How to Know When It’s Time to Expand Your Facility

karen felstedBy Karen Felsted, CPA, MS, DVM, CVPM

When looking to make any expansion changes at your veterinary practice there are a few things to consider to make sure you are making the best choice for your hospital. The first question to ask when you’re thinking about expanding is: What is the problem you are trying to solve?

For example:
• “Clients are stacking up in the reception area and have to wait too long”
• “We are turning away business because we are fully booked”
• “Our workflow isn’t very efficient because we don’t have enough exam rooms”
• “We’re tired of stepping over boxes of medical supplies every time we enter the restroom”

Before launching forward with any solution, you want to be sure it will solve the problem you have. For example, if clients are stacking up in the reception area, you first need to figure out why. If it’s because you have a doctor ready to see them but there aren’t enough exam rooms, then this may really be a space problem. But if it’s because all the doctors in the practice spend 30 minutes with a client in an appointment scheduled for 20 minutes, then adding exam rooms won’t help. Instead you have a scheduling issue or a doctor efficiency issue. If you’re turning away business because you are fully booked, adding another doctor or using technicians more efficiently may be the first step in solving this problem. Do you have to have more space for these extra appointments? Maybe or maybe not; before launching forward with the expansion, make sure you are using your current space to its best advantage.

Assuming you really have a problem that will be solved with extra space, the next question to ask is: What will be the impact on cash flow of expanding? If you’re expanding to accommodate more clients, you will likely see a dip in cash flow in the short-run but a later increase as more pet owners visit the practice. If you’re expanding simply because the space is too cramped but don’t expect much client growth, then the dip in cash flow may take longer to recover from. This isn’t always a bad thing; simply having room to turn around can be worth the extra bucks. If you will need additional clients to make the project pay off financially, you need to be confident you can attract them. The days of “build it and they will come” are behind us. Of course, you can borrow the money needed for the expansion but unfortunately, lenders want to be repaid at some point and you need to make sure you’ve got enough of a cushion to weather any dip in cash flow once you have to start repaying the loan.

Answering these two questions in depth will help you make the right decision in determining it it’s time to expand.

Dr. Karen Felsted is a senior advisor to Community Veterinary Partners.


Is your hospital growing this year?

A new national survey of veterinarian owners shows a majority of hospital revenues are up 2 to 5 percent this year.

survey Q1

Other key findings from the survey:

– Pricing appears to be slightly improved with more vets raising prices 3-5% and fewer raising 1-2%. However, 23% of respondents (9 of 40) did not raise prices, up from 15% (6 of 39) last year.

– Wage pressure appears to be increasing with 38%, or 15 of 39, expecting increases of 3-5% compared to only 23%, or 9 of 39, expecting over 3% increases last year (including some increases over 5%).

– More than half of veterinarians surveyed said they were increasing their use of generic medications.

– All owners were planning to keep prices flat or raise them in the next year.

survey q2

The survey was conducted by First Analysis, a Chicago-based equity research firm. A link to the full research report is HERE.

 

 


Do You Know What Your Veterinary Practice Real Estate is Really Worth? Part 2

Do You Know What Your Practice Real Estate is Really Worth?

Part 2- Diversification and Maximizing Value

Written By: Daniel Eisenstadt and Ian Widensky of Calico Real Estate

Like we discussed in Part 1 of “Do You know What Your Practice Real Estate Is Really Worth?”, today many veterinary practice owners are recognizing that their practice and building are two different and unique assets. And, if they own both, are realizing that viewing each separately can create greater financial value and more flexibility. Two other scenarios that can highlight the value of leasing your practice real estate rather than owning are Diversification and Maximizing Value.

Diversification

Many veterinarians that are considering selling their practice are surprised that their prospective buyer — a corporate group or an associate— is not interested in buying the practice real estate.  For some veterinarians the opportunity to collect rent is an appealing option.  For others, a lump sum cash payment means they can prepare for retirement with a well-diversified portfolio of investments.

Maximizing Value

Veterinarians are often surprised to learn that a sophisticated veterinary real estate investor may value their building for more than the standard real estate appraisal.  When this is the case, the opportunity for a veterinarian to sell his or her real estate and lease it back to the practice can be more financially rewarding than other traditional options.  In fact, certain veterinarians may garner higher values for their real estate through a sale today then by waiting for years to sell the real estate along with the sale of the practice.  In light of today’s historically low interest rates, real estate investors are often able to pay more now than they would in a higher interest-rate environment.  Many practice owners can maximize the value of their real estate when the practice is performing well as opposed to waiting until the growth of the practice begins to wane as the lead veterinarian slows down.


