? As we’ve said before, many of your clients won’t even think to buy routine preventative medications and diets from you if they don’t make the visible connection that you actually have them on-hand. Place the product in your front reception area and/or your exam rooms and make it accessible. Ensure your inventory levels are maintained based on historical purchases.

      Remember too that your online store will allow you to increase your product selection in a nearly unlimited way, especially if your store is set up to ship orders direct from your distributor. All the better if you offer home delivery for items like heartworm and flea medications. Your online pharmacy allows you to carry the veritable universe of pet pharmacy products while keeping a smaller onsite physical inventory of the most popular or best-selling products.

      Your hospital pharmacy is likely to have a large number of items big and small, inexpensive and costly. It’s critical you perform regular inventory counts to safeguard these assets and ensure a healthy cash flow. Most clinics are turning their drugs and related inventory only four times a year, whereas hospitals with the most efficient management systems can expect as high as a ten-times turn.

      The average clinic in the U.S. has approximately $80,000 of excess inventory. While the current supply chain allows nearly every clinic in the country to achieve a streamlined physical inventory, many practices have 90 days of inventory sitting on the shelf, indicating opportunity for significant internal process improvement.

      Another fact you may not know: Pharmacy consumables such as syringes and gauze pads can account for almost 50% of what you have sitting on your shelves. Be mindful that little things can add up to large stockpiles, prone to waste and excessive expense.

      Keep close tabs on trends in your in-house vs. home delivered pharmacy sales. You may need to adjust inventory levels if your web store sales begin to increase significantly. Home delivery services may tighten your practice margins on some products; in many cases, however, the increase in sales volume will more than make up for lower margins. The automated reorder options of home delivery along with competitive pricing adds the client convenience and value needed to increase loyalty and sales volume.

      Advice on managing your nutrition inventory

      We’ve written extensively over the past year about myriad ways to stand toe-to-toe with big box retailers on nutrition. Let’s face it: On the surface, it can be intimidating trying to compete with lower prices on the wellness diets they sell. But with the right value proposition that incorporates quality and convenience, and a reasonable tolerance and acumen for managing your inventory, wellness diets can and should be a complementary and significant part of your hospital’s overall nutrition business.

      Wellness diets have the potential to be in the top volume products of your practice and your practice income. All pets eat. It is better to focus on those products with high volume and profit potential even if the margin is lower instead of products with higher margins but much lower volume. Why? Volume. The volume will drive more overall dollars of profit. Any concerns about selling wellness diets for lower margins are easily erased by volume, but you must execute a plan for driving client awareness and purchasing through your practice. Compare a medication you purchase for $10 and sell for $20 to a diet you purchase for $30 and sell for $40. The markup on the medication is 100% compared to the diet at 33%. At first blush you may think you make more on the 100% markup but in fact you make the same of $10 per unit sold. And since all pets eat, if you have 4000 active patients then you have 4000 opportunities to sell the diet compared to a smaller number of patients needing a particular medication. Do the math. Home delivery can provide the added value and convenience to your clients to increase the sales volume and profits.

      You may be able to sell your client a wellness diet for a few dollars more the first time in your office, but if your client is now going to have to make a trip to get it, price is going to matter more. Moreover, there’s nothing more annoying to your clients than discovering you’re out of stock or being told to call three days in advance to get what they want. And if you’re short on space, it’s even more of an issue. That’s why having a home delivery program and/or web store will improve your inventory management issues and go far in ensuring you hold on to this valuable business.

      A few additional points to remember: Stay on top of your nutrition inventory (on a real-time basis if possible). Consider the following: How fast are you able to get product delivered to your hospital or even better, to your client’s home? Be sure to turn your nutrition inventory so that you can sell it before you need to pay for it and keep it fresh for your clients.

      In conclusion, inventory issues shouldn’t dissuade you from growing your nutrition business. Having a good selection of wellness products is an important value proposition for your clients. If you carry what they want at a competitive price, and make it as convenient as possible to get it to their home, your nutrition sales and profits will grow.

      Using data metrics to monitor and control inventory

      Earlier in this series, we devoted several articles to key performance indicators (KPIs) that veterinarians should measure and monitor.

      One of the most important set of KPIs essential to your hospital or practice’s day-to-day operations are related to inventory management. At the risk of overstatement, never forget: inventory is an asset that should be closely safeguarded. And in many cases, too much of that asset can turn into a liability if it’s not generating income on a regular and predictable basis.

      Key inventory KPIs include the following (although the list is not all-inclusive):
      • Inventory costs as a percentage of gross revenue;
      • Turn rates; and
      • Inventory per FTE doctor.

      The challenging part about inventory management is identifying all the variable costs of hospital consumables, pharmaceuticals and nutrition products. For example, an average metric of these total variable costs as a percentage of gross revenues for a typical veterinarian practice is between 20% and 22%. However that percentage can be appropriately higher if your client compliance in areas like heartworm and flea preventatives or nutrition is higher. But practices are unique so you really need to know the number that is right for your practice taking product sales and service revenue into consideration.

      Remember that none of this kind of inventory data is useful without an accurate balance sheet, which stems from regular counting and reclassification of inventory costs between the income statement and balance sheet. Conduct physical inventory counts on a regular basis and don’t simply rely on what’s in your computer inventory management software. A common practice across any industry is cycle counting, which essentially works like this: Every day you count a certain number of items until you count the entire inventory. Then, you repeat the process; each time checking the data against the numbers in your PIMS. A good cycle counting system counts the higher value and/or regulated items more frequently than lower value items. As an example, I might count Heartworm/Flea/ Tick medication every couple of weeks and gauze pads once a quarter.

      You may be surprised to learn that about half of your pharmacy inventory alone is for items you bought but don’t actually re-sell like gauze pads and sterile gloves. It’s critical you keep tabs on these as well. You may also be surprised to learn that many practices don’t do a good job of adjusting their balance sheet for on-hand inventory value.

      As the majority of veterinary practices use cash based financial reporting they don’t always record inventory and they should. An inaccurate balance sheet leads to skewed and often erratic profitability results that make it difficult to “manage by the numbers”. For best inventory management, it is critical to have both an accurate figure for the items sitting on the shelves at a particular date (i.e. the balance sheet amount) and an accurate figure for those sold during a particular period (the expense included in the income statement.) Accurate cash-based financial (and tax) reporting requires adjustment of the balance sheet for the value of inventory on hand that has been paid for but not yet used or sold.

      Work toward best practices in managing your inventory and help your practice remain financially sound. You may also sleep better at night.

      About the Author
      Dawn Burdette, Executive Director, Sales Leadership and Development has served HSAH for over 25 years. Dawn has served in a variety of positions in sales and management. This includes training our sales force on the business of veterinary medicine and bringing business solutions to our customers that increase financial success for veterinary practices. Dawn currently serves on the AVMA’s Veterinary Economic Strategy Committee.
    • Home Delivery Options Retain Clients; Good Data Retains Employees - 10th in Series

      Feb 17, 2016
      Editor’s note: This is the 10th in a series of monthly articles that discusses the insightful viewpoints of four of the most respected and well-known financial experts in the veterinary business today, who came together in late 2014 and 2015 at the invitation of Henry Schein Animal Health, Ceva, Elanco, Merck, Merial, Purina, and Virbac to share their expertise and informed opinions in the areas of pharmacy, nutrition and data.

      They are: Dr. Karen E. Felsted, CPA, MS, DVM, CVPM, CVA of PantheraT Veterinary Management Consulting; Gary I. Glassman, CPA of Burzenski & Company, P.C.; Dr. Marsha L. Heinke, DVM, EA, CPA, CVPM of Marsha L. Heinke, CPA, Inc.; and Fritz Wood, CPA, CFP, HF of Wood Consulting. The mission of the “Veterinary Pharmacy Diets and Data Solutions Workshop” is bringing expert advice and actionable business solutions to increase the practice success of the veterinary customers we serve while reinforcing the veterinarian to the pet owner as the best source of healthcare and product choices for longer healthier lives of the pet family member. Be sure to visit henryscheinvet.com/betterbusiness to watch live video clips excerpted from the workshop that accompany each monthly article.

      Home delivery: your pharmacy’s ace in the hole?

      Consider the following scenario. You client purchased flea and heartworm medication from your hospital pharmacy on their last visit and now they need a refill.

      What are their options? Could they call you and then make another trip back to the hospital to pick it up? Could they just go online and order it from another business? Could they call you for a prescription and choose to fax it to a competitor? Or what if while they were in on their last visit you set them up for an automatic refill and it was delivered right to their doorstep right when they needed it and at a competitive price…and all from your practice which is the trusted source for their pet’s healthcare?

      Chances are very good that final option is going to be effective nearly every time. Why? Convenience and value. You’ve spent considerable time and resources building a trusting relationship with your client, and she would most likely rather get it from you than anyone else as long as it’s convenient and competitively priced.

      Home delivery is a valued service that’s expected today for most businesses and it can supercharge your pharmacy sales and even capture transactions you didn’t even know you were missing. Moreover, studies have shown that home delivery with auto-refill actually improves compliance.

      Another benefit of having a web store that offers home delivery: It could actually help expand your medication offerings. Doctors are known to have certain medication preferences but limited space may prevent your practice from carrying all choices in-house. Online webstores obviate that, and allow the clients a broader choice as well.

      Consumers today expect the convenience of home delivery. And if you are not providing it for your clients then someone else will.. It is not just for the products you don’t wish to carry in your practice pharmacy but it is for all products your clients need especially those that would require extra trips back to the practice to obtain. It is all about bringing more value to your clients and one way is adding convenience to the products they need to keep their pet healthy and happy. Simple staff process changes can have can have a significant positive impact on the success of the practice online store. This includes staff passion and promotion of the service. It should become part of the exam room conversations and checkout protocols. And you can even link your online storefront to your practice website and social media.

      Other considerations:
      • Keep close tabs on trends in your in-house vs. home delivered pharmacy sales. You may need to adjust inventory levels if your Web store sales begin to increase significantly.
      • Be mindful that home delivery services may affect your margins on some products; however, a planned and targeted increase in volume should make up for lower margins.
      • Using a tablet computer in the exam room, demonstrate to clients the convenience of your online store.
      • Create an account for your client before they leave and use auto ship for recurring medication needs.
      • Designate a staff member to be your web store specialist that will promote the service and help sign up clients.
      • Your online pharmacy products should be priced no higher than your in-hospital pharmacy. Consumers today expect the same value for home delivery.

      Convenience: The core of home delivery for nutrition

      Nutrition presents a similar scenario to the pharmacy opportunity. You have just finished an annual preventive healthcare exam with your patient and you’ve recommended a therapeutic diet to lower her weight and improve her overall health.

      Do you send your hurried client to the front desk to lug a 30 pound bag into her car and even worse to have to make this trip every month which adds to her growing errand list? Or, do you offer a small bag to start with the 30 pound home delivered as needed with auto refill? If so, you’ve just made your client’s decision much easier not only for today’s first bag, but with an auto-refill service of many more bags to follow.

      Home delivery provides a level of convenience your clients expect now. Online stores provide consumers this kind of service, so why would you risk letting your diet business walk out the door? It’s a well-known fact that if consumers see no discernible value in buying food from you, price automatically becomes the lowest common denominator and the product becomes a commodity in their minds.

      Knowing that your practice is able to home-deliver the highest quality diets, many of which aren’t even available in big box stores, is that value proposition. If you have a Web store, the convenience factor is multiplied.

      And if your practice is able to offer more value and convenience at a competitive price, your diet business more than likely is going to soar. Remember – if you’ve established a relationship of professionalism, expertise, caring and trust, you’ve earned that business already.

      Diets can be bulky and gobble precious real estate inside your practice or hospital. Selling them through a Web store with home delivery could be a viable way to keep that business while generating good returns with increased volume.

      Ensure you communicate your home delivery services effectively through every means available, including:
      • Exam room and front desk communications
      • Signage (paper and digital)
      • Reminders (email, text messages, phone)
      • Social media

      Some practices fear that the more often transactions are handled online, the less opportunity they have to build personal relationships with clients. Some even feel in-practice diet sales lead to ancillary buys. But the reality is that stopping in the practice to pick up a bag of food is inconvenient for the client and inconvenient means they are less likely to do it. We already see that most often the second bag of a recommended diet is never purchased and this is even less likely for a third or fourth bag.

      Focus on bringing your clients back for more services and let home delivery take care of the diets. Done properly, home delivery can build on that goodwill you’ve already invested in with your clients, and generate significantly higher sales volumes.

      Good information can stem turnover, boost employee satisfaction

      Your employees are by far your most important asset. One of the best ways to retain good employees is mining and monitoring performance and job history data.

      There is data at your disposal that can help you spot employee performance issues early on to help boost morale and ward off turnover issues down the road.

