leverage from nursing Staff

SuMMeR 2013 / 2014

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One of the common problems we encounter in practices that we assess is the use of veterinarians to perform nurses’ work. Many practices do not avail themselves of the full scope of their nurses’ training and skills so hence we see qualified veterinarians taking Xrays, performing dental prophys, running lab tests, catheterising patients, drawing blood samples etc. I accept that in startup practices where there is one vet and one nurse (who holds the dog?), you have to make allowances but there are two points to make here:

1 The nurse should be given equal opportunity to practice and maintain his/her skills

2 All one vet practices should aspire to grow to 2 vet practices (and beyond) and this is best achieved by

leveraging fully off the nursing staff so they need to keep their training up.

When we look at the profitability of ‘low leverage’ practices we find that they are invariably less profitable than those practices that leverage fully from their lay-staff. Variations in cost of wages of up to 5% of turnover are not uncommon. We

don’t have to look far for good examples: Well run Specialist and Emergency centres invariably employ highly trained lay staff and they are used (in most cases) beyond the scope of many general practices. Corporate practices are another group that leverage well from their nurses and the main reason for this is that it is more profitable to do so.

In remote area practices where veterinary associates are often hard to attract, the only way for the vet to cover the work, turn a profit, afford time off and to remain sane is to leverage highly from the nursing staff.

So what ratio of vets to nurses should the average practice aspire to? In companion animal and mixed (predominantly) small animal practices we like to see a minimum ratio of one vet to 1.5 nurse/receptionists – this ratio assumes that all staff are working to capacity and that a full time vet or nurse will be measured as working 38hours/week. As practices delegate more clinical tasks to the nursing staff, that ratio should rise to a point where if we see a ratio of 1 vet to 2 nurses or beyond, we know we will be looking at a high profit practice that will be ‘team centred’ and not ‘vet centred’.

Dr Tony Thelander BVSc, MBA, CMAVA (Director ValuVet)

new graduate supply

The following link to an article on new graduates supply http://ausvetnet.wordpress.com/ has done the rounds since Christmas and is certainly food for thought. It appears that our profession will need to be more versatile when it comes to finding jobs for all our new graduates – traditional jobs as we know them may be a thing of the past for many. On the positive side, with more competition, it may produce more veterinarians who are prepared to work in rural areas.

Year ahead

Our year has started well with Hugh and I involved in visiting one of Australia’s larger practices which is taking on new partners as part of succession planning. We look forward to again assisting practices in all states with valuations and practice assessments. On the CE front for 2014, I shall be involved with more hospital tours with the AVAPM – Perth, Sydney, Gold Coast and New Zealand (Marlbrough District) in mid-September. In addition, I will be attending Tom Catanzaro’s last VCI Seminar at Sea in August in the company of many of the World’s foremost practice management gurus, so hopefully a few tricks will rub off. Yes, even practice management consultants need CE.

Year behind

2013 is behind us now and it is interesting to reflect on our activities for the year. The year found us valuing and assessing practices in most states of Australia (with the exception of Tasmania and NT this year). The thing that never ceases to surprise us is the difference in practice profitability (hence value) and the key factors that make the difference.

In the CE area, I was involved in leading Hospital tours for the AVAPM in Melbourne (equine), Adelaide (SA and Mixed) and Sydney (SA). These tours are a lot of fun and profile some of Australia’s top practices – not only do we check out their facilities but we also get to examine their business models so if you are looking for new ideas or thinking of upgrading or rebuilding, you need to join a tour!

During the year I co-presented two webinars with Crampton Consulting on Partnerships and Succession Planning. Copies of these webinars are available from Provet Qld – ask for Natalie (ph: 07 3621 6005).

My colleague Hugh White moved to Sydney in late 2012 to take up a full time position as CVE Director at Sydney University, but still does consulting for ValuVet in his spare time and looks after the Vets Practice Market Place listings.

industry trends

What of industry trends in the past year? We saw several practices where turnover had flat-lined compared to the previous year – high Australian dollar, weak milk prices, political uncertainty, floods and droughts were some of the contributing factors for some practices. Happily, I think the economy has turned upward in recent months (some colleagues have recorded a record January thus far) so hopefully we are looking for a better year in 2014.

