Running a profitable veterinary practice is harder now than ever before, making it even more critical to effectively manage costs in order to safeguard the value of your business. Here are three easy steps to increase the profitability of your veterinary business.
Set Proper Margins for Cost of Goods
The total cost of third-party goods and services , or Cost of Goods Sold, you sell through your practice should be no more than 25% of the total gross veterinary practice revenue. When checking your business against this benchmark, consider some common issues. Do your prices reflect proper margins for these goods and services? Ensure that discounts or sales on items or services still maintain proper profitability. Check to be sure your inventory remains accurate. Lost or stolen goods are lost revenue and lost profits.
Check Salaries and Professional Production
Another common profit killer among veterinary businesses is associates who are under-producing veterinary services. For a general practice, a doctor’s compensation should fall between 20 and 22% of their professional production. Growing your client base and providing training to increase professional production can assist you in bringing your practice in line with these benchmarks.
Commit to Proper Bookkeeping
Without proper bookkeeping, it’s impossible to know whether a veterinary practice is profitable. Keeping accurate records ensures you do not over-purchase inventory. It allows you to evaluate which areas of the business are most profitable and which are least. If your veterinary business consistently loses money on a certain service, does it make sense to continue offering that service? What pricing adjustments would be necessary to make the service profitable? Without accurate bookkeeping, all ideas are simply guesses.
Using industry standard benchmarks, such as those outlined on the AAHA website, will show you how your practice measures up with comparable veterinary businesses.
Have a Professional Valuation
Every three to five years, have your veterinary business valuated by a certified, accredited professional. This gives you a clear, accurate picture of your financial status as well as a roadmap toward greater profitability tailored specifically to your practice. Contact us today to schedule a consultation and get started on increasing the profitability of your veterinary practice with a complimentary and confidential valuation.
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