Help your veterinary practice walk the financial tightrope

You've got questions, we've got answers. Here's what you need to know to understand the business you work for.
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Jan 01, 2013

You're in the business of animal health, and your training until now has probably been focused on providing patient care and offering stellar customer service. Yet understanding the financial side of the small business you work for can help you help your practice—and it's part of your job. Consider these common questions and learn more about the serious financial concerns your practice owner must balance every day to keep your practice afloat.

What's the difference between the practice's gross revenue and net profit?



While you watch the credit card machine spitting out slips and fill the cash drawer with checks, cash, and debit card receipts, it's easy to perceive this as pure profit for the practice. Firstline Editorial Advisory Board member Kyle Palmer, CVT, practice manager at Silver Creek Animal Clinic in Silverton, Ore., says team members often have the opportunity to see what the practice brings in during a day, month, or year, but you often don't have access to how this filters down to profit. "These are common misconceptions for anyone who has never run a small business," Palmer says. "You just don't automatically think about overhead."

Gross profit is that revenue the practice takes in during a period without respect to expenses, he says. Net profit is what is left over after the practice pays all operating expenses, or overhead.

Why do we charge so much?

To remain competitive, practices traditionally charge less money for things like physical examinations, spays, neuters, and all the procedures that are shopped, says Bash Halow, CVPM, LVT, a Firstline board member and the owner of Halow Consulting.

"To make up for the money they save clients in one area, they charge more money in others," Halow says. "No, it's not fair, but it's a pricing strategy that is designed to be most acceptable and appealing to our clients."



Think of it this way: Most practices incur a cost of somewhere between $3 and $6 every minute they're open for business, Halow says. Now imagine that an exam at your practice takes 15 to 20 minutes. To cover expenses, you should charge $90 to $120 for the exam. But your practice owners want to stay competitive, so they choose to charge only $50 for the exam, with the understanding that they'll provide other services that will make up the lost revenue.

"If you haven't been educated about pricing, you might think, 'Wow, $20 for a nail trim, that's a lot.' But you should also think, 'But it's only $50 for an exam. That's a deal,'" Halow says.