With the unemployment rate in the veterinary profession dipping below 1% and a less than one applicant to veterinarian job ratio, hiring and retaining an associate veterinarian can seem like an impossible task. Candidates have more options for placement and are getting higher offers while stressing the importance of a work/life balance. I’ve had the absolute pleasure of visiting with several associate veterinarians this fall and picking their brain about their workplace and career. When comparing our discussion points with findings from various studies on the subject, the conclusions line up. Here are some of the key takeaways which can help you hire and retain your next all-star:
What makes your practice special?
Long gone are the days of candidates lining up to be interviewed. Now you are the one being interviewed! Why should a candidate want to work at your practice? What is your WHY? Why did you want to be a practice owner and how does your philosophy and mission show up every day at your practice? Does your practice “walk the walk” when it comes to its mission? Candidates want to feel connected to the practice and be as passionate about their job as you want them to be! Are you investing in new technology? Why do your clients love you? If you have a strong story in your practice, you can even have another associate veterinarian talk about their experience as part of the interview process. We all have a story, make sure yours is well communicated. As the saying goes, if you don’t toot your own, there will be no music!
Communication is key
During my discussions with several of the associate veterinarians, it was clear that the owners and management were not communicating effectively. Some were unaware of the mission and focus of the practice. This leads to a disconnection from the practice and the feeling that their concerns are not important. Lingering differences without resolution can cause small problems to become big problems and eventually result in a veterinarian leaving the practice. Employees should feel like they can have an open conversation with owners about issues concerning them such as scheduling, adequate support staff and large decisions affecting the practice. Likewise, owners should have open dialogs with the associate veterinarians to give constructive feedback and to discuss mentorship opportunities within the practice. Silence is a connection killer. Having clear dialogs during the hiring process and throughout employment will assist in retaining your next veterinary hire.
The Compensation Conversation
Employers and employees both agree that a competitive compensation package is the most important item to associates. According to the 2017 Well-Managed Practice Study, almost 75% of well-managed practices use an incentive-based compensation system for the doctors. When having the compensation conversation, make sure that the employment agreement clearly explains how the compensation works and for which revenue items the doctor receives credit. A lack of understanding about the compensation system can lead to confusion, misconceptions and hurt feelings on both sides. The owner can interpret the conversation as the associates desire for more compensation when really there isn’t a clear understanding of the associate’s current compensation. Education about the compensation at the start of the process and then continual check-ins can keep this awkward situation from occurring and build trust.
This is another area where effective communication early on can prevent concerns later. Employees are looking for career development opportunities whereas an owner might be looking for an employee to initiate a succession plan. Having mentorship opportunities including business mentorship can let employees test the water and think about business ownership before being overwhelmed about the idea of practice ownership. Developing and explaining advancement opportunities and how they are attained within the practice can create a long-term bond between the associate and the practice.
When we think of growing a practice, we often think of growing revenue and investing time and resources into marketing. Through a successful associate hire, you can better serve your patients while expanding your practice. A win/win for both owner and associate.
Once you have developed a better idea of what you want your practice to look like, you can create a business plan that will start putting your goals into motion. A business plan is a written document that describes in detail how a new business will achieve its goals. The plan is a timeline that sets deadlines for when the big and small details will get done and who perform the task. For example, when will the doors open for your practice? (BIG detail) or when will you put an ad out for your first employee? Listing who will perform the task provides a level of accountability to complete the task and keeps you on track. At this point, you will be the one doing all the heavy lifting in planning your practice but as you open the doors and hire employees, you may have a practice manager or other administrative person completing tasks as well.
Business Plan Steps
This section outlines a description of your practice including long-term and short-term goals. We add the goals and a description at the top to stay focused on them! Then, when we continue to add to our business plan, we can always go back and reference our goals and determine if our plan additions are in-line with our practice goals. In your proposal, answer questions such as:
What will your practice look like in one year?
How about in three years?
Where will your practice will be located?
What services will you offer or not offer?
The more detailed you can be in your proposal, the better you can align your tasks to your goals. You don’t need to have all the answers now and your business is very likely to change over time. Therefore, the plan can and will change over time. That’s ok!
