Does a business approach to veterinary practice management damage the profession’s reputation for care and compassion?
John Sheridan was President of the British Small Animal Veterinary Association (1974-1975) and first President of the Veterinary Practice Management Association (1993-1996).
The list of goals identified by the first Vet Futures Group meeting included an objective that ‘practice should be less focused on margins from medicine sales’.
To my knowledge this is a message that has been promoted by the profession for at least the last 40 years. Conventional wisdom suggests that, for too long, vets have relied on generating profit from the sale of medicines to sustain the viability of veterinary practice, because they have been fearful of charging properly for their professional services.
After all those years, what has changed?
Not a lot!
However practice owners measure the success of their own business (animal welfare, client satisfaction, client/patient database growth, stable motivated employees, market share, professional standards, personal income etc), each one of those ambitions depends on the ability of the business to generate a healthy return on investment for the owner/investor and sufficient profit to finance growth and continuing investment in practice resources.
John Sheridan
The limited income and expenditure benchmark data relating to the independent veterinary practice sector in the UK suggests, however, that the median real profit (after owners’ remuneration) generated by independent veterinary practices is poor and declining (circa 7% or less), when many ‘corporate’ groups are seeking and achieving 18% or more.
My experience over the years as a management consultant to the profession indicates that the margin generated by the sale of medicines and other products after allowing for an appropriate share of establishment, overhead and staff costs is modest but certainly not excessive – whilst the margin generated by the sale of professional time and expertise hovers around nil and, in many practices, is negative.
The problem is not confined to the UK and recent studies such as the VetPartners/National Commission on Veterinary Economic Issues /Bayer Animal Health North America study in the United States found that:
- There was a clear link between the use of a range of business practices with practice profitability
- 61% of study practices generated poor or negative levels of profit
- Veterinary practice profits were lower than six other professional groups
- Veterinary earnings were lower than seven other professional groups
- A steady decline in client/patient database per veterinarian
- A steady decline in median number of transactions per veterinarian
- Six key factors that limit client visits to veterinary practice – four of which are under vet control
I suspect that a comparable study in the UK would result in similar findings. All this at a time of major challenges for veterinary practice owners grappling with the impact of:
- More vet schools
- More graduates
- More practices
- More competition in a demanding marketplace
- Declining footfall
- Shrinking client database
- Downward pressure on veterinary salaries
- More regulation
- Growth in the ‘corporate’ sector and decline in the proportion of independent practices
- Declining profits, practice values and pension investment
- Growing stress
The literature review conducted by the Vet Futures team (January 2015) highlights a number of these and other issues and points towards some of the ways in which better business skills can address them.
What is the risk to the reputation of veterinary practice?
One of the cultural shifts that is expected to shape consumer behaviour, and identified by the Vet Futures literature review, concerns the growth of ‘mindfulness and the importance of ethical responsibilities’.
The good news is that vets are amongst the most respected professions and that 86% of Britons surveyed had a ‘great deal’ or ‘fair amount’ of respect for vets (Angus Reid Public Opinion 2014). More recent data from an omnibus survey carried out by the Vet Futures team amongst the GB public showed that 94% of the population trust veterinary surgeons generally or completely.
That reputation is our brand. It has been slowly built over many generations by veterinary surgeons and their practice teams up and down the country, every day of the week, dealing first hand with practical animal welfare challenges and delivering professional, caring and compassionate services for their owners.
Will it continue? Of course it will – but only if veterinary practices continue to be viable businesses generating the revenue necessary to enable them to thrive, cover all their costs and, when judged appropriate by their owners, to offer professional services on a pro-bono basis for wild animals, stray animals and those belonging to individual owners in need.
Will it continue? Of course it will – but only if the vet schools, our regulatory and professional bodies and the leaders and members of the practising arm of our profession, acknowledge that business expertise is as important as professional skills in the provision of veterinary services in a demanding marketplace.
Inadequate information leads to poor decision making and our professional bodies are currently ill-equipped to support the commercial needs of their members in practice or respond to adverse reports in the media about practice profits, veterinary fees and so on.
A major problem for the associations that represent the interests of the practising arm of the veterinary profession is that they simply don’t have any/sufficient generic information about the economic health of the practices that are owned by their members or where their members are employed.