We are seeing continual expansion of corporate practices with some acquisitions outside the major metropolitan cities. It is interesting to note how neighbouring practices adapt to compensate. My overall impression? I think the corporates are invariably well managed and I feel they have raised the bar generally in terms of service and fees.

director’s comments

let others know by advertising on our website www.valuvet.com.au

Buyers may register free of charge and confidentially by Emailing: mail@valuvet.com.au or Phone Dr Hugh White 0412 668 067

Buyers will be notified as soon as practices come on the market or if we happen to find a suitable practice,

we will introduce you first.

Wishing to buy or sell a practice?

This month we are featuring some outstanding practice opportunities for those veterinarians who wish to take on a challenge and change direction. Further details of these practices are on our website www.valuvet.com.au

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Mobile Vet Practice – Bribie islandcomment: Professional fitout and presentation. If you want to work your own hours in Paradise then this is a great opportunity.enquiries to: Dr Jacqueline Perkinsemail: answers@sandstonepointvet.com.au

Small Animal Practice – Sandgate (north Brisbane)comment: High quality fitout, profesionally run and profitable with glued on clients. This practice is affordably priced for first practice buyers or those who want to work in a great climate.enquiries to: Dr Simon ArmitPhone: 0410 540 376

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Small Animal Practice – Mount isacomment: This is another high profit practice with great potential. Another boom town economy with a great opportunity to earn a high incomeenquiries to: Dr Len FulhamPhone: 0437 833 331

tick Serum manufacturing business – casinocomment: This business is best owned and run by a vet but produces extremely high returns for a part time business. This is one for the entrepreneurs amongst us!enquiries to: Dr Ross Sillaremail: rosssillar@hotmail.com

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Small Animal hospital For Sale or lease – Busseltoncomment: This is a first class hospital facility waiting for a practice in the go-ahead town of Busselton on the doorstep of the Margaret River wine region.enquiries to: Mrs Kristina RichardsPhone: 0418 699 497

Mixed practice (85% small animal) in rural Victoriacomment: This long established practice has little competition and is still operated on a card system so the opportunity to develop the practice is huge. A great branch or first practice opportunity!enquiries to: Dr Patricia O’SullivanPhone: 0428 552 655

VetS PRActice MARket PlAce

AnYWheReBuyer 432: Anywhere 2-3 vet SABuyer 458: Anywhere 2 vet SABuyer 474: SW Syd/eastern States/tAS/SA 1-2 vet SA

QueenSlAndBuyer 409: Sth Brisbane/gold coast 2+ vet SABuyer 425: gold coast 1-2 vet SABuyer 426: Brisbane metro area 2-3 vet SABuyer 433: gold coast 2-3 vet SABuyer 445: Brisbane metro area 1-2 vet SABuyer 447: Sunshine coast 2-3 vet SABuyer 451: gold coast 1-3 vet SABuyer 453: nth Sunshine coast 1-3 vet SABuyer 457: Sunshine coast 1-2 vet SABuyer 459: gatton 1-2 vet SABuyer 464: Brisbane/gold coast 2-3 vet SA

SOuth AuStRAliABuyer 469: Adelaide metro Any vet SABuyer 475: Adelaide metro 2 -3 vet SA

WeSteRn AuStRAliABuyer 454: Perth Metro 2 vet SA

tASMAniABuyer 456: north West tasmania 2+ vet MixedBuyer 477: tasmania 1 vet SA

neW SOuth WAleSBuyer 287: Sydney/gold coast 1+ vet SABuyer 309: Syd metro area 2-3 vet SA Buyer 342: Syd metro/canberra 3-4 vet SABuyer 394: Syd/central coast 2-3 vet SABuyer 430: hunter/Syd/gold coast 3+ vet SABuyer 431: Syd metro area 2 vet SABuyer 436: Syd metro area 2-3 vet SABuyer 438: central coast/hunter 2-3 vet SABuyer 442: Sydney 2-3 vet SABuyer 460: Syd metro area 1-3 vet SABuyer 462: Sydney South 1-2 vet SABuyer 465: South nSW to gympie 1-2 vet SA/MixedBuyer 468: nth nSW to Se Qld 1-2 vet SABuyer 472: Sydney 1-3 vet SABuyer 473: nth nSW to Se Qld 1-2 vet SA/MixedBuyer 476: newcastle 1 vet SA