      Ways to gather key performance indicators of employee satisfaction include:
      • Pay. You must routinely determine whether your pay scales are competitive. Evaluate yearly if possible. If they fall out of line with pay scales in your community or region and you haven’t noticed, you may be looking at increased turnover issues. You also need to determine if you are paying the highest salaries to tenured people whose performance or productivity have slipped, or are noticeably less than lower-paid staff. They will notice, and it will fuel resentment and departure. The staff perception of pay that is too low can also lead to inventory shrinkage.
      • Turnover rates. Staff turnover is high in many veterinary practices. Know your numbers. How many employees leave annually? If your rates are high, it’s time to find out why.
      • Hours your employees spend on training. A balance is required here. To much training time for new employees can contribute to lost production which can have a negative impact on the practice financials and client service. Too little does the same. Most practices don’t spend enough time on training.
      • Performance reviews. Annual reviews with quarterly progress reports are key to maximizing your practice talent and reducing turnover. Reviews should reinforce the positive behaviors balanced with areas of development. And follow up is key to ensure your employee continues to grow and bring value to the business which also creates more employee satisfaction. Good employees really do want to be good at what they do and bring value to the business.
      • Employee satisfaction surveys. Conduct them anonymously using a service such as Survey Monkey, and have the results tabulated by an objective third party like a practice management consultant. Perhaps two of the most important questions to ask on these surveys: “Would you recommend our practice as a place for your friends to work?” and “How likely are you to enjoy working here a year and half from now?”

      About the Author
      Dawn Burdette, Executive Director, Sales Leadership and Development has served HSAH for over 25 years. Dawn has served in a variety of positions in sales and management. This includes training our sales force on the business of veterinary medicine and bringing business solutions to our customers that increase financial success for veterinary practices. Dawn currently serves on the AVMA’s Veterinary Economic Strategy Committee.
    • Improving and Measuring Compliance in Your Practice - 9th in Series

      Feb 17, 2016
      Editor’s note: This is the 9th in a series of monthly articles that discusses the insightful viewpoints of four of the most respected and well-known financial experts in the veterinary business today, who came together in late 2014 and 2015 at the invitation of Henry Schein Animal Health, Ceva, Elanco, Merck, Merial, Purina, and Virbac to share their expertise and informed opinions in the areas of pharmacy, nutrition and data.

      They are: Dr. Karen E. Felsted, CPA, MS, DVM, CVPM, CVA of PantheraT Veterinary Management Consulting; Gary I. Glassman, CPA of Burzenski & Company, P.C.; Dr. Marsha L. Heinke, DVM, EA, CPA, CVPM of Marsha L. Heinke, CPA, Inc.; and Fritz Wood, CPA, CFP, HF of Wood Consulting. The mission of the “Veterinary Pharmacy Diets and Data Solutions Workshop” is bringing expert advice and actionable business solutions to increase the practice success of the veterinary customers we serve while reinforcing the veterinarian to the pet owner as the best source of healthcare and product choices for longer healthier lives of the pet family member. Be sure to visit henryscheinvet.com/betterbusiness to watch live video clips excerpted from the workshop that accompany each monthly article.

      Addressing and managing pharmacy compliance issues

      We all lead busy lives. And so, it’s not uncommon for many of us to forget things. Your practice may be good at nudging clients to schedule an annual checkup for vaccinations and heartworm testing, but are you helping your clients to remember to administer prescribed medications and preventatives to their pet? Isn’t that critically important too in keeping their pets healthy and preventing disease?

      A recent analysis of compliance data indicates heartworm testing, heartworm prevention, flea and tick prevention and nutrition is very low. This may be painfully blunt but cannot be overstated: poor compliance with pet medications could mean your practice needs to do a much better job in educating your clients on the importance of these services and products that you offer.

      Is it enough that you perform the exams, make the diagnosis, recommend the treatment and provide medications and appropriate diets? If you’re not monitoring compliance, following up with your clients and helping them understand the importance of your medication recommendations and good nutrition in their pets, all of your dedication on the front end will be less effective in helping your clients keep their pets healthy. And aren’t healthy pets why you do what you do?

      What happens during the visit is only half the battle. What happens at home is the rest. And you need to be there to help your client with all of it. You need to make sure your client understands and follows your recommendations. And you need to make sure they come back and become loyal clients.

      Following are some excellent tips from our Veterinary Solutions Workshop.

      Strategies for compliance
      • Offer home delivery. If you make it convenient and easy, compliance increases. It’s a fact.
      • Review the patient records before visits to identify potential compliance issues. If the last purchase for heartworm medication ran out three months ago, that could be a big red compliance flag. Develop compliance checklists as a discussion tool during visits.
      • Take proactive steps in improving your reminders. Be sure and ask your client how they’d like to be reminded. Would they like a text, voice message, e-mail or postcard? If you use email and the client no longer uses that address or does not read email, guess what? Perhaps a text message would have been more helpful. Reminders are very effective, but does your practice have a system in place to ensure they are issued on a regular and consistent basis for all of your services? Your practice management software should be able to easily automate the task and save you time.
      • Remember to have these discussions in the exam room where they are understood by the client to be important for their pet. Check for refill needs for every pet…every time.
      • Utilize online pet portals so your clients can view their pets’ medical records, see when refills are due, and even make their own appointments.
      • Use visual aids in the exam room to help educate clients of the importance of your recommendation to increase compliance.
      • Describe the benefits of your recommendations including the lesser cost of prevention compared to treatment.

      Your client’s belief in the importance of your recommendation is critical in their decision to accept it.

      Addressing and managing nutrition compliance issues

      Compliance can be low with diet recommendations for many different reasons; whatever the reasons, however, it can be improved. Though you have to be competitive in price with diets, convenience can still trump less expensive alternatives that are offered by your competition. Having the product in stock and offering home delivery provides convenience.

      But of course all this starts with planning the time to discuss nutrition with each client. Pet owners want to have a reliable source of nutritional information. Yet often practices leave that counseling up to others outside the practice that are not the reliable source the pet owner needs. In a recent dog owner survey nearly half agreed that choosing the right food for their pet is the most difficult part of pet ownership and is more confusing than their own nutrition. 79% of millennials surveyed believe the dog food they selected is not the perfect fit.

      We know more and more pets are becoming overweight and this can lead to preventable diseases and even shorten their life. Diagnosing weight problems and recommending treatments is most often neglected in the practice. Most pet owners don’t even realize their pet is overweight; If they knew, most would follow the practice recommendations.

      Many clients will purchase the first bag of recommended diet but never purchase the next bag. Why? Did they understand how long they needed to feed it? Did they understand the importance? Education is key. If your client isn’t seeing an immediate improvement in their pet after buying the first bag, they may not seek a refill. Are you aware if they don’t? How can you address that, and ensure compliance rates remain high?

      Nutrition is good medicine and can be a source of revenue growth for the practice. All pets eat.

      Strategies for compliance
      • Provide home delivery with an auto refill option for both wellness and therapeutic diets.
      • Educate clients on the medical benefits of your nutrition products. Take special care in educating your clients on the benefits of the recommended diet even when not visible. It’s important for your clients to understand the long-term benefits that have been shown to help dogs and cats live longer, healthier lives.
      • Educate your clients on the dangers of obesity in their dog or cat, and how your diet can reverse the problem, along with regular exercise.
      • Compare the daily cost or cost per serving of your recommended diets to the diet they are currently feeding. Doing the math is a pretty easy task. You will often find your diet is actually less expensive per day and in the long run. You can overcome the bag price obstacle.
      • Review your clients’ pet records before visits to spot potential diet compliance issues. If your records show the client bought just one bag of therapeutic diet and the refill time has long passed, that could be a big red compliance flag. Develop compliance checklists as a discussion tool during visits.
      • Reminders may be your best ally when it comes to nutrition compliance. Remember to ask your client if, and how, they’d like to be reminded. Have a system in place to ensure those reminders are issued on a regular and consistent basis. Your practice management software should be able to automate the task.
      • And remember to have the discussions in the exam room so they are considered important.
      • Provide a nutritional assessment and diet recommendation for every pet…every time.

      Using data to measure and monitor compliance

      Ask any financial expert and they will tell you: the numbers don’t lie.

      Compliance first starts with the practice standard of care. Develop your practice standard of care for preventive healthcare. Partners for Healthy Pets has a preventive healthcare guideline already available for you to use to set your own standards and implementation tools.

      Compliance needs to be measured. Often the compliance level measured is lower than what the practice assumed it to be. This gap can be very costly to the practice revenue and patient care.

      So how do you measure and monitor compliance data?

      Use your practice management software to measure and trend your compliance data. Now you can easily identify trouble areas and develop solutions to reverse most compliance issues.

      Establish a system of automatic reminders to improve compliance. Communicate with your clients after they have left your practice to ensure they will come back in for your services and products.

      In addition to compliance rates you can measure the annual spend in various ways: per client, patient, dog, or cat. And when you increase the compliance you grow the annual spend and practice revenue.

      About the Author
      Dawn Burdette, Executive Director, Sales Leadership and Development has served HSAH for over 25 years. Dawn has served in a variety of positions in sales and management. This includes training our sales force on the business of veterinary medicine and bringing business solutions to our customers that increase financial success for veterinary practices. Dawn currently serves on the AVMA’s Veterinary Economic Strategy Committee.
    • Maximizing Exam Room Opportunities: Using Data to Monitor and Retain Clients - 8th in Series

      Feb 17, 2016
      Editor’s note: This is the 8th in a series of monthly articles that discusses the insightful viewpoints of four of the most respected and well-known financial experts in the veterinary business today, who came together in late 2014 and 2015 at the invitation of Henry Schein Animal Health, Ceva, Elanco, Merck, Merial, Purina, and Virbac to share their expertise and informed opinions in the areas of pharmacy, nutrition and data.

      They are: Dr. Karen E. Felsted, CPA, MS, DVM, CVPM, CVA of PantheraT Veterinary Management Consulting; Gary I. Glassman, CPA of Burzenski & Company, P.C.; Dr. Marsha L. Heinke, DVM, EA, CPA, CVPM of Marsha L. Heinke, CPA, Inc.; and Fritz Wood, CPA, CFP, HF of Wood Consulting. The mission of the “Veterinary Pharmacy Diets and Data Solutions Workshop” is bringing expert advice and actionable business solutions to increase the practice success of the veterinary customers we serve while reinforcing the veterinarian to the pet owner as the best source of healthcare and product choices for longer healthier lives of the pet family member. Be sure to visit henryscheinvet.com/betterbusiness to watch live video clips excerpted from the workshop that accompany each monthly article.

      Maximizing exam room opportunities

      Engaging clients on pet medications is as much science as it is art. How – and where – that engagement takes place is critical.

      Think about the frequency and kinds of distractions there are in your hospital or practice reception area. Now think about what’s competing for your client’s attention when important decisions need to be made about their pet’s health and well-being between this and the next appointment. If your front desk is simultaneously interacting with a dozen people as they struggle to rein in excitable puppies or cats, what kinds of meaningful education is accomplished?

      If you allow those decisions to be made in the often chaotic front reception area, you could be missing opportunities for better client education, better medicine, increased revenues and returning clients.

      Your exam rooms provide the ideal setting for engaging your clients on not only the current service or treatment needed but also for flea, tick, and heartworm prevention. It’s the difference between a serious consideration of a medication as a component of a beloved pet’s health, or a simple, cold retail transaction. If you make your exam rooms an inviting place, they will facilitate private, direct and focused communication. In this space, you have your client’s undivided attention. It allows you, the practice owner, or team, to not only have that important conversation, but the opportunity and presence of mind to record that effort in the medical record.

      Bear in mind that every member of your hospital or practice staff plays some role in marketing your pharmacy business. A technician or friendly receptionist or front desk team member can gently query and remind clients about recommended medications and answer questions. The important thing to remember is keep to your messaging simple, direct and consistent. Remember “every pet, every time.”

      Exam rooms also provide the perfect venue for product placement. There, in that intimate space, you have a captive audience. Utilize models for heartworm disease and other disease conditions to provide a compelling and powerful visual that’s impossible to miss. Consider wall mounted video displays of your team in action, providing different services and patient care, as well as featured recommended products like microchipping and pet nutrition.

      Finally, remember that opportunities to engage clients on important matters such as heartworm and parasite prevention decrease exponentially the longer you keep them waiting up front. The sooner your client and their pet are invited to a private exam room, the better. Exam room engagement allows you to respect your client’s time and opinions. The efforts you expend to make that as efficient and pleasant an experience as possible will pay valuable dividends.

      Maximizing exam room opportunities

      Displaying bags of pet food in six-foot-high columns in your front reception area is a good visual. It clearly shows clients you carry nutrition products and have plentiful supplies on hand.

      But it does little to sell the importance, the value, of quality therapeutic and wellness diets to your clients. This is why client-centric, exam room engagement provides a powerful way to not only discuss client-specific nutritional issues with their pets, but also a distraction-free means of explaining the kinds of nutritional products you carry and recommend.

      Exam room engagement allows you to have focused conversations about the health of your client’s pet, and address such concerns as pricing and quality perceptions. And studies consistently and definitively show how and why client decisions about buying pet food and medications are exponentially easier in the confines of the exam room, when you are engaging them face to face. This is where the trust you’ve worked so hard to build with your clients pays off.

      It’s a fact: People far more readily accept a doctor’s recommendation about nutrition in the exam room. Absent that discussion, your client could just as easily walk out to the front desk and declare, “I really don’t want or need that right now, but thanks,” and walk out the door.

      Remember to record client interactions about nutrition by using tools like exam room report cards, which allow you to document any signs of poor nutrition, notate a weight, body condition score, your discussion, and your nutritional recommendation. They also allow you to create a mechanism for following up at a later date. Reinforce that interaction by providing your client with the handout for the diet you recommended.