2. Do the research
The next step in your business plan is to put numbers to paper and prove that the practice you want to own is attainable and sustainable! To start, this step can sound daunting but by breaking each step down and taking it one task at a time, you will have a thorough business plan which is backed up by data!
Based on the size and practice areas of your practice, what size space will you need? Estimate how much it will cost to build out the space or to purchase a location that matches your needs. Will you hire an architect to create a floor plan so you can better visualize the space?
If you are starting a new practice, are there enough clients and demand for your services in the area you serve. How will you be different from other practices that operate in the same space? Analyze your target market and look at the demographics in the area you intend to practice.
What staffing will you need in the first year and as your practice grows? There are tools and websites that offer salary data as well as benchmarks for salary data through the AAHA that you can use to forecast your staffing level and pay. When will you start paying salaries and will you use a payroll company? You will also want employment contracts, employee manuals and possibly fringe benefits with your practices. There is a lot to think about! Your advisors can help you sort these questions out and tackle them one at a time. However, it’s important to set a budget for each of these essential pieces of your practice.
How will customers learn about your practice? Will you have a grand opening? Who will setup your website and your social media accounts? The marketing section of your plan will address how you plan to attain and retain new customers!
What software will you use to run your practice? Who will send out invoices, pay the bills and prepare the accounting? As a doctor, you will hopefully be too busy to do these tasks. Your CPA can give you great ideas on how these tasks can be accomplished within your budget and how this area of your practice can change as your practice grows.
Once you have your business plan completed and have estimates for the essential areas of your practice, then we can review your income and expense forecast and see if the plan can work! It’s not uncommon that you may want the BEST and BRIGHTEST for your practice to start, but with an uncertain starting cash flow, you may have to stay lean and mean in the first year in order to get your practice off the ground. This is once again where a CPA can come in handy. An outside review of your business forecast can give an objective opinion to whether or not your business plan and cash flow projections are reasonable. This is also where a good discussion on your backup plan can take place if cash flow projections do not follow your expectations at first. Will you have additional funds to draw upon if needed?
Creating a business plan can seem like a lot of work, especially when you are putting the entire plan in writing. However, the process of creating the plan and all of the questions that arise from the creation are invaluable and will give your practice its best chance of success.
Acquiring and starting your own veterinary practice can be overwhelming. You might be thinking, “Where do I start?” “How do I handle financing, payroll, patients?”! This article is the first of several articles that guides you step-by-step toward owning your own veterinary practice.
The idea of owning your own practice can be daunting. There are so many thoughts that can cause anxiety and concern:
• How can I acquire lending for a practice if I have mortgage and student loan debt?
• How can I afford to buy a practice if I have other debt to pay?
• What do I need to know to own my own business and have a steady income?
These are all valid concerns, but we have to start at the very beginning with what kind of practice do you want to buy?
Often the first place we look is to what is right in front of us. In this case, you could be working for a practice that you want to consider owning. However, it’s important to gain perspective of the current veterinary market and what practices are available in your local area. Owning your first practice is a BIG step and you want to make sure that the practice you ultimately buy is one that fits you perfectly. Here are a few tips that can assist you with gaining perspective as a buyer so that you can start your acquisition planning with a good base of information.
1. Ask Around
Be active in your state and professional associations and make professional relationships with other veterinarians. As you get to know your peers and they get to know you, you can learn best practices from other veterinarians and have a place to ask questions. As your relationships and trust builds, you can let it be known that you are interested in owning your own practice. This is a long-term approach, but it’s a great way to find practices to own that are quality practices and that you know. What’s equally important is that it’s also a great way to learn about what practices you wouldn’t want to own, such as a practice that is ultimately, unprofitable, or one that has poor employee culture. Through your professional relationships, you can learn about practices that might not even be on the market yet but could offer a great practice purchase opportunity.
2. What will YOUR practice look like?
Before you decided that you want to own your own practice, you might not have paid attention to the nuances of different practices and what you like and dislike. Now is a great time to think about what you want YOUR practice to look like. You don’t need to have all of the answers immediately, but if you can start answering these questions, it will assist you in narrowing down the practice that fits you.
