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.
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.