      There are two important things to remember about your exam rooms: make them comfortable and inviting (for clients and their pets), and maximize technological tools to supplement your efforts. Remember the “show and tell” effect – it can be powerful and effective. For example use the body condition score charts in the exam room and teach your clients to actually assess their pet’s score. Over 50% of your patients are overweight and most clients are not even aware of it. We know that maintaining a proper body weight will help avoid many diseases like diabetes. So take the time to teach your clients how to recognize a weight problem to help keep their pet healthy. The exam room is the perfect environment for this teaching and nutritional counseling. Remember “every pet, every time.”

      Using data to monitor and retain clients

      To grow your practice you need to grow both your number of active clients and your client compliance.

      As we noted in previous articles of this series, monitoring client growth trends is essential to growing your business. You need to make sure you grow your client base by retention of your active clients, re-engaging your inactive clients and bringing in new clients.

      You also need to understand your client compliance trends. Such metrics tell you what products and services clients are and aren’t using; the rate of compliance; how much they’re spending or not spending on your practice’s goods and services; and their loyalty – the length and value of your relationship.

      There are a number of tools to increase compliance. We will focus on four: report cards, reminders, forward booking and satisfaction surveys.

      Report cards. Used properly, client report cards can increase compliance. They can provide your client with information about your diagnoses, medication and nutritional recommendations, and the next visit. Report cards reinforce your discussion and recommendations and provide a tool for your clients to more accurately share the information with their family. This brings more value to the client experience.

      Reminders. With the exception of vaccinations and heartworm tests, so many practices fail to maximize the full potential of reminders. Every opportunity your practice utilizes to draw clients to return for visits and products could mean an increase in medicine, compliance and revenue. Your data gathering efforts around reminders can reveal the effectiveness of your messaging and, over time, increase your success in retaining existing clients and attracting new ones. Your practice management software and other client communication technologies can customize the reminder system each client prefers such as voice, e-mail, text messaging, and post cards. Some technologies even allow your clients to make their own appointments online and request medication and diet refills. And they can provide the data you need to measure and grow the compliance of services and products you offer.

      Forward booking. The concept is simple: while your client is still in the practice, whether in the exam room or at the front desk or by phone, never miss the opportunity to schedule their next visit. Dental practices are very successful with forward booking. They forward book 80% of their patients and about 90% will keep those appointments with a reminder system. Forward booking is active versus passive. Use your software prompts to remind you to make the next appointment before the client transaction is complete. Forward booking can help fill your appointments and increase both your quality of medicine and revenue. Make sure you have a standard of care plan to know “what’s next” so you can book that next appointment providing more services to your clients.

      Client satisfaction surveys.
      Their value is obvious. The data you can glean from them could easily drive most important decisions about your daily business and future endeavors. Use technology to send your clients a survey the day after they have been to see you. You can focus on finding out what creates a great experience and what causes your clients to decide not to come back. The more you know, the more changes you can make to maximize both your relationship with your clients and compliance with your product and service recommendations.

      About the Author
      Dawn Burdette, Executive Director, Sales Leadership and Development has served HSAH for over 25 years. Dawn has served in a variety of positions in sales and management. This includes training our sales force on the business of veterinary medicine and bringing business solutions to our customers that increase financial success for veterinary practices. Dawn currently serves on the AVMA’s Veterinary Economic Strategy Committee.
    • Managing Client Perceptions, Expectations and Trends - 7th in Series

      Feb 17, 2016
      Editor’s note: This is the 7th in a series of monthly articles that discusses the insightful viewpoints of four of the most respected and well-known financial experts in the veterinary business today, who came together in late 2014 and 2015 at the invitation of Henry Schein Animal Health, Ceva, Elanco, Merck, Merial, Purina, and Virbac to share their expertise and informed opinions in the areas of pharmacy, nutrition and data.

      They are: Dr. Karen E. Felsted, CPA, MS, DVM, CVPM, CVA of PantheraT Veterinary Management Consulting; Gary I. Glassman, CPA of Burzenski & Company, P.C.; Dr. Marsha L. Heinke, DVM, EA, CPA, CVPM of Marsha L. Heinke, CPA, Inc.; and Fritz Wood, CPA, CFP, HF of Wood Consulting. The mission of the “Veterinary Pharmacy Diets and Data Solutions Workshop” is bringing expert advice and actionable business solutions to increase the practice success of the veterinary customers we serve while reinforcing the veterinarian to the pet owner as the best source of healthcare and product choices for longer healthier lives of the pet family member. Be sure to visit henryscheinvet.com/betterbusiness to watch live video clips excerpted from the workshop that accompany each monthly article.

      Managing pharmacy client perceptions

      In some of our previous articles, we’ve discussed some communication best practices – whether it’s conveying your value proposition or developing and using consistent messaging. It’s all part of managing the perceptions your clients have on their first visit, or have over time because of external developments or even their experience with your practice.

      Why it’s important
      Practically everything your practice shows or tells on a daily basis circles back to managing client perceptions. If you and your staff send conflicting or inconsistent messages about heartworm medication, for example, your clients may perceive that as confusion or even incompetence. Much of managing client perceptions about pet medication may have nothing to do with what you are doing. Clarifying misinformation they absorb from the news, social media or even over-the-fence conversations can become a fulltime job. Here are a few examples:

      - Heartworm and flea infestations only happen because of risky behavior. We all know that getting a mosquito bite doesn’t constitute risky behavior – even in humans.
      - The odds of my dog getting heartworm are pretty low. I’ll take my chances. The prevalence in untreated animals is relatively high. Provide epidemiological evidence to your clients. It’s readily available for every geographic area of the country.
      - Heartworm medication is really expensive. Compare the cost of heartworm medicine to treatment. This is a no-brainer.
      - Big box retailers always sell for less. If you are able to sell these medications at or near what these retailers are selling them for, tell them! Provide a graphic comparing your prices with competitors.

      If your clients are feeling dictated to about products, help them feel they have a choice. If your clients perceive that getting medications at the animal hospital is a hassle, provide home delivery options or a web store. If your clients are muttering in the reception area they feel veterinarians charge the highest prices, exploit every opportunity to send the consistent and powerful message, “Our prices are competitive,” through posters, reminders, newsletters and exam room dialog, to name a few.

      A few tips …
      - When you find it necessary to combat misinformation or skewed perceptions about your business, personalize the conversation. Don’t over-rely on stiff medical journal lingo. It can be a turnoff.
      - Keep your messages simple and easy to digest. Powerful visuals tend to stick with busy people.
      - Share well-established, respected educational resources with your clients.
      - Don’t mince words when you need your client’s attention: (“Heartworm medication will save your pet’s life.”)

      Managing client perceptions with nutrition

      Nutrition shows time and time again its potential to drive volume in veterinary practices. Not only is it good medicine, but good business as well. But it’s often easy to allow your nutrition business to coast in neutral. Think: Are you paying enough attention to what your clients, both current and potential, think about your dietary business?

      Why it’s important
      Managing your clients’ perceptions and expectations of nutrition in general, and your business in particular, is a balancing act; pay too little attention and like your pharmacy business, your clients could begin to perceive that although nutrition is important to them, it isn’t to you. Barraging your clients with aggressive sales efforts could send them quickly to your competitors. As a veterinary practice owner, it’s essential that you take the time to tell people in a regular and consistent way how important nutrition is to their pets’ health. This will go far in warding off the misinformation so rampant now about pet food. This becomes all the more critical given the proliferation and mass marketing of animal wellness diets. Consumer choices are almost overwhelming.

      Common misconceptions
      There are many, but here are a few of the big ones:

      - Therapeutic and wellness diets are no different.
      Your clients may tell you they bought a “wellness” diet from a big box store formulated to treat kidney disease, and question why their pet isn’t improving.

      - Wellness diets are expensive or really unnecessary, or just a fancy label for what a grocer carries. Like pharmacy, it’s essential you know the prices your competitors (local and online) are charging, and educate your clients on the value they get from getting their diets from you. Remember to compare on a cost per day. Higher quality diets can actually cost less to feed.

      - Therapeutic diets seem pretty costly compared to a “normal” healthy diet.
      Clients can get so hung up on the bag price, they often miss the improvements the diets are having on their pet’s health. And remember to compare the diets on a cost per day.

      Best practices
      Stay informed. Animal nutrition is not a static science. New studies are exploding myths and uncovering new information that you can use to inform your clients. Pet owners want the same quality of nutrition for their pets that they want for themselves. There is a lot of news about contaminated pet snacks and diets. This is an opportunity to launch a discussion with your clients about the healthful benefits of your wellness diets. Consider all available opportunities to gather information on clients’ nutritional perceptions and expectations. Even the reception area can provide an opportunity to have a discussion about wellness diets if the animal is being weighed and something has noticeably changed. Also make sure to include a body condition score to identify your patients that are overweight. Make nutritional products highly visible and easily accessible in your practice. When you make recommendations about diet and nutrition, having the product available and making it convenient for the client demonstrates the importance of nutrition and enables that trusting relationship.

      Keeping tabs on client trends in your practice

      In our September issue, we discussed the kinds of client data to watch, such as: client attrition, attraction and return rates, and their effect on revenues and profits; satisfaction surveys; and new clients per doctor. Keeping tabs on client trends in your practice is among the most important data task there is because it directly and indirectly impacts revenues.

      Why? Increasing your clients is essential to growing your business, including exploring new potential markets, products and services to fill an unmet need. It is also important to track the source of your new clients to help create effective marketing programs and budgets. Finally, monitoring client trends helps you understand if your practice is resonating with the community and where it’s missing the mark – both essential to remaining viable and vibrant.

      The ways veterinarians manage their client bases are varied. Some pay closest attention to retaining existing clients. Others may prefer to focus more on growing their number of clients. But increasing new clients while increasing existing client loyalty are both important to increasing your practice success.

       

      Behind the numbers
      As we’ve previously discussed, the best data analysis involves relating key pieces of information with one another. Good examples can be revenues per client or returns on marketing dollars. A close examination and understanding of the relationship between your marketing spend compared to new clients will identify what’s working well and what’s ineffective. Knowing how much it cost to attract and hold on to a new client over one year, for example, can be invaluable when compared to the revenues that client brought to your practice in that same period of time.

      Other data gathering efforts such as mining exam room report card information could yield valuable intelligence about your clients’ likes and dislikes, and the perceptions they have about any number of things, including the products and services your practice offers. You can also use that data to drive compliance and adjust marketing efforts.

      Most veterinarians can easily tell you facts about the numbers of new clients they earned in a year, but far fewer seem to have a good handle on how many they’re losing or lost – or why. There may be a myriad of reasons for this, but if you don’t take the time to understand what they are, there could be trouble ahead. If client visits or purchases are trailing off, or pet owners have requested copies of their pets’ medical records, it could be a sign of an ailing pet, a change in loyalty (client defection), a change in a client’s financial condition, or simply client apathy. It’s important you find out why, and take steps to correct the situation.

      About the Author
      Dawn Burdette, Executive Director, Sales Leadership and Development has served HSAH for over 25 years. Dawn has served in a variety of positions in sales and management. This includes training our sales force on the business of veterinary medicine and bringing business solutions to our customers that increase financial success for veterinary practices. Dawn currently serves on the AVMA’s Veterinary Economic Strategy Committee.
    • Engaging, Educating Staff and Data Tracking - 6th in Series

      Feb 17, 2016
      Editor’s note: This is the 6th in a series of monthly articles that discusses the insightful viewpoints of four of the most respected and well-known financial experts in the veterinary business today, who came together in late 2014 and 2015 at the invitation of Henry Schein Animal Health, Ceva, Elanco, Merck, Merial, Purina, and Virbac to share their expertise and informed opinions in the areas of pharmacy, nutrition and data.

      They are: Dr. Karen E. Felsted, CPA, MS, DVM, CVPM, CVA of PantheraT Veterinary Management Consulting; Gary I. Glassman, CPA of Burzenski & Company, P.C.; Dr. Marsha L. Heinke, DVM, EA, CPA, CVPM of Marsha L. Heinke, CPA, Inc.; and Fritz Wood, CPA, CFP, HF of Wood Consulting. The mission of the “Veterinary Pharmacy Diets and Data Solutions Workshop” is bringing expert advice and actionable business solutions to increase the practice success of the veterinary customers we serve while reinforcing the veterinarian to the pet owner as the best source of healthcare and product choices for longer healthier lives of the pet family member. Be sure to visit henryscheinvet.com/betterbusiness to watch live video clips excerpted from the workshop that accompany each monthly article.

      Engaging, educating and training staff - Pharmacy

      Your practice has invested in recruiting and hiring the best staff – from receptionists to technicians to doctors. But you’ve only scratched the surface in maximizing their potential.

      Your hospital or clinic staff may be highly proficient at what they were hired to do, but it’s easy to overlook the value they can add as ambassadors for your practice and the roles they play in maintaining and even growing sales of your practice pharmacy and nutrition products.

      Your staff is the first impression the public has of your business. Are they representing you in the most professional way? Are they engaging pet owners in a way that turns them into clients? Do they effectively convey the messages you’ve invested so much effort in describing and branding your business?

