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Ten 2011 Steps for a More Profitable Practice! © 2010 McGaunn & Schwadron, CPA’s, LLC
31

Ten Tips For a More Profitable Veterinary Practice in 2011

May 11, 2015

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This powerpoint presentation by Mark J. McGaunn, CPA (of McGaunn & Schwadron, CPA’s, LLC) addresses how to best manage a Veterinary Practice to maximize profitability in 2011. Specifically covers best financial and management strategies and ten tips to follow for a successful vet practice.
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Page 1: Ten Tips For a More Profitable Veterinary Practice in 2011

Ten 2011 Steps for a More Profitable Practice!

© 2010 McGaunn & Schwadron, CPA’s, LLC

Page 2: Ten Tips For a More Profitable Veterinary Practice in 2011

Presenter Information

Mark J. McGaunn, CPA/PFS, CFP®

Managing Member

McGaunn & Schwadron, CPA’s, LLC75 2nd, Avenue, Suite 425Needham Heights, MA 02494-2897

main (781) 489-6651direct (781) 348-9227e-fax (781) 479-5985e-mail [email protected]: www.mcgaunnschwadron.com.com

Page 3: Ten Tips For a More Profitable Veterinary Practice in 2011

Agenda

Basics What is Profit? Real Life Issues and Responses Financial Strength Index Profit Drives Your Practice Overhead is Really not Evil!

10 Key Fundamentals The Survival Guarantees

Page 4: Ten Tips For a More Profitable Veterinary Practice in 2011

What’s Profit?

The making of gain in veterinary medicine for the benefit of the practice owners. Comes from Latin meaning "to make progress," with two definitions:

– Economic profit is the wealth increase an investor has from making an investment in a veterinary practice, taking into consideration all costs associated with that practice including the opportunity cost of capital.

– Accounting profit is the difference between price and the costs of bringing to market veterinary services in terms of the component costs of delivered goods and/or services and any operating or other expenses.

Page 5: Ten Tips For a More Profitable Veterinary Practice in 2011

Real Life Practice Issues

“I can’t work any harder!” (So work smarter) “Breaking even is just a goal now!” “Pet owners won’t pay for it.” “Quality care and profit are incompatible” “Profit” is not a swear word “It seems like I go 2 steps forward, 3 back.” “That’s it, I’m getting a valuation, sell and

retire.”

Page 6: Ten Tips For a More Profitable Veterinary Practice in 2011

Knee Jerk Responses

Reduce Expenses by:

Reducing Overall Cash Outlay Put Capital Equipment Orders on Hold Eliminating Maintenance Contracts Staff Reduction-Layoff or empty slot Across-the-board wage reductions

Page 7: Ten Tips For a More Profitable Veterinary Practice in 2011

Time-Tested “Magic” Formulas

Eat a HealthyDiet &

ExerciseRegularly

IncreasePractice

Revenuesand/or

DecreaseExpenses

Page 8: Ten Tips For a More Profitable Veterinary Practice in 2011

Financial Strength Index (FSI)

Financial measure that reflects a healthcare organization's overall financial condition.

Dimensions of Financial Strength measured by 4 ratios: Profits (Net margin %) Liquidity (Days cash on hand) Debt expense (Debt financing %) Age of physical facilities (Average facility age)

Page 9: Ten Tips For a More Profitable Veterinary Practice in 2011

Financial Strength Index (FSI)

Each of the four measures "normalized" around predefined average for each measure.

Adding four measures together creates composite indicator of total financial strength.

FSI = [(Total Margin - 4.0) / 4.0] + [(Days Cash on Hand - 50) / 50] + [(50 - Debt Financing Percent) / 50] + [(9.0 - Average Age of Facility) / 9.0]

Page 10: Ten Tips For a More Profitable Veterinary Practice in 2011

Financial Strength Index (FSI)

Practices with high profit margins, lots of cash, little debt, and new facilities are in better financial condition and have higher FSI.

On the other hand, practices with losses, little cash, lots of debt, and old practice facilities have lower ratios.

