Http://veterinarybusiness.org John Sheridan BVetMed CVPM DMS MRCVS Prepare to double your veterinary practice profits and the value of your business in

http://veterinarybusiness.org

John Sheridan BVetMed CVPM DMS MRCVS

Prepare to double your veterinary practice profits and the value of your business in

just 12 months – starting today


The value of your investment in the practice will depend on:

• the profitability of your business• the marketplace for buying and selling veterinary

practices and on• the availability of potential purchasers willing and able

to acquire your practice at a value which meets your expectations


So – what do we mean by ‘profit’?Cash is a fact – profit is simply an opinion and needs to be defined

Profit - the difference between the revenue generated by a business by selling goods and services to willing clients or customers – and the total costs involved in providing those goods and services.

Sounds easy! But a variety of specific definitions of profit, each designed for a specific purpose can be used, quite legitimately, to identify the financial performance of a particular business enterprise.

The ‘net profit’ identified at the bottom of the Profit and Loss Statement for a sole trader or partnership for example - calculated as a basis to determine the individuals tax liability - little value for management purposes. Perhaps it would be better defined as ‘profit before owner’s remuneration’.

Other typical measures of profit include:• EBIT – earnings before interest and tax• EBITDA – earnings before interest, tax, depreciation and amortisation.

An appropriate multiple of EBITDA is commonly used as a basis for valuing business enterprises, including veterinary practices.


Profit – what profit? Consider a ‘model’ practice


The reality may be very different

• in the UK – evidence that median net margin after all costs, less than 10%

• margin from product sales realistic• so margin from professional service sales totally

inadequate• That picture is very similar to the situation around

the veterinary world (Australia, USA, Canada, South Africa)

• what about practices in Hungary in general and your practice in particular?


So we need a plan to double your veterinary practice profits and the value of

your business:

Step 1 - Two questions:• How much profit did your practice make last

year?• What did that represent as a percentage of

revenue?


You can use a simple, free, online benchmark tool to compare the profitability of your practice with other similar practices, in your

specific marketplace

http://veterinarybusiness.org/international-online-benchmark-service/

It’s free!


What should you be aiming for?Scores based on NCVEI/VetPartners EBITDA data


Discussed briefly during the plenary session earlier today

Step 2 – Your Medium Term (5 Year) Strategy


So now you have a clear picture of what you want to achieve and where you want to get to – in the

next five years

Whatever your personal, professional and commercial objectives

Never forget that:• every one of them will depend on the ability of your

veterinary practice to operate effectively, efficiently and economically as a business and to:

• generate a healthy profit


Step 3 - the next job is to concentrate on year 1 – get year 1 right and you’re

well on your way

• The number one key component of year 1 is:• The budget - do you all set and follow an annual

financial budget?• Here’s how


This is a 3.0 vet practiceOne owner and two employee vets FTE

Let’s look at some numbers – a

hypothetical SA practice in the UK How was

this sum calculated

?


Now we’ll set some key objectives for next year

Remember – the budgeted margin is not a ‘hope’ but an ‘intention’


Auto production of next years projections


Step 4 - the next job is to:

– define policies required to achieve specific objectives in year 1

– define policies which will contribute to your strategic objectives

– answer the questions what? who? how? when?


Some suggestions, examples and tips• when looking at the big picture and setting objectives – think bold• when considering the what? who? how? when? – think small• does that make sense?• suppose your bold objectives were:

– margin up 50%– top line up 25%– costs down 25% (as %age of top line)

• would you have to:– increase fees by 25% and/or– work 25% harder or longer and/or– reduce salaries by 25%– or a number of other ‘bold’ steps

• no! no! – why not?


Because veterinary practice is largely a ‘fixed cost’ business and

now is the time to think ‘specific’ and ‘small’ to achieve big changes


First – a clinical initiative to grow the bottom line by circa 20%

Let us consider two ‘real life’ examples


The same three vet small animal practice

But you can do similar calculations for any specific clinical service appropriate for your practice


A study by Vetoquinol some years ago suggested that 10% of all dogs suffer from CHF

• assumptions – active patients per vet – 1,250– assume 45% are dogs - 563– assume 10% have CHF - 56– dog visits per year – 4.5 times (FDI)– assume need to examine dogs with CHF on 2 extra occasions per year– then canine transactions increased by 112– existing transactions per VS = £210,885/£45 = 4,686– after cardiology initiative increases by 112 equivalent to 2.4%


Three vet small animal practice (owner plus 2 employee VS’s)

647,840

160,664

281,996

135,445

69,744

100.0%

24.8%

43.5%

20.9%

89.2%

19.6%278,938

10.8%

578,105


Second – a ‘business’ initiative to grow the bottom line by 20% plus


Average consulting charge as %age of standard consulting charge

Why is this number very, very important?


Here’s an example

Assume Increase Average Cons Charge by £2

Additional Revenue per vet straight to bottom line £5,600

So margin increased by £5,600 equivalent to: 21.6%


Step 5 – make it all happen

• A written clinical protocol for each condition, agreed and

implemented by all the staff• Need to recognise issue of clinical autonomy so consider

spectrum– preventive medicine and long term treatment (practice protocols)– acute medical cases (more clinical autonomy)

• Clearly defined standard operational policies for administrative issues

• Staff who accept and comply with SOP’s• Clients who accept and comply with the professional

recommendations• Management operational protocols which monitor compliance

and take appropriate corrective action when needs be

The success of these and similar illustrations depends on:


1.The big picture – need to set bold objectives• but it’s the few small details about the what? the

who? the how? and the when? which are essential to make it all happen

2. Look in the mirror• The person you see may be getting in the way of the

success you deserve• And yet that’s the only person who can ensure you

can achieve everything you want to achieve in your career in veterinary practice

Two Final Tips


John Sheridan BVetMed CVPM DMS MRCVS

Thank you

Documents

Http://veterinarybusiness.org John Sheridan BVetMed CVPM DMS MRCVS Prepare to double your veterinary practice profits and the value of your business in