      Armed with knowledge and training, and properly motivated, they often can be the difference between failure and success. Viewed collectively, your staff should be a cohesive team with one shared vision and goal. As we learned in last month’s issue, it begins with consistent messaging. If someone walked into your clinic and asked five different people what you recommend for heartworm or flea and tick preventative, would they all say the same thing? Much earlier in this series we learned of the critical nature of medical protocols and standards of care, and how vital it is that everyone on your staff not only understand them, but believe in the value they provide to your patients. Put differently, your staff needs to be on the same page.

      If only a small fraction of your clients are buying commonly used pharmacy items from you, poorly conveyed or understood standards of care and medical protocols are likely at least partly to blame. It’s only exacerbated when doctors all have different opinions. Each year before parasite season begins, your medical staff needs to meet and collectively agree upon the most appropriate products. There are a plethora of sources to make those decisions meaningful, some right under your nose. These include your distributor and manufacturer representatives. When your clinicians and office staff are comfortable and on board with the products you’re selling and promoting in pharmacy and nutrition, the battle is half over.

      Imbuing a consistency of messaging calls for training. It can be as simple as a set of written principles or as involved as training and sales exercises.

      Scripts are a popular and effective tool to ensure your staff is engaging the public and your clients in the most effective and productive way – from social media and emails and the front desk to the exam room. Carefully conceived and presented, scripts convey in black and white the messages your clients need to hear about your pharmacy and nutrition products – why you chose them and how they will benefit their pets. It’s less important that scripts are robotically committed to memory and more important each person on your staff understands the spirit behind each message. It can be as simple as “This heartworm medication will save your pet’s life.”

      Training your staff to learn and use scripts does not have to be an arduous affair. Make it fun. Allow groups of staff to gather and learn together in a pleasant, non-intimidating way. Keep it simple.

      Of course, what a doctor conveys to a client who has asked about the efficacy of a heartworm product may be more technical or clinical in nature than what a receptionist would say, but the core messages are always the same.

      It’s also essential that everyone on your hospital or clinic staff understand the roles they are expected to play in promoting pharmacy and nutrition products. Establish up front if you decide a technician is the best person to have an initial conversation with a client about flea preventative, for example. But don’t forget to engage your front desk staff, including your receptionist, about the roles they are expected to play as well. New clients may often engage a receptionist about the price or quality of your heartworm medication before they see a technician or doctor for the first time. Also be mindful that noisy, overcrowded front office areas can impede these important discussions and plan accordingly.

      In addition to being fonts of information, certain staff can be designated to other roles designed to manage and boost practice sales of pharmacy and nutrition products. If you decide your receptionist or a technician is capable of “closing” a sale, make sure you properly train them in fundamental or basic sales techniques. Don’t overlook the fact that even though you may think you know your clients, expert salespeople can be an invaluable resource for helping you understand how pet owners think and make decisions about products for their dogs and cats. Take advantage of your vendor or distributor representatives, which can provide valuable tips or training on sales methods.

      Certain staff members can also be called upon to play reconnaissance roles. By visiting local retailers that sell heartworm and flea/tick preventatives on a regular basis, they can return to your practice with invaluable “intel” about pricing, as well as how products are being displayed and promoted.

      Finally, don’t overlook the value of continuing education and training for everyone on your staff. The investment will pay dividends in more ways than you may realize. Not only will it increase the competency of every technician and non-clinical employee, but will boost their confidence in the veterinary profession, strengthen their belief system and feed their passion.

      Engaging, educating and training staff - Nutrition

      The standards of care your practice subscribes to should guide the decisions you make about the kinds of wellness and therapeutic diets you carry. You and your fellow veterinarians may strongly believe in the value of wholesome nutrition and how and why it can combat disease and extend life, but is it possible for technicians and front office clerical staff to convey those ideas as succinctly and powerfully to the public or your clients?

      The answer is a resounding YES. Clients expect everyone on your staff to be knowledgeable about pet nutrition. After all, everyone does work in a veterinary clinic, right? Your staff needs to be on board with the value of nutrition, or they won’t be able to convince your clients that their pet needs it. If your staff doesn’t believe your wellness diet is the best product for healthy pets, or they don’t know why, how will your client feel confident buying it from you? Consumers are smarter than most businesses give them credit for, and most can detect insincerity a mile away.

      Regarding nutrition, we always hear, “My clients can’t afford that.” Well, they ARE affording it! Only 12% of food sold in US is value priced, while 88% is not!

      The most important conversations about pet nutrition can and should occur in the exam room between a doctor and client. But what if the client initiates that conversation at the front desk while waiting to be seen? It comes back to consistent messaging and scripts, as we just discussed in the last section.

      One recent study compared the nutrition recommendations practices made to pet owners with the percentages of veterinarians and team members who actually followed them. The gap was significant among dog owners, and even greater among cat owners. The takeaway? If your own veterinarians aren’t using the product you’re recommending, the client may never know, but your staff will. What incentive will they have to advise a client to use a product even you don’t use?

      Another important point: Make your nutrition products (and your popular pharmacy products) as affordable as possible for your clinic staff to buy. If they can’t afford it and use it on their own pets, what incentive do you think they’ll have to promote it with clients?

      In the previous section on pharmacy, we discussed roles certain staff members can play in managing and increasing sales. Nothing is more true when it comes to wellness and therapeutic diets. Wellness diets in particular are becoming very price sensitive with their prevalence in competing big box stores and the Internet. Properly coached and trained staff, especially those front-facing employees who meet and greet people as they come through your doors, can and do play roles that cannot be overstated enough.

      These employees are your clinic’s eyes and ears. Neglect to tap into what they’ve seen and heard about consumer attitudes and preferences about price, availability and quality when clients are paying their bills, picking up supplies or waiting for an appointment, and you are missing a goldmine of information.

      Many practices have identified cost-conscious staff known to be “coupon clippers” and engage them on pricing. Others train their receptionists or customer service staff to engage clients on wellness diets while they have their attention on other matters. Home delivery with auto-refills will keep clients using the diet you recommend.

      It may surprise you to learn that few practices train their staffs to effectively handle phone shoppers – those ubiquitous callers who inquire what your practice recommends. Many practices overlook the opportunity to steer those callers toward a clinic visit after explaining the features and benefits of your wellness diets or heartworm medication.

      Again, scripts are an invaluable tool for staff when it comes to nutrition discussions. It can be as simple as “A wholesome diet of nutritious food could add years to your pet’s life.”

      How do you keep the enthusiasm going? As we’ve previously discussed, ongoing training and education can go far. It’s easy to return from a weeklong conference jazzed about the latest good news about pet nutrition or heartworm prevention, and even easier to lose that enthusiasm when the work takes over. Some practice owners have had success gathering staff for very brief morning huddles to reinforce simple yet powerful messages reminding everyone why they are here and the value they bring to pets’ lives.

      At the end of the day, it’s about believing that what you do is making a difference in the health of dogs and cats and the people who love them, and treating them exactly how you would want to be treated.

      Tracking and trending: A look at expenses, and client/employee data (Second of two parts)

      As we discussed in part one of this topic last month, you need to develop a plan for tracking and monitoring data you’ve identified as important to your practice, so you can stay within your budget, plan for improvements, and keep tabs on key changes in your client base, employees, inventory, etc.

      Trending that data allows you to see where you’ve been and where you are now. And knowing what affects key data may help you decide where you are headed.

      You can track and trend expense data using a simple spreadsheet or your practice management software. Beyond that, however, you need to use other comparisons to see what effect the costs of running your business have on – and are affected by – factors such as client retention and employee productivity, to name a few.

      Put another way, this involves comparing one key piece of information with another, such as practice expenses as a percentage of gross revenue. Following is a look at key types of expense data.

      Inventory management
      Business 101 tells you that carrying inventory costs money. The inventory expense is the second largest expense of the practice, next to labor costs. Your inventory also generates significant revenue for the practice. A good inventory management system should save time and money while generating income.

      Designate someone in your practice to take ownership of your inventory management. Develop a written standard operating procedure (SOP) for your practice. It should include the procedures for placing the order, receiving the order, and the control of your inventory until used or sold. Make sure it can be easily taught to your inventory manager and staff. Involve the team and help them understand their role in inventory control along with the importance. Utilize your practice management software. Your distributor partner can also provide inventory management training. Most companion animal practices generate 27-29% of the gross revenue from product sales including diets. Bear in mind your practice may be unique in one regard or another so it’s important to look at your practice’s entire financial picture before getting too alarmed if this figure is higher or lower.

      Payroll
      One of the most essential pieces of payroll data to keep close tabs on is overtime. It has a way of sneaking up on your income statement. Left unchecked, excessive overtime can have a negative impact on your business if there isn’t a specific amount of revenue to counter its impact. One way to better control overtime is set thresholds with the staff person doing scheduling in terms of hours – not dollars.

      Consider comparing revenue with actual time worked. Tracking revenue per hours of work paid is one way to help ensure overtime is not putting your business in the red zone. It also can provide insight into the efficiency of your staff. You also should consider comparing your payroll on a month to month, and annual basis while evaluating the variable factors that are causing it to fluctuate. For example, if your payroll for March 2015 was significantly higher than it was for March 2014 and you haven’t added or subtracted any staff in that time period, what are factors other than pay increases?

      Client trends
      There are a myriad number of data elements related to clients that, viewed individually and collectively, can provide a critical snapshot of your practice health.

      Is the number of clients rising or falling year after year? How is client growth or loss affecting revenues? Are you monitoring your client base’s overall satisfaction with your practice year after year? Do satisfaction rates correlate with these trends?

      What kinds of information will new or active clients per doctor give you? If the ratio of new clients per full-time equivalent doctor is declining while you’ve added veterinarians to your staff, that will provide important insights into possible issues.

      One of the most important pieces of data is your practice’s year-to-year client return rate, sometimes referred to as the bonding rate. If that percentage from one year to the next is near or above 70%, that’s generally a healthy sign.

      Some practices may focus on acquiring new clients while neglecting attrition rates among existing ones. There could be any number of reasons for clients leaving your practice, or visiting less frequently than they have before. One way to objectively understand why they may be leaving is to conduct client satisfaction surveys. The data could provide valuable ideas for retaining existing clients and attracting new ones to grow your practice.

      Knowing which data to compare will sometimes help you avoid missing the forest for the trees. For example, tracking annual revenue per patient rather than revenue per visit takes emphasis off having to squeeze every last dollar out of the client each visit and focus more on the longer term care that the pet needs. In addition, if you look at revenue per patient as a measure of your practice’s success, it may help to spread out the procedures you’re doing rather than trying to cram everything in one visit.

      Marketing expenses
      They are a necessary cost, but you need to make sure you are getting a good return on your marketing investment. To understand the returns you’re getting on your marketing dollars, track the services or products provided to your clients as a direct result of a marketing campaign, and what it cost you to achieve that. This will help gauge your marketing plan effectiveness.

      All too often practice owners “do marketing” simply because they’ve been told they have to , all without knowing what works best. Others let struggling marketing programs languish too long and bleed red before pulling the plug. Establishing key metrics up front before embarking on a marketing campaign will prevent this from happening. For example, if you start a marketing campaign be sure to set your goals including those related to revenue, your budget, how you will track the information, the roles of your team members, and the evaluation and modification process to ensure success.

      Employee data
      There are innumerable ways to slice and dice data about your staff. Here are a few important ones to consider.

      Measuring the number of employee hours it takes to complete an average transaction can provide a key measure of efficiency. Obviously, the less time it takes, the better as long as it still meets your quality standards. And if you benchmark that metric with other practices, make sure you are doing apples-to-apples comparisons with practices in similar geographic areas, with similar demographics and average wages.

      Tracking the hours your doctors work can be difficult because they don’t clock in or out. Consider asking your doctors to track their time for reasons other than pay. When you compare their hours to the revenue their work generates, you’ll understand why.

      Another metric to consider is individual doctor production. If two doctors using the same fee schedule differ widely in average invoice dollars per visit, or number of invoices generated over a specific time period, there may be good or bad reasons for that.

      Still one more metric to consider with medical staff is appointment fill rates, which reveal the capacity issues of both the hospital and the individual doctor. Measure on a daily basis how many hours are available for each doctor to see appointments and how many of those hours are actually filled. You can generate a wealth of information if you do that daily for each doctor and for the hospital as a whole. For one, the comparison will tell you which days and times are busier than others and allow you to make necessary adjustments to schedules. This will allow you to effectively meet capacity levels each day.

      About the Author
      Dawn Burdette, Executive Director,Sales Leadership and Development has served HSAH for over 25 years. Dawn has served in a variety of positions in sales and management. This includes training our sales force on the business of veterinary medicine and bringing business solutions to our customers that increase financial success for veterinary practices. Dawn currently serves on the AVMA’s
      Veterinary Economic Strategy Committee.
    • Pharmacy, Nutrition Messaging and Data Tracking - 5th in Series

      Feb 17, 2016
      Editor’s note: This is the 5th in a series of monthly articles that discusses the insightful viewpoints of four of the most respected and well-known financial experts in the veterinary business today, who came together in late 2014 and 2015 at the invitation of Henry Schein Animal Health, Ceva, Elanco, Merck, Merial, Purina, and Virbac to share their expertise and informed opinions in the areas of pharmacy, nutrition and data.