VictORiABuyer 176: Melb Se Suburbs 2-3 vet SABuyer 220: Melb metro area 2+ vet SABuyer 300: Melb ne Suburbs 1-2 vet SABuyer 427: Melb metro area 1-2 vet SA Buyer 429: Melb metro area 2-3 vet SA Buyer 439: Melb metro area 1-3 vet SABuyer 443: geelong area 2-3 vet SABuyer 444: Melb metro area 1-3 vet SABuyer 446: Outer east Melb/SA/Qld 1-2 vet SABuyer 448: Melb metro or large Regional 2-3+ vet SABuyer 452: Melb metro area 1-3 vet SABuyer 455: geelong area 1-3 vet SABuyer 461: ne Melb 2 vet SABuyer 466: Se Melb 2-3 vet SABuyer 470: Se Melb 1-3 vet SABuyer 471: Melb metro area 1-3 vet SA

QueenSlAndSeller 183: Sunshine coast – 1 vet SASeller 215: Brisbane Metro – 1 vet SA iSeller 229: South Burnett – 2 vet Mixed practice iSeller 250: Brisbane Metro – 1 vet SA iSeller 252: killarney – 1.75 vet Mixed iSeller 253: north Brisbane – SA vet Premises For Sale / Lease iSeller 253: Brisbane South – 2 vet SASeller 258: Bribie island – 1 vet Mobile SA practice iSeller 262: north Brisbane – 1.5 vet SA practice i

VictORiASeller 238: Sale – 1 vet SA iSeller 242: West gippsland – 1 vet SA/Mixed iSeller 255: Victoria Rural – 4 vet SA/Mixed s H

Seller 263: Victoria South – 1-2 vet SA/Mixed ineW SOuth WAleSSeller 204: central coast – 1/2 vet SA iSeller 259: casino – Tick Serum Business i

WeSteRn AuStRAliASeller 217: Busselton – Premises For Sale or Lease s i

Seller 230: denmark – 2.5 Vet Mixed Practice iSeller 257: harvey – Premises For Sale i

These practices are for sale and information is available from ValuVet by calling 07 3831 5555

ValuVet valuation 4 ValuVet report available

H Excellent facilities s Purpose built facility

i Website ListingSelleRS

See website advertisements on www.valuvet.com.au

BuYeRSThese buyers have all signed confidentiality agreements and are genuine buyers in their preferred areas and may be reached by contacting ValuVet on 07 3831 5555

Vet’S PRActice MARket PlAce

Apart from improved productivity and financial profitability, there are other benefits to be gained from leveraging fully from lay-staff. Invariably the ability to leverage form nursing staff increases with training and subsequent delegation – this in turn improves efficiency, promotes job satisfaction and increases tenure. It is not hard to see that a happy, well-trained team will be more productive and help to improve the bottom line of the business.

How does a practice improve the leverage from its lay-staff? The secret is in the appropriate delegation of as many of the para-veterinary tasks in the practice to the nursing team of course. Some steps to consider in building a well-oiled team would be:

1. Examine your veterinarians’ current job descriptions and daily activities to identify non-essential (vet) duties

2. Audit your nursing team’s skill-set to see what they are capable of performing and to identify training gaps

3. Re-invest in your business by providing necessary training to bring your team up to speed (you will never regret it)

4. Write job descritions for employees and protocols for tasks that will be delegated – this will act as a guide for your team and add ‘structure’ to your practice

5. Monitor your team members’ progress and be sure to praise your team when progress is made (remember the 3 Rs of team building: Respect, Responsibility and Recognition)

6. Take a holiday because you will have just created a ‘team oriented’ practice that will be able to run itself

Finally, do not underestimate the magnitude of taking a practice from A to B and you may need to invest in the services of some of our industry partners to get your practice to where it needs to be. If you would like advice on where to start or what to do, please feel free to call the ValuVet consultants to discuss Ph 07 3831 5555

Dr Tony Thelander (ValuVet Director)

...cont from page 1

David Sharp B Econ, ACA Director DFK Richard Hill

When purchasing equipment, the question most generally posed to accountants is:

‘If I have sufficient cash in the bank, do I use that or do I finance the equipment purchase’ ? Or:

‘If I don’t have the money now do I save and buy when I have it or do I buy now using finance?

The first part in finding an answer is quite simple: in business, you should only buy equipment that will generate income.

