Simply put, overhead expenses directly impact the overall profitability of your practice, and therefore directly impact the sales price. Unfortunately, many veterinarians interested in retiring are discovering that their practice value is significantly lower than they expected. Value is closely tied to profitability, and you, like many other practicing veterinarians may not even realize that a problem exists.
Many veterinarians make a reasonable income, and when they add in the sale price of their real estate they anticipate substantial retirement funds. When overhead expenses are subtracted from the gross revenue, the net profit may amply support the veterinarian. However, the practice may have little selling value because it does not provide sufficient money for a buyer after paying back a practice loan. When there is very low profit, it may means not enough money coming in or too much going out. Following are four ways to become more financially successful in your veterinarian practice.
Cutting costs in your veterinary business does not necessarily lead to increased profits, however, increasing prices can be a factor in business success. Recent studies are suggesting that profitable practices generally charge higher fees than businesses that do not. Many veterinarians are afraid that they will go out of business if they raise their prices, as they are trying to compete with low-cost clinics that have sprung up across the nation. There are alternative ways to offer attractive options to customers that will keep them coming back for years. These can include package offerings with spay or neutering, and vaccinations and examinations for a year.
2. Adding New Services
Veterinarians who focus only on selling products, such as vitamins or special foods, may be missing out on valuable opportunities to provide other services that are highly valued by pet owners. Examples of these additional services are nail clipping or teeth cleaning, which can be accomplished during routine checkups. Other money generating possibilities include grooming, boarding, and pet sitting.
3. Control Inventory
One way to control overhead is to reduce the number of in-stock products. Successful practices offer a comprehensive but compact collection of products that have a high turnover. Prices for products, medical equipment, and office supplies should be carefully researched to make sure you are getting the best deal for your money.
4. Recognize the Value of Your Time
You, the veterinarian, are the primary generator of revenue, and your time should be spent generating professional fees. To the extent permitted by professional standards, time spent in the back, restraining animals, monitoring anesthesia, or drawing blood should be performed by paraprofessionals. All back office work should be handled by staff. Client and patients should have your full attention.
An early valuation of your practice, long before retirement, is highly recommended to make sure that your overhead costs are in line with industry benchmarks. Reducing or eliminating overhead does not always substantially boost profits. The best practice is to work at both controlling the overhead when possible and increasing the practice income.