      They are: Dr. Karen E. Felsted, CPA, MS, DVM, CVPM, CVA of PantheraT Veterinary Management Consulting; Gary I. Glassman, CPA of Burzenski & Company, P.C.; Dr. Marsha L. Heinke, DVM, EA, CPA, CVPM of Marsha L. Heinke, CPA, Inc.; and Fritz Wood, CPA, CFP, HF of Wood Consulting. The mission of the “Veterinary Pharmacy Diets and Data Solutions Workshop” is bringing expert advice and actionable business solutions to increase the practice success of the veterinary customers we serve while reinforcing the veterinarian to the pet owner as the best source of healthcare and product choices for longer healthier lives of the pet family member. Be sure to visit henryscheinvet.com/betterbusiness to watch live video clips excerpted from the workshop that accompany each monthly article.

      Your pharmacy and the value of communication

      In our previous four articles, we’ve discussed the importance of identifying and being guided by your practice’s value proposition and standard of care, and how to be price-sensitive and competitive with your pharmacy products and services.

      While that all may make sense to you, does it translate as clearly and powerfully with your clients?

      Practically everything your practice does – in words and actions – conveys some kind of message to your clients and potential clients. Whether it’s a reminder on an invoice or email, an e-newsletter, a receptionist’s greeting or smile, or a poster on the wall – they all serve as visual and verbal cues to your clients. That’s why it’s so important to never miss a single opportunity to communicate positive messages that will grow your business and keep your clients satisfied and loyal.

      An oft-heard cliché in veterinary medicine holds that pet owners need to hear the same message at least 10 times before it finally sinks in. Follow up your reminder about an upcoming heartworm test with an article or video about heartworm disease in your weekly newsletter or on your client web portal. Post tweets or posts about heartworm disease trends on Twitter or Facebook. Write a blog conveying helpful tips for keeping your pet heart healthy. In addition, your distributor partners likely have good quality materials you can make available in your exam room or reception area. And don’t overlook the abundance of free educational videos you can share from respected veterinary websites, as well as YouTube.

      You want to send clear, unambiguous messages about the value of your pharmacy; that pricing for popular items such as heartworm and flea/tick preventative is competitive, that your stock is plentiful, and that the quality of your products are unsurpassed. But is that enough?

      You also need your messages to convey the competence of your practice, and its core mission of keeping your patients healthy – whether it’s maintaining good health or restoring it after an injury or illness. Strong, consistent communication is the foundation of a trusting relationship your practice has with its clients.

      One popular communication training method is scripting, which employs written message points that everyone on your staff needs to understand and follow. Nothing can damage your messaging more than conflicting signals. Scripting ensures everyone on your staff sends a consistent message in every client encounter – from the front desk to the exam room to email to the whole gamut of verbal and non-verbal communications that happen daily. Call on your practice consultant to inquire about media training, another technique that helps your staff refine their public written and verbal communication skills.

      Clear communication also works to mitigate misconceptions the public or your clients may have about your practice. If your clients or potential new clients are saying things in public that are counter to the messages you and your staff are conveying, you may have a serious trust gap. Make it a point to monitor social media websites to see what people in the community are saying about veterinarians in general, or your practice. You can’t control those messages, but you can manage them. Use the client comments and reviews to make positive changes in your services and products offered.

      Here are some additional tips:
      • Consider having customer service calls forwarded to a staff member in a separate, discrete room away from public areas in your practice. This not only allows unencumbered two-way conversations, but also keeps them private.
      • When interviewing office staff for open positions, don’t overlook the value of the candidate’s communication “soft skills.” How your employee maintains eye contact and listens with empathy and attentiveness are just as important as what they say or write.
      • Train your reception staff on how to turn phone shoppers into loyal clients. Show them how to transition a simple “hit and run” query about prices into a simple, direct yet powerful discussion about why they should consider getting their meds from you. In the end, your reception staff could be adding to the growth of your practice in a very important way.
      • Finally, enlist the help of your distributor representative for guidance on messaging, communication, and educating clients about specific products.

      Fueling a consistent and positive conversation about diets - Nutrition

      Much of what we’ve just discussed about pharmacy communications can easily apply to your nutrition business.

      According to the World Small Animal Veterinary Association guidelines, a nutritional assessment and a specific nutritional recommendation be made on every pet every visit. This is the 5th vital assessment following temperature, pulse, respiration and pain. Remember every pet every time!

      Consistent and clear communications about therapeutic and wellness diets can take many forms – from client reminders about upcoming preventive care exams or therapeutic refills to positive blogs or website articles espousing the benefits of healthy diets in dogs and cats.

      As in pharmacy, your communications will go far in conveying messages about your practice’s dedication to maintaining your patient’s health, your competence in recommending diets comprised of the highest quality ingredients, and your sensitivity to competitive pricing.

      Your message should reinforce your practice philosophy about the important role of nutrition in extending their pets’ lives.

      And again, scripting ensures that everyone on your staff continues to use the same or similar messaging about nutrition, pricing and quality.

      One very powerful non-verbal communication technique with nutrition is product placement. Having a healthy stock of your nutritional products on display in your reception area with posters in your exam rooms sends visual cues to your clients that your practice has plenty of product on hand.

      Some additional tips about nutrition messaging:
      • Follow-up communications are critical with diets. Many clients may hesitate to ask for a second bag because of “sticker shock.” Reinforce the message that your products are competitively priced and affordable by comparing the cost-per-serving or cost-per-day when compared with popular brands from big box retailers.
      • Call the client about 7 days after they go home with the first bag to make sure the pet is doing well with the transition to a new diet. And remind them when they are ready for a refill. Pets usually eat about half their body weight per month so it is easy to calculate when they need a refill. A 20 pound dog eats about 10 pounds monthly and a 10 pound cat will eat about 5.
      • Make use of an exam room patient report to make written nutritional recommendations – whether you are recommending a therapeutic diet for a disease like obesity or if you are recommending a high quality wellness diet. You may also want to include a distributor partner’s promotional or educational materials as well.
      • Seize opportunities to query your clients about their pets’ eating habits during routine exams or after weighing in. Include a body condition score in the exam. Conversations can spring from that about wellness and therapeutic diets. Invite them to bring in a photo of everything their pet eats.
      • Enlist your reception staff to call clients just before an office visit and offer to have refills of their therapeutic or wellness diets ready when they come. Offer home delivery with automatic refills. Convenience is a powerful sales tool.
      • Enlist the help of your distributor and manufacturer representative for messaging and product placement advice. They may have coupons, merchandising and training available. Take advantage of the free, self-paced nutrition courses.
      • Promote good nutrition on your website and social media.
      • And consider loyalty programs for your clients. Remember – everyone in your practice plays an important role in educating clients on how to provide the best care for their pet. Every opportunity you miss to engage clients, ask how their pets are doing, suggest products and communicate your messages is a lost opportunity to provide the very best care for your patient.

      DATA - Tracking and trending your data: A look at revenues and liquidity

      (First of two parts) In previous articles we’ve discussed some of the key performance indicators and other kinds of data that are critical to running a successful veterinary practice. Once you’ve identified important data, you need to develop a plan for tracking and monitoring it to ensure revenue growth, stay within your budget, plan for improvements, and keep tabs on key changes in your client base, employees, inventory, etc.

      Tracking and trending data can be as simple as keeping a spreadsheet showing revenues and expenses – by category, date, or numerous other parameters. But few businesses could survive without the ability to see where they’ve been, where they are now, and where they are headed. Tracking and trending data often involves comparing one key piece of information with another, such as revenue per doctor or practice expenses as a percentage of gross revenue. This allows you to see the effect of one aspect of activity on another, and makes forecasting much more meaningful.

      It’s also important to keep in mind that your practice trends could be different than other practice trends. For example, if non-DVM labor costs run between 18% and 22% in a typical veterinary practice and yours have been consistently 28% for years, it may not be cause for alarm if your practice is in a robust job market compared to the rest of the country and other well-controlled costs of operations support a healthy profit margin. And yet, that knowledge may still lead you to question, and probe further for answers.

      Following is a look at some of the tracking and trending possibilities with revenues and cash.

      Revenues
      • Sales – There are hundreds of ways to slice and dice sales data. Some yield more meaningful results than others. Accountants typically like to give their veterinary clients a daily breakeven point to help them to understand how much sales they need to generate each day just to break even. Going further, it’s often useful to track monthly sales and monthly break-even points. When you create an average daily or monthly break-even point, you can then compare periods to better understand why some months were slower when others were robust. This kind of exercise is a quick and easy way to get a snapshot of gross revenues and identify weak spots.
      • Transactions – Another way to evaluate revenue is how it’s produced. Breaking down revenue production by practice doctors, for example, can yield some revealing and powerful information. You may find one doctor produces more revenue than another doctor. One doctor may be promoting additional services or products that produce more revenue while still meeting the practice standard of care. Often such tracking and trending can give you a strong picture of each doctor’s production and level of care. For example, if your practice just raised its preventive care exam fees by $5 and the average transaction charge for a particular doctor stays the same, you may want to look into the reason for that.
      • Receivables – You may also want to track and trend accounts receivable balances. Is the team letting client credit extension spin out of control? Is that receivables balance increasing because your credit standards have changed and all of a sudden someone at the front desk isn’t promoting payment options? And where’s that going to show up? It’s going to show up in the tracking and trending of your accounts receivable activity.
      Liquidity
      Most veterinarians today can quickly tell you how much cash they have in the bank, but fewer and fewer are keeping much of it for rainy days. Many practices today are running closer to the edge than they used to, and few could tell you what impact a 5% drop in revenues would have on their business. This is not unique to our profession; it’s symptomatic of many industries in the midst of an economic recovery.

      When your practice doesn’t make a concerted effort to reinvest its profits, your debts are paid slower and you run the risk of being unable to weather a downturn. Reinvestment helps your practice build equity and financial strength. Many practice owners think reinvestment only applies to big capital expenditures for equipment or remodeling or renovation projects. But reinvestment also applies to building healthy cash balances and emergency funds.

      Veterinary medicine is a seasonal business. Many months are strong. Some are weak. All the more reason to track and trend your financial data to maximize every opportunity to build liquidity. Make a commitment today to reinvest cash on a quarterly or annual basis. Establish an emergency fund.

      Note: Part 2 next month will explore key tracking and trending issues with expenses, and client and employee data.

      About the Author
      Dawn Burdette, Executive Director, Sales Leadership and Development has served HSAH for over 25 years. Dawn has served in a variety of positions in sales and management. This includes training our sales force on the business of veterinary medicine and bringing business solutions to our customers that increase financial success for veterinary practices. Dawn currently serves on the AVMA’s Veterinary Economic Strategy Committee.
    • Pricing Strategies, Working With Metrics - 4th in Series

      Feb 17, 2016
      Editor’s note: This is the 4th in a series of monthly articles that discusses the insightful viewpoints of four of the most respected and well-known financial experts in the veterinary business today, who came together in late 2014 and 2015 at the invitation of Henry Schein Animal Health, Ceva, Elanco, Merck, Merial, Purina, and Virbac to share their expertise and informed opinions in the areas of pharmacy, nutrition and data.

      They are: Dr. Karen E. Felsted, CPA, MS, DVM, CVPM, CVA of PantheraT Veterinary Management Consulting; Gary I. Glassman, CPA of Burzenski & Company, P.C.; Dr. Marsha L. Heinke, DVM, EA, CPA, CVPM of Marsha L. Heinke, CPA, Inc.; and Fritz Wood, CPA, CFP, HF of Wood Consulting. The mission of the “Veterinary Pharmacy Diets and Data Solutions Workshop” is bringing expert advice and actionable business solutions to increase the practice success of the veterinary customers we serve while reinforcing the veterinarian to the pet owner as the best source of healthcare and product choices for longer healthier lives of the pet family member. Be sure to visit henryscheinvet.com/betterbusiness to watch live video clips excerpted from the workshop that accompany each monthly article.

      How competitive are your prices? Developing a strategy

      As we’ve discussed in previous articles, online pet pharmacies and big box retailers have given consumers more choices and, in the process, have made prices for pet medications more transparent – and competitive.

      It’s worth considering: Your clients’ perceptions about how you price your pharmaceuticals (including therapeutic diets) may be influencing their perceptions about other things. If they perceive your prices are far out of line with what your competitors are offering, they may begin to question what your practice is charging for services like preventive care exams, dentistry and diagnostics, for example.

      Without a sound strategy in place, you could unwittingly be sending the wrong message with your pharmacy prices that can cause a lot more harm than just losing a sale here and there.

      Every practice is unique, and how it approaches the pricing question depends on a number of things such as tolerance for lower margins, the prospects of losing clients or not attracting new clients in a highly competitive area, and more. Pricing strategies seen in veterinary medicine include:
      • The "markup" method, which basically multiplies the acquisition cost of the product by a certain percentage.
      • "Margin pricing," in which a practice endeavors to net a fixed dollar amount on every sale regardless of how expensive it was to acquire the product and provide it to the client.
      • "Community pricing," which, like the name implies, involves monitoring your competitors’ prices through online searches, physical visits or "phone shopping" techniques.
      • "Value pricing" where the price is set based on a perception of how valuable the product is to the client

      A few guiding principles to keep in mind

      Regardless of what particular strategy you use, keep the following in mind as you ponder the competitive price landscape and develop tactics of your own.