• Location – Do you want to operate in the city, the suburbs or have a rural practice? Depending on the location and demographics, there can be significant differences in the prices you can charge and the money you can make. Therefore, it will be helpful to think about how much money you want and need to make as well.
• Services – Are you going to focus on small animals, large animals or both? Are you going to offer boarding and grooming at your practice? Take time to consider the quality of medicine you will offer and the specialties you will provide in your practice.
• Facility – Are you going to lease your practice space, buy your space or build a new building? Knowing what type of services your practice will provide will assist you in exploring these options.
• Sole Owner or Partnership – A partner can be there to share the workload and the financial welfare of the practice. He or she could also assist with animal diagnosis and treatment. Entering a partnership is in ways similar to getting married, your interests must be fully aligned for the partnership to work. Exploring the benefits and drawbacks of adding a partner should be carefully considered.
3. Developing your advisory team
Having a quality team of advisors in place is essential in completing your practice purchase objectives. An initial meeting with your advisors can help you answer questions that you have about a practice start-up or purchase. Here is a list of advisors that you might want to meet with first and share your ideas:
CPA – A CPA that has experience with veterinarians can assist you by discussing the process by which you will account for your practice. It’s important to setup your practice accounting right from the start so that you both can monitor your business income, expenses and cash flows in comparison to your business forecast to make sure you are on target in the early stages of your practice. A CPA can also help you with registering your business taxes and how you will perform payroll for your employees. A CPA familiar with veterinary practices can also walk you through a business purchase and even assist you with valuating a current veterinary practice. Once the business is setup, your CPA can plan and prepare tax filings and be there to answer questions as they come up.
Attorney – An attorney can help you form the proper business entity to protect you from legal liability, review lease agreements, purchase agreements and be there to answer questions as legal issues come up.
Additional advisors you will want to meet with:
Business banker – To setup your business banking options
Commercial banker – To discuss financing options for your practice acquisition
Commercial insurance representative – To setup and price professional liability, lease or building insurance for your practice
Payroll representative – To setup employees to be paid and register the business for payroll taxes
A good CPA or attorney that works heavily in the veterinary industry can help you with these introductions.
Our next blog will discuss taking this information and forming a business plan to get your dreams of owning a business into motion!
Have you ever wondered how your veterinary practice is performing compared to those of your peers?
It doesn’t matter whether you have a community or a competitor mindset, it is only natural to want to know how your practice is performing in comparison others in the veterinary industry.
But how would you begin to gather this information?
While sharing stories with other vets at conferences or following them on social media may provide you with glimpse of other practices, financials will provide you with a clearer picture.
To gain a better understanding of how your practice is doing, begin benchmarking yourself.
What is benchmarking?
Benchmarking is comparing your key metrics and processes to other successful veterinary practices to identify areas of improvement.
The process of benchmarking will provide you with a bigger picture than a simple comparison between yourself and a neighboring veterinary practice. Typically, benchmarking is the gathering of information from multiple veterinary practices, spanning a geographical area, niche or even by practice size.
Depending on the quality and depth of information, benchmarking can do anything from compare your turnover to similar veterinary practices down to income per veterinary assistant.
How can I benefit from benchmarking?
Benchmarking will give you a rare insight into the business processes of the other veterinary practices as well as the results of these processes. So, if you compare poorly to a benchmark, then you can dive deeper to why you are performing poorly, giving you insights into business processes that you can improve.
Not all benchmarks are purely financial. Benchmarks are at their most powerful when they are combined with information from outside your accounting system. This is why it is important that your practice management system is also set up to enable benchmarking.
An example of these duel benchmarks is average transaction charge and revenue per full-time equivalent veterinarian.
By combining these benchmarks, you may discover for instance, that your veterinary practice has a higher than average fee for cats but a lower than average fee for dogs. But that your practice has an above average number of canine patients.
The extra insight could help you to increase your profitability or just enable you to continue to run an efficient veterinary practice.
What kind of insights can I achieve from benchmarking?
Amongst our clients, revenue per full time equivalent (FTE) veterinarian is a very popular benchmark.