The next part of the answer is: ‘How much income will the equipment item need to generate to justify its purchase’? In simple terms, what is the working life of the item, so work out how long you expect the asset will continue to generate income? For instance, a digital xray processor may realistically only be effective for 5 years given the speed of change of technology while good quality stainless steel cages can easily last more than 20 years with good care. Once you estimate the number of years (or months) the equipment will be productive, divide the full cost of the equipment by the number of years /months and in simple terms that is the minimum income per year/month you will need to generate to justify the purchase.

Where the discussion becomes more interesting is when the question is raised about the cost of borrowing or interest. In truth whether you are paying interest to a finance company or to yourself there is always a cost of funds. If you assume that your requirement for return on your investments is at least the same as the finance company’s then whose cash is used is not relevant to the purchase decision. What is relevant is that the cost of funds on an annual or monthly basis must also be covered by the income generated by the equipment.

(income generated > cost of item + cost of funds)

Once you have established that the income generated will be greater than the combined cost of the equipment and of the cost of funds then we revert to the final questions. ‘Do I use my funds or those of the finance company’? Or, ‘ Do I use my cash and take the interest as my return on that cash or do use that cash for something else and borrow’? There can be many responses to those questions.

If you can get a better return on another investment use the funds for that and borrow.

Borrow for the equipment and keep the cash on hand in case of emergencies or other possible future investment opportunities

Investing cash out of the practice diversifies your investments.

Lending for equipment purchase is not a growth investment. As equipment wears out, it depreciates.

A business with no lease or finance obligations can better withstand a downturn in business.

In conclusion, common-sense is the key. Do not enter into more finance than you can comfortably service after allowing for any downturn in profits. If you buy equipment then track the income and make sure it is paying for itself; if it is not then sell the equipment and cut your losses. Finally, if you have to really try to convince yourself the equipment will be a revenue generator and it turns out not to be, then it may well be more properly classified as a “toy”. In this case at least have fun using it and do not let it gather dust (and guilt) in the cupboard.

using Finance – When and Why?

We recently evaluated two practices that had negative growth over the past 2 years; both were only minimally profitable. Both practices were in provincial towns and both suffered a high degree of competitive pressure from neighbouring practices (too many vets!). It is interesting to see how both practices were coping with what I perceive will be an ever growing problem in our country with our seven veterinary schools producing ever more graduates for our population of 23M.

The first practice was a mixed (mainly small animal) practice in a large rural town that had focussed very keenly on delivering superlative customer service, a reliable service for large animals and a special interest in high end small animal surgery. Working from modern, purpose built premises; you would wonder why they were not doing a little better than they were. The simple fact was that one of the existing practices in town had recently changed hands, relocated and upgraded their facility and another vet had set up in town in the last year – this had to be making a difference to turnover - so where to from here for this practice? In my opinion they need to ‘stick to their knitting’ to some extent; continue to broaden their service offering (equine dentistry has been neglected) and to tighten management (some re-rostering would save some wages). This practice is giving clients a clear choice and while some clients may try the other vets in town, I suspect that most will return to a great practice that endeavours to look after its clients – time will tell!

The second practice was a small animal practice situated in a regional city where there was high competition from other practices - an all too familiar situation. The practice had recently completed a high quality renovation as a differentiation strategy so it was well presented and had easy access and plenty of off-street parking. The practice was also situated in a good part of town and was run by a competent and affable veterinarian, ably backed up by a loyal team. This practice on the outside seemed to be doing everything right so why was it going backwards? Simple – they were offering a stock standard companion animal service just like the practices down the road so there was nothing apart from geographic proximity and basic necessity driving clients through the door. In simple terms they were being ‘out marketed’ by other well established neighbouring practices so where to for this practice?

On further investigation, we found that the practice was poorly marketed internally, the practice was managed almost entirely by the vet and the nursing staff were inadequately

used for their skills. The solution for this practice is clearly ‘differentiation’ from other practices in town. Having a nice building and good access is taken as a ‘given’ by clients, as is a reliable and competent service. By good fortune, both vets working in this practice had unique skills that they were not using so with a change in ‘service direction’; with some strategic marketing and some re-allocating of management duties, we see a brighter future for this practice.

lessons to be learnt:

When are there too many vets? In very broad terms, companion animal and predominantly small animal-mixed practices require a vet to population ratio of approximately 1 full time vet equivalent (38 hours) per 4000 population so if you are operating in an environment where there are more vets than this, you will need to differentiate your practice from your colleagues’ practices. How this should be done depends to some extent on your neighbours’ service offering and practice positioning so it is not the same remedy for every practice. A great way to do some homework and to get information on your practice’s positioning is to run a client focus group. Your clients will probably tell you what is important in their eyes and this will help to point you in the right direction strategically. There are many ways to differentiate veterinary practices but the most common areas are through the patient service offering; a customer service orientation; practice management; strategic practice marketing; team selection and fee structure to name but a few areas.