      Be competitive and transparent. First, determine whether your prices really are competitive by checking what other sources sell the same products for. Some veterinarians wrongly assume that their pharmacy prices are higher than anywhere else. But when you factor in various discounts or rebates you can pass on to your client, your prices actually become quite competitive. You won’t know until you understand what your competitors are charging, so make it a point to determine where your prescriptions are being filled.

      Be consistent. Whatever strategy you employ, apply the same policy to every client. You risk ill will or even losing clients if you make a habit of giving special "deals" to one and another finds you didn’t offer it to them. The same is true if you sell your medications in-store and online. It’s eye-opening to consider how many practices actually sell a product for less through their web store than in person, the rationale being web-based transactions are less costly in terms of inventory or labor. But two-tiered pricing structures are fraught with risk, and could send the wrong message to a client.

      Educate your staff and your customers. Veterinarians have a secret weapon most of their competitors don’t at the point of sale: a trained staff. You would be amazed how the right human interaction can influence a purchase decision just before it’s made.

      Even if you are uncomfortable with "selling", simply telling your client that heartworm preventive medication is easy to administer, is cost-effective and can save their pet’s life will many times make that decision easy. Second, make it a point to tell your clients that your prices are competitive. You can do this indirectly and "softly" with price comparison charts, or you or your staff can do so directly by saying "our prices are competitive" at the front desk or in the exam room, when you have their undivided attention. Third, understand that it’s difficult to promote a specific brand of heartworm or flea and tick medicine if you or your team don’t fully believe in its value. Some of your best product ambassadors can come from your staff, many of whom are very price conscious coupon clippers, so make your pet medications affordable for them.

      Don’t sell yourself short. Obviously, if you sell under cost you won’t be in business for long. But many veterinarians cannot make the leap in understanding they don’t always have to have the lowest price to keep a client’s business. Just being in the "ballpark" by a few dollars is often enough. Price matching doesn’t mean you have to be cheaper. It just means you have to have parity. After determining what three or four of your main competitors charge, determine a range you’re comfortable with and stick with it. If you are able to price your medications a little higher than the competition with a successful pitch about the value-add that comes with the transaction (like convenience, service, expertise, etc.), make sure that value-add is real. Finally, relax. Understand and accept the fact that there always will be price battles your practice simply can’t win.

      Deciding on nutrition pricing strategies - Nutrition

      Much of what we discussed in the previous section on pharmacy applies to both therapeutic and wellness nutrition products. So let’s review the basics:

      To determine whether your prices are in line, check out what your major three or four competitors are charging. In some cases, you may be surprised to find your practice is charging the same or even less, particularly on wellness diets. If not, perhaps minor adjustments are all that’s required.

      Be transparent about your prices so your clients can make a hassle-free purchasing decision. If your prices are competitive, make a point of broadcasting it appropriately.

      Understand that one of your practice’s strongest value propositions with therapeutic diets is that they are only sold through veterinary practices; this is even more reason for you to carry a strong selection of high quality wellness diets. You have a captive audience with therapeutic nutrition already. Many clients who may have their pets on wellness diets may end up at some point needing to put them on therapeutic diets. Conversely, many clients who have their pets on a course of therapeutic diets may understand the value of transitioning to a good quality wellness diet. If your practice carries both, and you have a sound pricing strategy, you have the potential to be a market-leading pet nutrition business in your community.

      About 4% to 5% of a typical hospital’s gross income comes from nutrition and diets, so how price sensitive should your practice be? As we’ve noted in pharmacy pricing, it’s important to understand you likely will never win every challenge your clients confront you with. Remember the old adage, some profits are better than no profits. The nutrition products business can be an annuity for your overall practice; it requires only modest re-investment and staff "touches" and has great potential for repeat sales, volume, and profits.

      You may already BE price competitive

      As previously noted, consumers generally assume big box retailers sell pet food for less than veterinarians do. Similarly, many veterinarians wrongly assume their prices for wellness diets are much higher than what big-box and online retailers are charging.

      Your practice may be more price competitive than you realize. In some cases, the wellness diets you sell can be as much as $1 cheaper than those being sold in big box stores. In fact, you may also be surprised to learn that prices for your therapeutic diets are likely somewhere in the middle of the top 10 selling wellness diets in big-box stores.

      But your clients’ perceptions about the prices you charge may be somewhat distorted by packaging "sticker shock." If all your client is looking at is the price on a very large bag of food in your reception area and thinking about the check they’re going to have to write, they may end up walking out the door without a simple math lesson.

      It’s called "cost-per-day." Would you be surprised to learn that most cat owners save anywhere from $300 and $800 a year when they switch to a hospital-dispensed diet? For example, the small single-serving tray packages in retailers typically sell for 79-89 cents each. Feeding instructions typically require four servings per day for a 10-pound cat. When you are able to educate your clients about the cost-per-day for your wellness diets versus the costs for some of the higher priced single-serving trays from the big-box retailers, the savings can be very compelling.

      Another pricing obstacle is inventory space. By virtue of their size, diets can require a significant amount of floor or wall space in your practice. Nothing is more annoying for a client than to be told you’re out of stock or to be required to call three days in advance to get what they want. Moreover, wellness diets can become commoditized in consumers’ minds because of their now mass market availability.

      But that shouldn’t deter you. If your clients are viewing wellness diets as commodities, they more often than not will move to the lowest denominator of price. Your practice can combat that by moving the wellness diet out of the commodity arena with the right value proposition. A big one is home delivery. You may get away with selling your client a wellness diet for a few dollars more the first time in your office, but if your client is now going to have to make a trip to get it, price is going to matter more. If you offer the convenience of home delivery, that becomes less and less of an issue.

      Finally, this may be applicable to many businesses, but it’s no less relevant for veterinary practices today: Roughly 20% of what you sell in products and services generate about 80% of your income for those products and services. Consider focusing less on the other 80% of what you may sell at much lower quantities, even though your profit margin might be greater. The best profits are typically tied to volume and nutrition can provide both volume and profit } DATA

      "Metricking": Working with data

      Working with metrics, otherwise known as "metricking," is not an exercise confined to the "geeks" of the world.

      Metricking is a necessary and vital part of running any veterinary hospital business today. Without accurate data on the activity of your practice – from sales and expenses to client compliance and employee performance – it’s difficult to make sound decisions about marketing, expansion and new products, just to name a few.

      As we’ve stated previously, outdated, incomplete, unreliable or just poorly managed and maintained data can seriously impair or even cripple your practice. Yet, anyone with the right tools can work effectively with metrics, regardless of their level of proficiency with numbers and data analysis.

      Whatever tools you use, make sure you know how to use them so you maximize their potential for helping you analyze data and make good decisions. Even QuickBooks can stymie some practice owners, and too often even the best practice management systems can be like a Ferrari stuck in a school zone because veterinarians don’t fully understand their capabilities. If unsure, consult your supplier or your CPA.

      Working with metrics boils down to three major objectives: what to measure, how often to measure, and how to report what you’ve measured in easily understood ways.

      Often the first step in working with metrics is deciding what’s most important to keep your practice financially vibrant and healthy in the long-term. Basic metrics target data such as payables and receivables, employee hours, practice income, etc. Going beyond fundamentals can vary from one practice to the next depending on the problems or opportunities in the practice.

      Often the choice of metrics has little to do with the size of a business.

      When he was running General Electric, arguably the biggest and most complicated business in the world, Jack Welch was asked by a reporter, "What do you measure?" To that, Welch replied, "Three things: How much cash do we have in the bank? How happy are my employees? And how happy are my customers? And not necessarily in that order." Of course, this is a big picture answer—it’s a starting point. More detailed metrics in each category are critical as well.

      The frequency at which you monitor data varies between weekly and annually. In many cases, a monthly review is suitable for most kinds of metrics.

      Finally, familiarize yourself with the most basic, fundamental metrics. These metrics are available from useful accounting reports, including but are not limited to: a general ledger (a record of all transactions, both expenses and revenue) financial statements (balance sheet, profit and loss report, and cash flow statement) and data from the practice management information system. The basic underlying framework for the foregoing reports is a veterinary-specific chart of accounts, which categorizes each and every monetary transaction into meaningful groupings that allow consistent and reliable data about practice financial standing.

      With these basic tools in place, you can then begin to slice and dice the information to uncover a myriad of metrics that associate one kind of data with another. Examples include costs as a percentage of gross revenue and revenue growth per doctor. Of course, it’s essential you have trusted partners like a practice manager, practice consultant and accountant to guide you on using this data appropriately and strategically.

      In coming articles, we will discuss some of the ways you can and should analyze all the myriad types of data you collect, because tracking and trending provides a kind of roadmap to see where your practice has been, and where it’s going. We’ll examine some of the most important data you should be tracking and monitoring, and why.

      We also will discuss, techniques like forward booking and reminders, as well as using your data to build tools like satisfaction surveys. The resulting information will yield valuable insights on employee and client retention and future recruitment possibilities.

      Later, we’ll take a look at ways your practice can use data to monitor and manage compliance.

      About the Author

      Dawn Burdette, Executive Director, Sales Leadership and Development has served HSAH for over 25 years. Dawn has served in a variety of positions in sales and management. This includes training our sales force on the business of veterinary medicine and bringing business solutions to our customers that increase financial success for veterinary practices. Dawn currently serves on the AVMA’s Veterinary Economic Strategy Committee.
    • Competing With Retailers, Key Performance Measures - 3rd in Series

      Feb 17, 2016
      Editor’s note: This is the 3th in a series of monthly articles that discusses the insightful viewpoints of four of the most respected and well-known financial experts in the veterinary business today, who came together in late 2014 and 2015 at the invitation of Henry Schein Animal Health, Ceva, Elanco, Merck, Merial, Purina, and Virbac to share their expertise and informed opinions in the areas of pharmacy, nutrition and data.

      They are: Dr. Karen E. Felsted, CPA, MS, DVM, CVPM, CVA of PantheraT Veterinary Management Consulting; Gary I. Glassman, CPA of Burzenski & Company, P.C.; Dr. Marsha L. Heinke, DVM, EA, CPA, CVPM of Marsha L. Heinke, CPA, Inc.; and Fritz Wood, CPA, CFP, HF of Wood Consulting. The mission of the “Veterinary Pharmacy Diets and Data Solutions Workshop” is bringing expert advice and actionable business solutions to increase the practice success of the veterinary customers we serve while reinforcing the veterinarian to the pet owner as the best source of healthcare and product choices for longer healthier lives of the pet family member. Be sure to visit henryscheinvet.com/betterbusiness to watch live video clips excerpted from the workshop that accompany each monthly article.

      How to be price-sensitive and still keep your pharmacy thriving

      Competition for pet pharmaceutical business is more intense than ever before. And it’s happening on multiple fronts – from the Internet to brick-and-mortar stores in your community.

      Because of this, pricing has become increasingly transparent for both prescription and non-prescription medications like heartworm preventative and flea and tick preventative. Online retailers make it easy to price comparison shop, and smartphones have become the weapon of choice among consumers waging price comparison battles in your community. Big box retailers have the volume and the ability to lower and raise prices frequently. Like online retailers, many also offer 24/7 shopping convenience.

      It’s a fact that many consumers, including your existing clients, are quick to buy from whomever has the best price or provides the product in the most convenient and accessible way.

      The good news is your practice can – and should – compete on a level playing field and maintain a thriving and vibrant pharmacy business. And in some respects, veterinary hospitals actually have an edge.

      How can veterinarians defend against some of these threats to their business? Many can’t compete fully on volume, but they certainly can compete on convenience and service.

      The first thing to do is size up the competition. Make mystery shopping a priority. It’s easy to gather price information online. For brick-and-mortar and big box competitors, conduct phone shopping expeditions or physically visit the merchants. And make sure this is done on a regular basis (monthly is fine) to ensure your prices are competitive.

      Assign one or more people on your staff to be your eyes and ears both online and in the community. Consider rank and file employees who are very price conscious coupon clippers and use them to gauge where the keenest competition is.

      Want to conduct a more focused and efficient campaign? You need to be aware of what products your clients are purchasing elsewhere in your area. You also need to know the range of competitive prices that are out there. You can do this easily by monitoring where scripts are being filled. When they visit your practice, ask your clients where they are buying from when you write a prescription for heartworm medication or are wrapping up a consult. Make a copy of your script with a notation of where they went and put it in a folder. Go to that folder at the end of the month and see where the majority of your scripts are going. Use this information to narrow your price comparison efforts.

      Remember – many of your clients won’t even think to buy routine prescription medications from you if they don’t make the visible connection that you actually have them on-hand. Display the product in your front reception area and/or your exam rooms. And make it accessible. Ensure your inventory levels are maintained based on historical purchases. Make it convenient. If you find your clients aren’t buying from you, ask them why. Consider options like home delivery or do what more and more practices are now doing: web stores. A 24-hour online store with affordable or free shipping will go far in capturing the business you’ve been allowing big box and online competitors to take from you.

      When you factor in convenience and availability, many clients actually will allow your practice to be in the “ballpark” on prices because of the one thing you have your competitors don’t: the trust factor. Your clients rely on your consultant expertise and the concern and care you provide their pets.

