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Improving Profitability Major areas that should be a priority for all practice owners to improve profitability


By Edwards L. Blach, DVM, MS, MBA
February, 2016

Time is limited. Practice is busy. Where should veterinary practice owners start in their efforts to improve the profitability of their practice? This is a frequent question from practice owners who are skeptical that they can significantly change the financial results that they see from their practice. Helping them to understand where they can have the biggest impact in their practice doesn’t have to be difficult. Here are 5 major areas that should be a priority for all practice owners to improve profitability.


Customers have a choice of where they do business. Providing an exemplary service includes not only high quality veterinary medicine, but also a complete focus on providing exemplary customer service. Everything the veterinary team provides should be focused on the satisfaction of the customer. Customers should have a very easily accessible and publicly visible method to give feedback, and responses should be rapid and decisive in satisfying customer needs.


Labor costs are the highest category of expenses in almost all veterinary practices. These costs must be managed closely by matching labor and staffing to peak customer flow and demand. These principles are crucial to ensuring consistent and pleasing service, while maintaining optimal labor costs as well.

Veterinary labor costs in the healthiest practices are about 18-20 percent on a percent of revenue basis. Non-veterinary labor costs in most healthy practices are approximately 15 percent to 20 percent of revenue. These ranges vary by the structure of the practice and should be optimized based upon the individual practice.


The goods and services required to operate a practice account for the second highest category of costs in a veterinary practice. Typically, most practices require goods and services, termed Cost of Professional Services, that represent approximately 15 percent to 20 percent on a percent of revenue basis. Veterinary practices should lock their pharmacy, and apply sound inventory management principles to get inventory costs in order. This is where distributor reps can help. Your resources and programs can help veterinary practices improve inventory management, as they have to implement these principles in their businesses. You can be a strong ally for your veterinary practices.


And communicate, communicate, communicate! Research has repeatedly shown that veterinarians believe they are good communicators, while clients disagree. The disparity is typically a difference between what veterinarians believe is important versus what clients believe is important. Once client preferences are understood, veterinarians are typically more attuned to those parts of service that clients want and are willing to pay for. In general, clients want to know that veterinarians care, and their loyalty will lie with those who demonstrate the care that matters to them.

Everything a veterinary practice does communicates the level of care to customers. How staff dress, the cleanliness of the clinics, how staff answer the phone, the professionalism of stationary and business cards, and the reliability and timeliness of follow-up and many other touch-points are important to creating a brand. We all have a brand, which is essentially what we are known for by our customers.


Veterinary practices need to ensure that they have sound practice management software in place and that they are using it to enhance their medicine and business practices. This involves good accounting software, a good bookkeeper, and an accountant that not only helps with tax preparation but who understands and values the process of building an enterprise with value. If the accountant is primarily concerned with minimizing taxes, a veterinary practice may need other expertise on board to ensure business structure and accounting are built to maximize enterprise value as well. The accountant needs to prepare current financial statements including an Income Statement, Statement of Cash Flow, and a Balance Sheet, all of which are important in managing and building an enterprise with value.

For veterinary practices to enhance their ability to measure Key Performance Indicators (KPIs) and manage their business for maximal profitability, it is important to implement a good chart of accounts that is compatible with industry standards. This will help establish goals and make management decisions based upon comparisons with other practices.

The measured KPIs should be the ones that have the greatest impact on a practice. A few of these include total revenue, number of transactions, labor costs, inventory costs, accounts receivable, number of active clients, and others. For more resources, see:

Edward L. Blach, DVM, MS, MBA is a veterinarian with diverse business credentials and background. He earned both DVM and MS degrees from Colorado State University prior to entering private practice on the Central Coast of California from 1987 to 1991. Dr. Blach earned his MBA degree from The Anderson School at UCLA and then started a consulting business focused on providing customized market research, marketing consulting, business development, and practice management services. Dr. Blach also founded, an educational venue for people interested in practice management. Dr. Blach is an avid student of web technology and is seen as a leader in the use of web models in the animal health industry. In addition, Dr. Blach is an avid inventor, who holds more than a dozen U.S. and international patents of which he was co-inventor. Dr. Blach is also the former CEO of Hagyard Equine Medical Institute in Lexington, Ky. Dr. Blach, who is an avid outdoorsman and sports fan, is married to wife, Darci, and has six children.


Topics: Companion February 2016 Vol 8 Issue 1Healthy Practice

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