The aim is to achieve a higher than average revenue per veterinarian.
However, rather than having higher prices for medical services, we have discovered that the veterinary practices that rank well against this industry benchmark offer additional services and products such as grooming, boarding and various retail products.
Veterinary practices with a low revenue per veterinarian typically have their veterinarians doing staff-level work. In these instances, we often recommend hiring a highly-qualified non-veterinarian employee, whose role will include taking the time to offer and explain all available treatment options and recommend the best care for your patients.
Having the wrong staff mix can lower the revenue and profitability of your veterinary practice and using this benchmark is a quick way of deciphering how your veterinary practice compares with the industry average.
Start by creating comparable data
The first step towards being able to benchmark your veterinary practice is to ensure that you have comparable data. We recommend using the standard chart of accounts supplied by the AAHA.
Doing this enables you to create data that is comparable to all the other veterinary practices who also use this chart of accounts. And this is important because using a difference chart of accounts will at best make the process of benchmarking difficult and at worse will give you incorrect results which you could then decide to act upon.
If you are going to be comparing a financial metric, such as your gross profit percentage, you want the elements that make up the best practice example to be identical to yours. Including or omitting additional costs within your figures will skew the results.
Align your practice management software for consistent information
Having the AAHA’s chart of accounts uploaded into your QuickBooks is only half the story.
We have been working with a practice manager who was becoming increasingly frustrated that she couldn’t pull together an accurate budget for her veterinary practice. She needed the correct revenue information, but it never seemed to be available.
We did some digging to locate the cause and discovered the that practice management software hadn’t been set up properly. The team had been entering information by doctor instead of by revenue source or procedure. This meant that any extracted information was not comparable to the AAHA chart of accounts.
It was important that this was corrected promptly, as the information being generated by the practice management software wasn’t aligned to the chart of accounts within QuickBooks. As well as hindering the budgeting process of the veterinary practice, it also meant the data wasn’t suitable for benchmarking.
We resolved this by adjusting the practice management software so that information could be correctly entered going forward.
How can your practice management software affect your numbers?
There is an old saying: garbage in, garbage out. And while this may sound harsh, it can highlight why your practice management software is so important to your financial information.
If your team are entering incorrect information into your practice management software, then any report that you generate from it will also be incorrect.
We tell our clients that the goal should be to create a streamlined process of entering the initial information so that it flows through the practice management software and into QuickBooks. Once the information is in QuickBooks you can check any metrics that you many be monitoring, compare and update budgets, and generate the financial reports that you require. The next stage is to be able to use these reports to benchmark your veterinary practice.
Any glitches and inconsistencies within the system, such as mismatched charts of accounts, can disrupt these efficiencies.
Set things up correctly from the start
We always recommend that you work with a CPA firm that truly understands veterinary practices and has experience creating and setting up systems that work for you from the very start. You may not want to benchmark your practice today, but having your financial information structured and formatted in a way that will make benchmarking possible will save you a considerable amount of time and effort later.
If you’re not sure your chart of accounts are set up correctly or would like to learn more about how we can help, schedule a time to talk with us.
Very few people who go into business enjoy doing their own books. In fact, we suspect you might even hate your financials, and we get it.
A question we like to ask all new clients when we sense their eyes glazing over is when we bring up the subject of their financials is: do you want to be involved in your accounting?
The initial answer is typically ‘no’ and that doing the books is boring or simply too time consuming. You would much rather be working on your business and selling.
However, as the conversation progresses, we often discover that because your passion lies elsewhere, you may not have the time or have been given the support you need to understand your books.
Are you left feeling confused by your financials?
How do you feel every time you sit down in front of QuickBooks to review your books? Do you feel disinterested? Overwhelmed? Uninspired?
When you’re running your veterinary practice, chances are that you usually feel in control. You know your profession inside out and you’ve built up great relationships with your patients and their owners.
When the time comes to work on your books, that control and that comfort may not be there.
You might print out a profit and loss from QuickBooks and have no idea whether it is accurate or even what it is supposed to be telling you. Maybe it is showing a healthy profit, but today you have very little money in your bank account. It feels disjointed and you are not sure whether you should trust it.
