Increasing practice profitability requires benchmarking, defining core values

Using data to implement targeted business models-from the best method for using a veterinary practice's physical space to staff utilization-can be an effective way of driving operational decisions and optimizing operations, says Dr. Peter Weinstein, president of PAW Consulting. But foundational to all of that is having a practice with a stated direction and purpose.

He and Frederic B. Ouedraogo, PhD, senior economist and associate director of economics in the AVMA Veterinary Economics Division, discussed practice health metrics during the presentation "Unlocking Veterinary Practice Performance." They both spoke during the AVMA Veterinary Business and Economic Forum, held virtually October 8-9.

Much of the data the pair discussed came from the 2024 Practice Owner Survey, which collected information from clinics' performance over 2023.

Practice operations

Among those surveyed, the average practice had 4,200 total square footage with an average of 3.3 examination rooms.

Of that square footage, 9.3% on average is used for boarding, grooming, and other ancillary services, while 88.8% is used for delivery of veterinary services.

Practices reported being open and accessible to clients an average of 9.5 hours, with veterinarians available to see scheduled appointments 7.4 of those hours, on average.

Frederic B. Ouedraogo (top), PhD, senior economist and associate director of economics in the AVMA Veterinary Economics Division, and Dr. Peter Weinstein, president of PAW Consulting, talk about practice health metrics during the presentation "Unlocking Veterinary Practice Performance" at the AVMA Veterinary Business and Economic Forum.

As Dr. Weinstein pointed out, that two-hour discrepancy can make a difference.

"If you look at this, there are entire days in the week and days in the month where there's no income being generated," he said. "So, what can we do to offset the potential lack of income when doctors aren't available? How do we optimize our people? How do we optimize our physical plants to give us the targeted productivity that we're looking for and ultimately the target profitability?"

The share of revenue generated by profit centers at a practice, broken down by average percentages, are as follows:

• 23.5% examinations and consultations
• 13.6% pharmacy sales
• 12.2% laboratory (in-house or outside provider)
• 12% vaccinations
• 11.9% surgery and anesthesia
• 7% imaging
• 6.3% dentistry

Dr. Weinstein noted that all these higher percentage revenue streams are based on veterinarians' expertise and knowledge. He says this reinforces the importance of emphasizing patient care and the education of the health care team, including owners.

Practice owners reported spending 74% of their time, on average, seeing clients and patients, followed by 22% of their time managing the practice, and the remainder on other tasks.

Dr. Weinstein recalled he spent his first few years as an owner working about 60 hours a week, with 50 of those dedicated to clinical duties.

"How do you balance being an owner, being a manager, and being a doctor?" he said. "In my opinion, you want to optimize your education, so being a doctor is your greatest income generator. The best thing you can do if you want to optimize your education and your productivity in your practice is to hire a manager."

Staffing practices

Since 2021, there has been a sharp increase in both veterinarian and nonveterinarian positions among surveyed practices, Ouedraogo said. In fact, one in four practices had a practice manager in 2019 compared with half of practices in 2023.

Meanwhile, the percentage of practices with veterinary assistants also increased substantially in the past few years, going from 57% in 2019 to 84% in 2023 while those with veterinary technicians only increased from 40% to 49% in that same time.

Since 2021, an increase can be seen in both veterinarian and nonveterinarian positions among surveyed practices. "With the changes we see in staffing, we have to focus on using staff to the top of their job descriptions," says Dr. Weinstein.

Companion animal predominant practices reported the largest workforce with an average of 13.9 full-time equivalent (FTE) staff members: 2.8 veterinarians, 6.4 veterinary technicians and veterinary assistants, and 4.5 nonveterinary staff, on average.

The veterinarian-to-veterinary technician ratio remains around 1:1, on average, for companion animal practices and about 0.8:1 for mixed animal practices.

In the transition from the pandemic to postpandemic era, Dr. Weinstein says the increase in staff reflects the attrition that happened during the pandemic of skilled workers, and the efforts to build back. Staffing levels now appear to have returned to those seen at the start of the pandemic. However, the number of veterinary technicians has shown little growth. Attracting and retaining veterinary technicians as well as doctors is the biggest challenge, he said.

Productivity and vision

When looking at gross revenue per FTE veterinarian, the optimum veterinarian-to-staff ratio is between 4:1 and 5:1, according to AVMA data. Above those, there is no significant impact on productivity.

Specifically, the optimum ratio for veterinarian-to-veterinary technician is 1:1 and for veterinarian-to-medical support staff ratio is 3:1, which includes veterinary technicians and veterinary assistants.

"Of course, revenue goes up as the DVM-to-staff ratio goes up. With more people, more fully leveraged, the doctor can generate more income," Dr. Weinstein said. "Build a team by hiring and onboarding correctly. Set up an ongoing training program and learn to optimally utilize the team to the top of their job descriptions. Learn what it takes to retain and keep your team. The more and longer a team stays and is trained together, the greater the efficiency and, ultimately, the productivity."

Revenue goes up as the nonveterinarian staff-to-veterinarian ratio goes up, at least until practices hit the 4:1 to 5:1 range. "The more leveraged staff are, the doctor can build more income. Hire and onboard correctly. Learn what it takes to retain and keep your team," Dr. Weinstein says.

All of this requires planning. Dr. Weinstein recommended that practices start by developing vision, mission, and value statements, along with standards of care to ensure long-term success.

Among surveyed practice owners, 56.3% reported having a vision statement, 44.1% having a mission statement, and 57.7% having a values statement.

Dr. Weinstein explained that the vision defines what practices are seeking to attain or what it will look like when operating at its peak. The mission is, essentially, its purpose, and the values define how everybody behaves together. Finally, standards of care define how the medicine will be practiced.

"If you don't have these, you're just going through the day with no direction. With these in place … you have a stronger foundation upon which to build a fully functional and engaged business," he said. "A purpose-driven practice is much more motivational than a profit-driven practice."

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