Only when that information is readily available will the profession be in a strong position, backed by the evidence to prove it, to promote the message that:
- Better business is essential for the delivery of better medicine
- Veterinary fees are costly – so they should be. It’s simply not possible to offer comprehensive professional veterinary services on the cheap
- In well-managed practices, however, vet fees represent excellent value for money and the payback in healthy pet animals and livestock kept commercially is substantial
- A business-like approach to practice management is not a question of feathering the veterinary nest but of providing the facilities, the equipment, the skills and the commitment necessary to deliver the standard of professional expertise demanded by animal owners and by the profession’s regulatory bodies.
John Sheridan was President of the British Small Animal Veterinary Association (1974-1975) and first President of the Veterinary Practice Management Association (1993-1996). He was joint founder of Veterinary Practice Initiatives, the first veterinary corporate consolidator in the UK, and was Chief Veterinary Officer from its launch in July 1998 until he retired from the company executive team in 2003. John Sheridan now offers part-time management consultancy to the veterinary profession. He has spoken widely on veterinary practice management issues in the UK and overseas for many years, publishes the VeterinaryBusiness.org practice management resource and presents a new episode of the Veterinary Business Video Show every two weeks.
It’s great that you are highlighting this information John – there is still a perception out there that “vets are loaded”, and that vets are somehow “ripping people off”. There seems to be a particular distrust of corporates, because there is an assumption that “good business practice” means “profit above all else”.
It takes a long time to change cultural attitudes, but as a profession we need to keep repeating your final sentence: “A business-like approach to practice management is not a question of feathering the veterinary nest but of providing the facilities, the equipment, the skills and the commitment necessary to deliver the standard of professional expertise demanded by animal owners and by the profession’s regulatory bodies.”
This is very interesting business has to become one of the key skills taught in vet schools so vets value their worth. Vets with little or no business skills should seek help! Bring in a manager or use consultants and get the best out of your team and your practice!
Excellent points, John. However I’m concerned if the drive for profit is distant from the delivery of services. It is laudable when it drives investment in people, skills and equipment to deliver first rate veterinary care but I’m concerned when it is driven by the demands of a distant shareholder wanting an ever increasing return on their capital. Profit generated by charging properly for professional expertise is far more likely to sustain our reputation than profit generated by upselling, unnecessary diagnositic procedures and unnecessary treatments all of which only serve to lower our professional integrity.
Hi John
Great contribution to the discussion that must continue. ‘Corporate’ practices have thrived because they make money and generally have better margins on products because they buy in bulk. They also reduce the ‘paper work’ of vets who prefer to be surgeons than business managers. There is also the gender issue to consider. Many new small animal practices are now owned by women and this will grow. That’s bound to add a new flavour to the profession. I wonder what goes through people’s minds when they see a huge ‘VET’ sign painted on the roof of an old house to announce a vet practice – I think that message should be dealt to and a more professional approach taken.
Malcolm Dennis
The Veterinary Business Letter
New Zealand
Care/compassion and a business approach are not mutually exclusive, indeed I would argue that they vitally dependant on each other. So much has changed in the last 10 to 15 years – competition (both online, corporate, new pet-related businesses), technology, social media, changing client and vet attitudes and expectations, etc. These challenges are forcing the profession to provide higher levels of care with parallel levels of service, facilities and convenience. In my humble opinion, this can only be sustained (paid for) by ensuring business success. A business approach is so much more than simply charging higher fees and many of us are having to develop new skill sets or at least hire them. An important topic- thanks for raising the issue John.
I agree that business skills should be taught to veterinary students. Good business skills encompassing strategy, HR, and marketing focus on great customer care and happy staff. A lot of business management focusses on communication skills, and good communication improves clinical outcomes. In short good business skills can only improve the client experience and hence value for money.
This is a great article. Focusing on the veterinary care for the animals and the business aspect of these when rendering the services..
Its hard to de-link the two. Care is essential in maintaining the clients base. and results is what makes the client keep coming back to you again. This means a veterinary officer can not afford to go about the business of caring for the animals as usual.
good read .
Thanks for putting these thought together for us John: they make clear the critical link between financial performance and quality of clinical care delivered, and it’s really important that this is debated and understood.
The business and management aspects of veterinary practice are often treated as separate and distinct from clinical care, and this is commonly reflected in the structure of CPD events, with separate business/management and clinical streams, each attracting its own audience.
I have found that some colleagues can react quite strongly even to the vocabulary used in these discussions, and that the term “business” alone can have negative connations for some.
For me, it is far better the two aspects should be indivisible; no matter where you practise, independent, corporate, charity or voluntary, there is a cost to providing the care delivered, and it has to be paid for from somewhere.
Lots of opportunities and work to be done!