Because of this, doing the books on a regular basis can feel like a pointless task.
Once you are in that mindset, it becomes commonplace to hand everything over to your CPA. You may not even review the books before doing this. It can become an annual transaction during tax season. A job that you have decided to ignore and so nothing gets done.
How understanding the basics can help
At Stopp VanHoy, we strongly believe that doing your books should not be an annual, tax season transaction as there is little value in preparing your tax returns once per year.
You want your financials to be an integrated part of your business and something that you update on a regular basis to help you accurately plan ahead of time. Not a department out on its own that fails to communicate efficiently with yourself and any other member of your senior management team.
We don’t expect you’ll find a sudden joy in doing your books and that’s okay. Our role as a CPAs is not to turn you into one of us. However, it is important to have a basic understanding of your financials, so you can see and monitor where your veterinary practice is going.
The goal of your financial information is not to make you feel intimidated or stressed.
The goal of your financial information is to enable you to feel in control and to help you to make sense of all the information that is whizzing around your veterinary practice every day.
We’ve found that while most business owners know roughly what a profit and loss is for, they can be overwhelmed by the amount of information within each report. For example:
- Do you simply look at the profit figure?
- What if it is lower or even higher than you expected?
- Where do you look to find out why?
- What should you be monitoring?
- Do you even care about profits?
Then, having too much information can be as troublesome as not having any. You could panic, change the wrong things or begin to micro-manage your practice.
This is why we work with our clients to create a handful of specific measurements, called metrics, for them to monitor in their practice. We work together to discover what metrics you need to monitor to keep your veterinary practice moving in the right direction – the sort of metrics that you can identify and understand quickly.
Invest the time and have conversations about your books
Has your CPA ever sat down with you and taken the time to explain your financial reports? Have you ever asked your CPA to explain your financial reports to you? This doesn’t need to be an intimidating process. It should be a low stress conversation.
Currently, a trendy word amongst CPAs is ‘proactive’. However, what CPAs say and what CPAs do can be a little disjointed. For this reason, you should not expect your CPA to conclude that you don’t understand your financials and would like, and possibly benefit, from some help. Most will assume that you’re not interested or will purely provide the services that you have engaged them to carry out.
If you believe that is the case with your CPA, then don’t be embarrassed to ask them to explain the reports that they are showing you. A good CPA will be more than happy to help you understand what your numbers mean.
It is standard practice at Stopp VanHoy of us to produce a simple one-page document that will clearly explain what financial information is important for you to monitor. This will assist you in being able to quickly review and identify trends within your veterinary practice.
We also make a point of meeting with any new client once a month, until you feel comfortable with your books and financial reports. Once that stage has been reached, we’ll typically reduce our meetings to once a quarter.
If your current CPA isn’t doing this, then find one that does
If your current CPA doesn’t appear to want to help you to understand your financials, or they try to, but their descriptions end up causing even more confusion, then you may want to consider finding a new CPA.
Good communication is such a vital component of a successful business owner and CPA relationship, and any signs that this is not happening should be addressed.
At StoppVanHoy, we specialize in the veterinary industry which means that we understand your business as well as your financials.
If you would like a taster of how we work, you can download a copy of our free guide “Six Steps to an amazingly profitable veterinary practice” here
We are excited to announce a great new relationship! Stopp & VanHoy is now a Partner for Progress with the Missouri Veterinary Medical Association (MVMA). This wonderful partnership will provide the opportunity for Missouri Veterinarians looking for tax saving strategies and/or practice management consulting, to find help easily from a reputable source.
Our research shows that financial literacy among veterinarians is a prevalent topic. We know Veterinarians come out of school with a significant amount of debt while starting salaries remain challengingly low. At the same time, veterinarians struggle with pricing their services, controlling expenditures and analyzing their practices. We can help!!!
We will be participating in the 126th Annual MVMA Convention, January 18th-20th, 2018 in Columbia, Missouri. Convention registration is now open – click here to join us!
Did you come across this post researching how to help your practice? Download our free guide to get an idea of where we can start. Feel free to call us! Our number is 314-569-3800 or email firstname.lastname@example.org.