Page 11: Ten Tips For a More Profitable Veterinary Practice in 2011

FSI Rating Index

Score Financial Health

Greater Than 3 Excellent

0 to 3 Good

-2 to 0 Fair

Less than -2 Poor

Page 12: Ten Tips For a More Profitable Veterinary Practice in 2011

FSI Rating Engine

If one area of your practice's finances improves but others regress, the FSI will properly reflect the tradeoff.

If practices increase cash simply by borrowing more debt, improvement in days cash on hand offset by increase in debt financing %.

No single financial measure is capable of assessing the financial health of your veterinary practice.

Page 13: Ten Tips For a More Profitable Veterinary Practice in 2011

FSI Keys

Profitability is the strongest relationship to financial strength.

High-FSI hospitals had greater mix of surgical patients.

Pricing far more important than cost control as a driver of financial strength.

High-FSI hospital fees on avg. 13% higher but costs that were only 2 % lower than those of low-FSI hospitals.

Page 14: Ten Tips For a More Profitable Veterinary Practice in 2011

Overhead is not the Enemy

Management guru Tom Peters:

• Your ability to cut costs is limited, but your ability to increase revenue is UNLIMITED.

• Almost any practice in degree of financial distress can trace it back to REVENUE problem, not an overhead problem.

Page 15: Ten Tips For a More Profitable Veterinary Practice in 2011

I Choose Both, But…

“Closed” System:

Generate more revenue from existing patient base

“Open” System:

Increase the (1) number and (2) complexity of patient encounters from new patients

Page 16: Ten Tips For a More Profitable Veterinary Practice in 2011

Profit Doesn’t Happen Overnight

Pay attention to profit instead of overhead (look at the glass half-full instead of half-empty)

Veterinarians must work on increasing profit by:

Monitoring overhead and inventory, Negotiating better associate contracts (for both

parties) and staff pay policies, and Developing services that generate additional

revenue.Don’t miss billing for services.

Page 17: Ten Tips For a More Profitable Veterinary Practice in 2011

The 10 Steps

1. Communicate2. Patient Profiling3. Capture All Business4. Focus on Referrals5. Craft Your Message6. Maximize Your Reach7. Develop Loyalty8. Reassess Practice Model9. Demonstrate Leadership10.Expand Emotional

Spectrum

1. Here’s what you should do now…

General Thoughts The Specifics

Page 18: Ten Tips For a More Profitable Veterinary Practice in 2011

1. Consider Pay for PerformanceNot all production-based compensation but a higher standard of pay tied to:

Clinical Performance Champion of a Department (Dentistry, Ultrasound, etc.) Management Duties Practice Marketing & Networking Association Involvement Pro-bono/volunteer Work Conformance to Practice Values/Mission 360° Evaluations

Will reduce waste & increase volume = higher margin.

Page 19: Ten Tips For a More Profitable Veterinary Practice in 2011

2. Improve the Patient Experience

There are economic and patient-outcome benefits to improved performance. You could offer:

Free Starbucks coffee with milk in waiting area Free wi-fi access Automated check-in Reminders via email, text messaging and phone Follow-up phone calls on every appointment Automated prescription and food refill service Pharmacy Drive-though Date-night pet sitting

Practices should be more convenient & pleasant for patients. Better compliance = happier patients = more revenue.

Page 20: Ten Tips For a More Profitable Veterinary Practice in 2011

3. Educate Your Audience.

Another path to revenue is developing new or better methods for telling patients what you do.

New patients pay better than established patients, and promote gradual practice growth vs. stagnation.

• An awesome practice sign• Pet Care TV or Pet Health Network kiosks• A wrapped vehicle from Turtle Transit• A vastly improved website• Open house events w/bring a friend• Pet agility events and breed shows• Reward staff if 24/7 practice marketers

Page 21: Ten Tips For a More Profitable Veterinary Practice in 2011

4. Don’t go too far.

Labs, imaging & lasers popular ways to increase revenue, but should be done carefully.

Important that ancillary services dovetail with your practice’s current services,

Need systems and people in place to handle added business.