So how do we re-position a practice? First we look at the ‘fixed’ factors (things that cannot be changed) affecting the practice such as geographic positioning, local client demographics, position of neighbouring practices then we look at ‘variable’ factors to see what can be changed. If you are faced with falling turnover in the face of competition, please feel free to call us for some ideas.

Dr Tony Thelander (ValuVet Director)

case Study:hot competition

Salaries and Super are 35-37% of turnover in high profit practices.

FASt FAct

Fees for equinedental Procedures

The following was a question recently posed to me by another vet seeking advice about pricing equine dental procedures.

“The pricing of more advanced dental procedures is something I have difficulty in coming to terms with. I think many of us commonly undervalue a dental procedure for fear of losing the opportunity when the client thinks the cost is too high. What and how do others charge for example for an extraction which needs to include the time taken for the procedure, x rays, CRI, antibiotics, pain relief etc. I don’t want to undersell myself or the veterinary profession but at the same time want to charge what is fair and in keeping with my level of expertise. I’m sure we don’t charge enough especially in comparison to vets doing small animal dentistry. Has anyone got any thoughts”?

A response provided by another colleague demonstrates some of the issues discussed: “I believe that many of the ‘advanced’ equine dental vets are in fact ‘raising the bar’ in equine dentistry, which is a good thing. The bad thing is that they believe that one must insist upon using all of the available modalities (radiology, scans, hematology, etc.) for every case, which unfortunately results in ‘raising the bar’...beyond the reach of many/most horse owners, and therefore most horses”.

In reply to this statement, I maintain it is not the new techniques and equipment (which can be very helpful), but the insistence upon using them when not needed that is the problem.

So how do we go about pricing equine dental procedures?Firstly, you need to offer value for money and stay relevant to most horse owners and secondly, the economics of vet practice means you must generate a comparable income from equine dentistry to other vet farm services, otherwise there is no incentive to grow that aspect of the business. Bear in mind that in rural areas that most equine clients are predominately farmers who are reasonably pragmatic when it comes to the value of individual animals.

Equine dental practitioners like all other veterinary practitioners, have invested time, money and effort into a career and in addition, into training and equipment. As with all professionals, there needs to be a reasonable return on your investment in the form of fees charged for your services. In Australia it is common to quote figures of $300-$600 for routine small animal dental procedures which would commonly involve a patient weighing from 4-50 kgs which comes in as a day procedure. By comparison, equine dentists need to deal

with a 500kg animal that often requires that we travel to the owner’s property or provide care for several days in a hospital. The fact is that most of us VASTLY under charge for our equine dental services for a multitude of reasons but reasons don’t pay the bills. The other fact is that if equine dentistry is not profitable in your practice, there is a big incentive to not offer the service, thereby assigning another ‘act of veterinary science’ to lay dentists.

Most vets price their services based on a ‘competitive price model’ (what your neighbours charge) when they should be using a ‘cost based model’ (what the service costs to produce). You need to know what your costs are, how much of your time is involved and what return you wish to achieve. You can then apply some basic economics to determine the point at which the value of your service is maximised. This is the point where you can charge appropriately for your services and retain enough clients to maximise your income.

One of my referring practices both needed and wanted a charge-out rate of $300 per vet per hour, yet they only charged $130 per dental. You can see that even if they managed 2 dentals per hour (allowing for time to travel, setup etc. and remember this is a remote regional area) they will have a shortfall. The economics just don’t add up!

So what do I charge? I charge $600 per incisor for an extraction, cheek teeth begin at $1500 and radiographs are an additional $330. These are not routine procedures but the principle is the same for all dental services: Having an hourly rate; an idea of costs and an idea of what you need to turnover each day to keep the doors open and what you want to earn allows you to do quick, basic calculations onsite to help with pricing queries.

Please remember that the advice given here is general. If you require specific advice feel free to contact me either at vetbloke@gmail.com or on 0418 598 621

Dr Shannon LeeBVSc, MACVS(Equine Dentistry)

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