      Finally, effective communication is essential. Many pet owners automatically assume veterinarians are going to be more expensive. And so, take advantage of every opportunity your practice has (in person, through push e-mails and newsletters and personal emails or phone calls) to remind clients of the importance of preventative medications and that your practice is price competitive. Don’t forget to remind them that you do regularly check online and local merchants to ensure you are staying price-competitive. Consider in-office posters or video slides to show actual prices and where your practice stacks up against the competition.

      How your practice can manage a healthy and profitable nutrition business

      It’s been stated before in our series, but it bears repeating here: more than ever before, consumers are becoming convinced about the connection between wholesome nutrition, good health and disease prevention in humans – and pets. And veterinarians who elect not to be in the nutrition business are not only leaving considerable practice income on the table (food is the single largest category of pet owner spending), but could be doing their clients a disservice.

      Why? By virtue of who they are and the relationships they have with reputable companies in animal health, veterinarians can and should be seen as the guardians of pet nutrition in the community. Consumers naturally trust – as they should – that only the best, most wholesome, most nutritious and healthiest food is carried in veterinary practices.

      So why aren’t practices selling more? Price. Availability. Convenience. Yet these all are differentiators a smart and savvy practice can address to keep their animal nutrition business thriving.

      The challenges of online and big box, brick-and-mortar competition are brutal. Not only are such competitors able to wage price wars, they’re also able to lure consumers in with daily specials, massive availability and good selection and 24-hour buying and delivery convenience.

      We all understand how the great recession left permanent scars on our consumer psyche. Many people who never considered or cared about doing more with less before now do. And it’s not just middle-to-lower income consumers. Welcome to the new normal. Visit the parking lots of big box retailers and you’ll see plenty of luxury automobiles. Why? Nearly everyone today – regardless of their economic status – is looking for a deal. And you may also be surprised they’re generally receptive to paying your price if they feel you’re amenable to meeting them halfway.

      If you carry a nutritional product that isn’t available locally, don’t miss the opportunity to let your clients know about that. But you may be surprised to learn that the wellness diets you sell could actually beat competitors in terms of price per day, an oft-ignored metric. Of course, low-end, commoditized wellness diets can’t be beat on price, no matter how you slice it. But the higher-end, more expensive wellness diets sold by your competitors may actually be pricier per day than the ones you carry. It’s worth checking that out, and letting your clients know if that’s the case. Most of your clients would likely acknowledge they don’t mean to give their pets the cheapest food they can find.

      Here’s another epiphany: Veterinary practices can and should be in both the prescription and wellness nutrition business. Therapeutic diets should unquestionably be actively integrated in an animal hospital. There’s pretty clear evidence in disease management that they are important. But also understand that wellness diets are like an annuity that keeps providing dividends with no risk to your initial investment. And it requires no additional work for the veterinarian after the initial recommendation and first order. The practice staff and home delivery can ensure the continued compliance.

      Some practices may be concerned about carrying wellness diets because so many have become commoditized, and can be prohibitive to carry because of the inventory space they require. After all, there’s nothing more annoying to your clients than discovering you’re out of stock or being told to call three days in advance to get what they want. Your practice can overcome the commoditization by carrying only the highest quality products, and educating your clients about their value and price points. And if your practice cannot absorb the inventory requirements, consider home delivery programs. Wellness diets are a booming business your practice can benefit from.

      A lot of little revenue and profit streams support a practice’s overall financial success. Even if food is a relatively small percentage of your practice income, consider what you would have to do to replace its contribution. The volume opportunity with diets can be very profitable. Pets all eat. And every practice wants more client visits.

      Many veterinarians tend to only consider the amount of markup they make per bag of food, or whether one individual type of diet is not doing so well in terms of sales. To do so is missing the big picture.

      Finally, remember that balance in everything you and your practice does is vital to the longterm health of your business. This is not only a dietary maxim, but a financial one as well.

      Don’t over-stress about leaving no stone unturned in the Internet world. It’s easy to get lost in viral marketing in social media like Facebook and Twitter. At the end of the day, your clients will be buying from you – not an avatar. It is the trust and confidence they have in you and the compassion and concern you show their pets that will largely shape your clients’ decisions about the way they conduct business with you. Remember there is a wealth of resources to help your practice position your nutrition products. One of them is Partners for Healthy Pets (partnersforhealthypets.org).

      Key performance indicators: the ‘big data’ of your practice

      As we discussed in last month’s issue, data is the blood of your practice health. If your data analysis is weak, your practice could become vulnerable. One of the tenets of sound financial management is the decisions you make about monitoring and tracking information about your practice’s activities – whether that is revenue, expenses, receivables or other data concerning inventory, clients and staff.

      Regular monitoring of key metrics is important because it allows you to make important decisions about operations, marketing and strategic planning. But it also allows you to identify potential issues that, if not addressed promptly, could lead to trouble or challenges down the road.

      For example, if your practice’s variable costs as a percentage of gross revenue begin increasing, you may gradually lose the ability to forecast net income and plan for things like expansion projects or new ventures such as grooming or boarding services. Or if your revenue growth per doctor fluctuates significantly from one month to the next, there may be extenuating factors that are affecting sales or your clinicians’ performance.

      Financial professionals generally agree most veterinary practices should focus on a baseline of a dozen or so KPIs. Monitor far more than that and you run the risk of information overload. Monitor far less and you’re simply not minding the store, so to speak.

      The baseline metrics are a starting point. Depending on the individual practice and the particular challenges it faces, other metrics can be added as well. What those additional KPIs are is as unique as the practice itself. One practice may find it vital to measure one thing while another has no use for it. Consult with your CPA to mutually decide which KPIs are most important to you.

      The important thing is consistency. It’s not fruitful or useful to produce a KPI once and rarely look at it again.

      Following are some of the more significant areas in which veterinary practices should develop KPIs.

      Profits – Bottom-line operating profits essentially provide a snapshot at any given time of the overall success of your practice. It’s also instructive and enlightening to drill down to the items that shape profits, such as revenue, revenue growth, transactions, new clients, cost of goods sold, labor costs, etc.

      Expenses– Expenses are obviously a significant determinant of profitability. They are best analyzed as a percentage of gross revenue. This is critical because fluctuations in expenses are often related to changes in revenue and it may be difficult to know if expenses are really rising or falling by just looking at the dollar amounts. For example, if you looked only at dollar expense fluctuations, you might be overly alarmed by an increase in dietary product expense if you didn’t see that practice revenue was increasing and consequently more food was being sold. Another essential expense metric is payroll. Most CPAs believe it should be among the top items on any veterinary practice’s KPI list. Avoid looking at payroll simply as a matter of outgoing dollars. Better to view it in relation to revenues generated and hours spent over a specific period of time. Finally, payroll in a practice is often best controlled when it’s owned by the person who creates work schedules. Convert your target dollar amounts to hours and your scheduling person will easily be able to work efficiently with you on payroll expense targets.

      Inventory management – A popular adage in any business says that inventory that turns, earns. Put differently, product that you invest in to sell later is costing you money if it’s sitting idle. At its most fundamental level, inventory should be analyzed by understanding all of the variable costs that affect it, such as hospital consumables, pharmaceuticals, dietary products, etc.

      Staff metrics – It’s essential you keep your finger on the pulse of your most precious asset, your people, and understand how those resources are being used. Staff costs are one of the most expensive costs in running a veterinary practice, so the more metrics you can track to understand efficiency and performance, the better. Some KPIs focus on labor efficiency, such as revenue per veterinarian. You also may choose to monitor KPIs focusing on staff turnover, comparative pay scales, employee satisfaction and performance planning.

      Client metrics – If you don’t regularly monitor and track key trends focusing on your clients, you may completely miss subtle yet powerful demographic shifts, or turnover that could be tied back to a dramatic change in your practice. One possible KPI is annual revenue per active client (broken down further by dog and cat clients), which can give you vital information on compliance. One of the more powerful client KPIs is the year-to-year client return rate (also called the “bonding rate”), which gives you important metrics about repeat business. It may very well force you to ask painful but revealing questions about why you are losing clients. You may just assume they are leaving town, but it may be a bad clinic experience that’s causing them to walk next door to your competitor. The average “benchmark” for year-to-year client return rate is 68% to 70%. Remember that a client who has been with your practice for several years is likely to be far more valuable than a new client in terms of dollars spent.

      About the Author
      Dawn Burdette, Executive Director, Sales Leadership and Development has served HSAH for over 25 years. Dawn has served in a variety of positions in sales and management. This includes training our sales force on the business of veterinary medicine and bringing business solutions to our customers that increase financial success for veterinary practices. Dawn currently serves on the AVMA’s Veterinary Economic Strategy Committee.
    • Getting Started in Growing Nutrition, Pharmacy and Data - 2nd in series

      Feb 17, 2016
      Editor’s note: This is the 2th in a series of monthly articles that discusses the insightful viewpoints of four of the most respected and well-known financial experts in the veterinary business today, who came together in late 2014 and 2015 at the invitation of Henry Schein Animal Health, Ceva, Elanco, Merck, Merial, Purina, and Virbac to share their expertise and informed opinions in the areas of pharmacy, nutrition and data.

      They are: Dr. Karen E. Felsted, CPA, MS, DVM, CVPM, CVA of PantheraT Veterinary Management Consulting; Gary I. Glassman, CPA of Burzenski & Company, P.C.; Dr. Marsha L. Heinke, DVM, EA, CPA, CVPM of Marsha L. Heinke, CPA, Inc.; and Fritz Wood, CPA, CFP, HF of Wood Consulting. The mission of the “Veterinary Pharmacy Diets and Data Solutions Workshop” is bringing expert advice and actionable business solutions to increase the practice success of the veterinary customers we serve while reinforcing the veterinarian to the pet owner as the best source of healthcare and product choices for longer healthier lives of the pet family member. Be sure to visit henryscheinvet.com/betterbusiness to watch live video clips excerpted from the workshop that accompany each monthly article.

      What is your pharmacy’s value proposition?

      It’s no secret that a significant proportion of pet owners do not have their pets on potentially life-saving medications like heartworm prevention. In fact, there remains a massive unmet need, and an important opportunity to fill that need through your hospital pharmacy.

      Pet owners today are bombarded with information that shapes their opinions about pet care in powerful ways. That information can be both good and bad, yet its influence cannot be underestimated. At the same time, consumers are inundated with choices about where to buy their pets’ medication – from the proliferation of Internet web stores to big box retailers.

      All too often, consumers make these very important decisions on convenience and price alone. What often gets lost in all that “noise” are critical issues like efficacy, safety and trust.

      That is precisely why your animal hospital is perfectly positioned to change the conversation. And it begins with your value proposition.

      When it comes to your value proposition, think carefully about the messages your practice may be sending, both unwittingly and purposely. Most clients can quickly sense if your pharmacy is or isn’t an important and valuable part of your business.

      If you ignore price pressures, or fail to respond to your clients’ subtle and not-so-subtle complaints about costs, it could indicate a lack of concern. If your medical and office staff are not well-versed in explaining the features and benefits of medications and recognize all of the opportunities to do so, your clients may leave thinking the products you carry are no better or worse than the competitors’. If medications like heartworm and flea and tick preventatives are out of sight, they may be out of mind.

      It’s important to be price competitive on popular medications like heartworm prevention, but that doesn’t mean your client will base their buying decision on price alone. When you can make the assessment and buying process as easy and convenient as possible for pharmacy purchases, most clients will quickly see the value-add. This entails effectively conveying to your client that you are a trusted partner in their pet’s health and they can rest easy knowing the medications you provide are the best quality and most appropriate therapies for their pet.

      What is your standard of care?

      As a veterinarian and medical professional, of course you are passionate about helping your clients maintain their pets’ health with the highest quality medications available today. But does your pharmacy’s value proposition reflect that?

      A critical part of that is the very rationale you have for offering pharmacy services in the first place. The decisions you make about what medications to carry are eclipsed only by the decisions about why you carry them.

      Put differently, it’s important you and your team decide on the most appropriate standards of care, the medical protocols you follow in your practice, for heartworm prevention, flea and tick prevention, and other preventive care recommendations, for your patients at various points in their lives. Whether you adopt external care standards from organizations such as the Companion Animal Parasite Council or American Heartworm Society, or develop your own practice protocols, it’s important your staff is on board and in synch with them, and your practice standards are reviewed and refreshed, if necessary, on a regular basis. This consistency forms the backbone of your pharmacy’s value proposition.

      Growing your nutrition business: Wellness and therapeutic diets

      More than ever before, consumers are becoming convinced about the connection between wholesome nutrition, good health and disease prevention in humans. But to what extent are they taking that leap of faith with their pets?

      When it comes to wellness diets, evidence shows many pet owners are. Veterinarians are the most ideally suited professionals to be in the wellness nutrition business. But it can be challenging because big box retailers and the Internet have done a good job commoditizing them. When your clients can see no value in a wellness diet or have no way to measure its worth other than price, the diet becomes a commodity. And commodity based items will always move to the lowest denominator of price.

      Therapeutic diets have always been, and will continue to be, the core of most hospitals’ pharmaceutical nutrition business, but there still are vast areas of untapped revenue potential in the broader pet nutrition business including wellness diets.

      Veterinary practices should be in the nutrition business. Diets should be a staple of every animal hospital’s nutrition pantry: all pets need them and they are nonseasonal in nature. Food is the single largest category of pet owner spending (for every $1.00 spent at the veterinary practice, a pet owner spends $1.50 on food). Price concessions you make to be competitive on food may be eclipsed by the volume you’re able to sell.