Whatever it is that you do, you want to be fantastic at it.

Must have a passion in new service.

Page 22: Ten Tips For a More Profitable Veterinary Practice in 2011

Popular Physician Ancillary Services

Physiatrist (Rehabilitation Medicine) Nephrologist (Dialysis facility) Radiologist (MRI facility) Anesthesiologist (Pain Management Clinic) Alternative Therapies (homeopathy, chiropractic,

acupuncture, massage, kinesiology) Dermatopathology (Nail fungus analysis) Dermatology (Moh’s surgery fellowship training)

Page 23: Ten Tips For a More Profitable Veterinary Practice in 2011

5. Raise Your Staff/DVM ratio

The most profitable medical practices tend to have higher-than-average staff-doctor ratios (despite what some say).

The practice’s highest-paid employees ought to be spending as much time as possible on the thing that actually earns the practice money: patient care.

All levels of care providers need to take on the work they can do most efficiently.

Rather 60 percent overhead w/ $1.5 million revenue than practice with 50 percent overhead w/ $1 million revenue.

Page 24: Ten Tips For a More Profitable Veterinary Practice in 2011

6. Warm Up Reception Process

Revenue Process starts with the very 1st patient phone call.

Getting all the information is so important: Verify all information and then update it at each subsequent encounter. Seems basic wrong data is common.

Need to eliminate front desk turnover & add superstar training.

Reconfigure the front desk so that check-in, scheduling, refills, billing, collections and check-out are done

with minimal interruption and maximum privacy.

Page 25: Ten Tips For a More Profitable Veterinary Practice in 2011

7. Shore Up Billing Procedures

Staff may fail to enter a charge for every service.

Make sure you have 2 people checking charges-could even be the receptionist who knows your protocols by heart.

Pre-counsel pet owners on pricier services (don’t wait until they are at the payment counter).

Collections procedures need to be formalized in writing so they aren’t lost when key staff members leave.

EMR can help!!

Page 26: Ten Tips For a More Profitable Veterinary Practice in 2011

8. Engage EMR System

Biggest challenges facing all veterinary practices. Potential benefits far outweigh any challenges. I’ve seen the benefits & efficiencies (I’m paperless!) Business emphasis moves from a concentration on

record management to a focus on medicine. Integrated lab work and radiological test results. Getting everyone in practice to actually use EMR. Designate/pay a veterinarian to be EMR “champion”.

Page 27: Ten Tips For a More Profitable Veterinary Practice in 2011

9. Be Your Marketing PlanWhat marketing plan?

Herding new pet owners in the front door will not take place on its own-

You need the web, direct mail, email, television, signs, videos, well-trained employees and anything else to catch the all-too- fleeting consumer attention span. But it has to be coordinated.

Page 28: Ten Tips For a More Profitable Veterinary Practice in 2011

10. Know Your Costs and their Relation to Your Fees!!!!!

Are you updating your fees more often than annually? You should be.

Global consultant McKinsey & Co. says to monitor not just your overall profitability, but your individual customer profitability as averages just don’t cut the mustard anymore. Which means you need to know how much it costs to provide each service pet owners need.

Page 29: Ten Tips For a More Profitable Veterinary Practice in 2011

Free # 11. Hug Your Major Vendors

They provide invaluable business support

They know your business

It’s not just free pizza and brochures

The keep you updated on the industry, and

They are your spy satellite on the competition

Page 30: Ten Tips For a More Profitable Veterinary Practice in 2011

Thank You!

谢谢 Merci

Danke Schon

Grazie

ありがとう 당신을 감사하십시오

Obrigado

Gracias

Page 31: Ten Tips For a More Profitable Veterinary Practice in 2011

Presenter Information

Mark J. McGaunn, CPA/PFS, CFP®

Managing Member

McGaunn & Schwadron, CPA’s, LLC75 2nd, Avenue, Suite 425Needham Heights, MA 02494-2897

main (781) 489-6651direct (781) 348-9227e-fax (781) 479-5985e-mail [email protected]: www.mcgaunnschwadron.com.com