      To do that well you need a value proposition.

      What is your nutrition value proposition? Good, nutritious food is an important part of overall pet care. In fact, nutrition is at the very core of why most people become veterinarians: to help pets lead long and healthy lives.

      But are you and your practice sending that message to your clients in an effective or convincing way?

      Clients expect veterinarians to be their most trusted advisors, and that includes being knowledgeable about nutrition and how it contributes to overall pet care. Never miss an opportunity to remind your clients about the critical role nutrition plays in promoting pet wellness as well as preventing and treating disease.

      Much like the pharmacy side of your business, it’s essential to recognize which standard of care your practice follows. For example, if your practice agrees that providing wholesome nutrition is a core value, make a point of letting your clients know this. As the old saying goes, “good medicine equals good business.”

      One of the most critical components of your nutrition value proposition is recognizing and addressing your clients’ pushback on price, especially when it comes to wellness diets. If you don’t, not very many are going to buy food from you, no matter what its features and benefits are.

      Most consumers understand that high quality wellness diets cost a little more. Your job is to help them understand why. Look no further than the incidents of tainted or contaminated foods that make pets sick or worse, and can lead to fatal conditions. Many of these unfortunate issues happen because shortcuts are taken, or quality controls are absent. Explain why your practice sells the brands it sells, and why quality is important to your practice. Compare pet nutrition to human food choices—does your client want to eat random chicken parts and rotten vegetables? No, and they don’t want their pets to ingest the equivalent of that in their diets.

      Your value proposition should also send the message that your nutrition products are accessible and easy to buy. Make sure they are visible any where your clients engage your staff – from the front desk to the exam room. Their buying decisions also become exponentially easier if your nutrition products are competitively priced and can be home delivered or purchased through your web store (if you have one).

      Getting started with data collection and management

      By necessity, doctors of all kinds today have been forced to become better business people. But while few will ever match their medical/surgical knowledge with their business acumen, some can easily make a case for with the importance of slicing and dicing their numbers.

      Why implement good data collection and management practices? For one, financial and operational data provides a critical snapshot of your business’ financial health at any point in time. It keeps you honest by helping you avoid overspending or wasting valuable resources such as labor. Data review also keeps your staff honest when it’s widely known how deep and how often you are watching the books. Put simply, if you’re not measuring it, you can’t manage it!

      But how do you go about deciding what’s worth measuring, how often it should be measured, and how much weight do those metrics have in the overall decisions you make about the day-to-day and long-term direction of your clinic or hospital?

      First, start with the basics. Use a veterinary chart of accounts to set up the categories you will collect information in. While some accounts will be similar to those seen in other small businesses (for example, credit card merchant fees, health insurance), other accounts are specific to the veterinary field (cost of drugs and medical supplies, associate veterinarian compensation.) The veterinary chart of accounts allows you to aggregate information in a way that will be useful in management decision-making. Surprisingly, many veterinary practices don’t use the types of accounts that will be most helpful.

      Other important tools for making meaningful management decisions include the balance sheet, the income statement, the statement of cash flow and reports from your practice information management system (PIMS.) Deciding on the best metrics to follow Many accountants believe there are between 12 and 15 core metrics that every practice should regularly review. However, every veterinary practice is unique and there will be other metrics that a particular practice should also analyze depending on the challenges or opportunities in that practice. Some of the most important metrics (aka key performance indicators or KPIs), that allow you to make key strategic planning decisions include the following:
      • Inventory metrics, such as turn rates, inventory item costs as a percentage of gross revenue, or inventory per FTE doctor;
      • Staff metrics, such as employee retention and turnover rates, revenue and revenue growth per doctor, average invoice per doctor, doctor production per hour and revenue generated per payroll hour;
      • Client metrics, such as average dollar spent per client per year, and year-to-year client return rate (also called the “bonding” rate);
      • Expense metrics, such as total variable costs as a percentage of gross revenue; labor costs, and facility costs
      • Revenue related metrics, such as average transaction charge, and revenue by category (dentistry, vaccinations, exams, etc.)
      There are two common ways of using practice metrics. The first is to track changes over time within your practice; for example, if the practice is attempting to increase doctor efficiency, one would expect to see an increase in average doctor production. A decline in new client numbers may warn the practice of the need to focus on improved marketing. Another common way to use practice metrics is to compare them to published studies of veterinary practice financial and operational metrics.

      These published benchmarks allow you to compare your practice’s performance with other practices of similar type and size, allowing you to see how your business is doing against industry “averages” or even best in class. The most commonly used benchmark studies are “Benchmarks: A Study of Well-Managed Practices”, “AVMA Report on Veterinary Practice Business Measures” and “AAHA Financial and Productivity Pulsepoints.” Comparison to outside benchmarks can be beneficial to a practice, but these benchmarks are just one tool and shouldn’t be the only tool used in management decision making. A good balance between your internal metric trending and comparison to outside benchmarks is essential in any good decision making process.

      For example, if non-doctor support staff compensation costs run between an average of 18% and 22% in a typical practice according to the published benchmark studies, and for the past 10 years, your labor costs have consistently been at 28%, it would be good to investigate the reason your practice is so much higher. The practice may not be willing or able to make a change but labor costs that are this much higher than typically seen will generally drive down practice profits significantly and the practice owner needs to understand the ramifications of their choices. If your marketing expenses are 5% of your practice spend and a benchmarking study says the industry average is 1.0%, it doesn’t necessarily mean you’re spending too much but you may want to consider the value of what you’re getting for that spend.

      Finally, try to keep your data collection and management in perspective. Many accountants advise their clients to not obsess over daily fluctuations in key metrics. More often than not, a monthly review of your key data metrics is sufficient. And remember the old adage, ‘garbage in, garbage out. No decision making process is good enough to survive the devastating blow of bad information.

      About the Author
      Dawn Burdette, Executive Director, Sales Leadership and Development has served HSAH for over 25 years. Dawn has served in a variety of positions in sales and management. This includes training our sales force on the business of veterinary medicine and bringing business solutions to our customers that increase financial success for veterinary practices. Dawn currently serves on the AVMA’s Veterinary Economic Strategy Committee
    • Leading CPAs Discuss Importance of Pharmacy, Nutrition and Data - 1st in Series

      Feb 17, 2016
      Editor’s note: This is the 1st in a series of monthly articles that discusses the insightful viewpoints of four of the most respected and well-known financial experts in the veterinary business today, who came together in late 2014 and 2015 at the invitation of Henry Schein Animal Health, Ceva, Elanco, Merck, Merial, Purina, and Virbac to share their expertise and informed opinions in the areas of pharmacy, nutrition and data.

      They are: Dr. Karen E. Felsted, CPA, MS, DVM, CVPM, CVA of PantheraT Veterinary Management Consulting; Gary I. Glassman, CPA of Burzenski & Company, P.C.; Dr. Marsha L. Heinke, DVM, EA, CPA, CVPM of Marsha L. Heinke, CPA, Inc.; and Fritz Wood, CPA, CFP, HF of Wood Consulting. The mission of the “Veterinary Pharmacy Diets and Data Solutions Workshop” is bringing expert advice and actionable business solutions to increase the practice success of the veterinary customers we serve while reinforcing the veterinarian to the pet owner as the best source of healthcare and product choices for longer healthier lives of the pet family member. Be sure to visit henryscheinvet.com/betterbusiness to watch live video clips excerpted from the workshop that accompany each monthly article.

      Understanding the Value of the Practice Pharmacy

      Small animal pharmacies have long been a staple inside veterinary hospitals, and they will continue to be in the future. In fact, close to 70% of all pet pharmacy sales are still owned by the veterinary profession.

      Pharmacies are a vibrant and vital part of any veterinary practice. In fact, they typically represent up to one third of gross income, and are a critical and essentially irreplaceable part of the business.

      Moreover, pharmacy revenues as a percentage of gross revenue have remained fairly constant, making them a very healthy part of any veterinary practice’s revenue stream. Focusing on the revenue potential for flea, tick, heartworm, and nutrition should be integral to any practice’s financial growth strategy.

      That said, the value of your pharmacy business cannot be overstated. One key yet often unknown benefit is the way it attracts and maintains client relationships. Your practice pharmacy offers convenience – an indispensable retention tool and a critical way of maintaining influence over the decisions pet owners make.

      The practice pharmacy also provides an intrinsically valuable conduit for clients to interact and develop trusted relationships with the veterinarian and practice staff, who can communicate the value of their products and services during visits. In turn, regular contacts like this often lead to greater use of your practice services.

      How to effectively address market challenges
      And yet, there are many forces that challenge veterinary pharmacies today, including competition from online and brick-and-mortar “big box” retailers and mainstream pharmacies, which are often able to sell prescriptions for less because of volume and offer 24-hour convenience. Customers today are savvier about price and more inundated with pet health information resources than ever about health, creating greater pressures that need to be addressed sooner rather than later.

      Ongoing consumer pressures to sell pet pharmaceuticals for less or make the transaction process more convenient can be taxing on any practice owner. But such pressures can be met effectively by being as price transparent as possible and showing your clients the added value they realize when they purchase from your practice pharmacy. Put differently: Be wise about how you manage your pharmacy, how you price it, and stay as competitive as possible while providing value and convenience to your clients.

      Even in the face of slimmer margins, many practices today are actually increasing their pharmacy sales and generating profits through innovative techniques designed to make them more client-friendly and market competitive. These approaches include web stores and home delivery.

      Understanding the Value of Your Nutrition Business

      Prescription and wellness diets typically contribute about 5% to the practice’s gross income, but those are significant dollars that should never be overlooked.

      Today, nearly 97% of all pet food in the United States is sold outside of veterinary clinics and hospitals. But veterinary practices can and should be ideal places to not only market pet nutrition, but start important conversations with pet owners about the intrinsic value of quality diets for maintaining their pet’s health. For example, pet obesity is on the rise, providing an important opportunity for explaining the value of proper nutrition.

      There are innumerable reasons why now is an important time to grow your nutrition business.

      For one, clients expect veterinarians to provide nutritional counseling as part of their pets’ overall healthcare, particularly the benefits of good nutrition in managing or even preventing disease. Making nutritional products accessible in your practice can not only lead to greater revenue, but go far in fostering a level of trust between you and your client.

      Second, marketing therapeutic and wellness diets is almost a “no-brainer”: Nutrition requires very little “selling” effort on the part of a doctor, it is 100% prevalent, it’s not a seasonal product that comes and goes and done effectively, high volume sales can generate significant revenues that can keep your practice vital and financially strong. Pet nutritional products are helpful to ensuring clients are visiting your practice on a regular basis.

      Overcoming challenges to your nutrition business
      Much like pharmacy, your nutrition business is being challenged by online and big box retailers, fueling pressures to sell for less. Staying competitive may mean slimmer margins. The key is having a practice staff that is fully committed – from both a sales and a standard of care point of view – to growing the business.

      Such pressures can be mitigated by higher volume sales of diets achieved with methods like tapping the auto-refill and delivery features of home delivery. Home delivery options can also reduce your diet inventory on hand while saving space in the practice.

      Good Data: Your Practice Health Depends On It

      Accurate and timely information are part of the bedrock of any successful veterinary practice. Conversely, outdated, incomplete, unreliable or just poorly managed and maintained data can seriously impair or even cripple your practice. All practices need metrics to manage their business from a financial and operations viewpoint, as well as perform strategic planning. It is essential that a veterinary practice owner have an acumen for deciding what to measure, how often to measure, and how to report the data in meaningful ways.

      Basic metrics may come from the practice’s monthly financial statements including the balance sheet and income statement and from the practice management software.

      Additionally, there are industry benchmarks that allow you to see how your practice operations and finances stack up to others of similar size and type, as well as innumerable key performance indicators (KPIs) that measure your practice performance in various ways. Some KPIs can measure financial performance by tracking data like daily or weekly revenue and revenue per active clients, or client-facing metrics like year-to-year client return rate, or operationally focused metrics that measure employee satisfaction and labor efficiency, or inventory costs as a percentage of revenue.

      Each practice has unique characteristics that require choosing the most appropriate KPIs to measure, monitor and track. Make use of tools like your feature-rich practice management software or various online resources for benchmark data.

      Challenges to good data collection and management
      Busy veterinary practice owners say data management often gets neglected because of the daily activities of treating patients (including sometimes unforeseen visits) and consulting with clients. Many are challenged by simply not knowing which data to monitor daily, and which data isn’t worth close attention. It can be an exhausting endeavor. One impediment to good data management can be over-reliance on one resource or another. Among them are industry published benchmarking metrics, which if not viewed in the proper context, can provide a somewhat skewed picture.

      That’s why it’s important to rely on your practice manager, a practice consultant or your accountant, and insist on sound bookkeeping practices. Realize that the extra time you take in understanding the value of fundamental metrics, or even managing key performance data on your own, are some of the best investments you will ever make.

      About the Author
      Dawn Burdette, Executive Director, Sales Leadership and Development has served HSAH for over 25 years. Dawn has served in a variety of positions in sales and management. This includes training our sales force on the business of veterinary medicine and bringing business solutions to our customers that increase financial success for veterinary practices. Dawn currently serves on the AVMA’s Veterinary Economic Strategy Committee.
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