Dr. Karen Felsted: Say it in English

The Bayer Veterinary Care Usage Study made it very clear that veterinarians and their team members aren’t doing as good of a job in communicating with pet owners as we’d like to think we are.

For example, only 57 percent of pet owners completely agreed with the statement “My veterinarian communicates with me in language I understand” and only 44 percent completely agreed with the statement “My veterinarian clearly explains when I should bring my pet in.”

What this tells us is that we are asking clients to make decisions about things we recommend that are difficult to understand, scary because it involves a beloved family member and expensive and we can’t even explain clearly to them what we want them to do!

Without a doubt many veterinarians are genuinely trying hard to communicate with pet owners but it’s clear we need to improve how we do it.  First of all, it is critical that doctors & staff tell the same story.  It confuses clients to get different recommendations from different team members; pet owners expect us to be clear about what we think is best for their pet.  It also confuses technicians and other team members when they hear doctors give different recommendations for the same problem or preventive care situation.  And once team members are confused, we have lost the ability to use them well in the client education process.  If they don’t know what to say, they either won’t say anything or they will try to interpret what they’ve heard and may end up giving the wrong information.

Doctors and other team members also need to remember that people learn in different ways — some adults learn best by listening, some by reading and others by doing.  Communication with a client shouldn’t be limited to the exam room conversation; all of the common recommendations and information should also be included on the practice’s Web site, in handouts, in newsletters and email blasts and in any other web-based communication the practice engages in.  The same message should be conveyed in many different forms.

In the next edition, we’ll talk about some specific language that makes a difference in talking to pet owners.  What has worked for you?

Dr. Karen Felsted

Read all of Dr. Felsted’s blogs here.


Dr. Karen Felsted: The Hidden Value of the Exam

When veterinarians surveyed in the Bayer Veterinary Care Usage Study were asked about communicating with pet owners about the examination process, 51% completely agreed with the statement that “I talk my clients through the exam, explaining what I am doing in detail.”  Another 37% somewhat agreed with that statement.

Comments made by pet owners in the Bayer study focus groups, however, told a different story.  Many did not know their veterinarian was doing a full nose to tail exam; instead they thought that when the doctor had his or her hands on the pet, they were merely stroking it or keeping it from jumping off the exam table.

One of the simplest things that can be done to educate clients about the physical exam process is to describe it as you go. For example, say things like “I’m listening to Fluffy’s heart — the rate is normal and I don’t hear any murmurs” and “I’m palpating Fluffy’s abdomen now — the kidneys are of normal size and I don’t feel any masses.”

If you are a veterinarian examining 15 pets a day, this may seem very boring after awhile but pet owners generally only get this information once a year max.  To them it is new and fresh information and critical to their understanding not only of the care the pet needs but the value that the veterinarian and his or her team provides to the pet and the pet owner.  This ongoing communication also strengthens the bond between the pet owner and the practice team.

This concept can actually be expanded to the rest of the team.  When an assistant walks into the exam room to leave the necessary vaccines, they should introduce themselves and say “These are the vaccinations Fluffy needs — Dr. Felsted will be in to see you in just a minute.”  When a technician takes the pet to the back to weigh it, they should explain what they are doing.  “I’m going to take Fluffy to the back to weigh him; we’ll be back in a minute.”  Even more important is to say something when Fluffy is brought back to the exam room; for example “Fluffy has gained 2.3 pounds; Dr. Felsted will talk with you about his weight and nutrition when she comes in.”

Do you think your clients appreciate the full physical exam done on their pet?  What do you do to make sure they do?

Dr. Karen Felsted

Read all of Dr. Felsted’s blogs here.


Dr. Karen Felsted: Pet Owners Want More Education

Pet Owners Open to Education

Last time we talked about how many pet owners really don’t understand the need for veterinary care.  Fortunately, they seem to be open to more education and to visiting the veterinary practice more often if they better understood the need for care.

Three of the top four things pet owners in the Bayer Veterinary Care Usage Study said that would make them take their pet to the veterinarian more often were about education. These top four items were the same for both dog and cat owners although the order and the percentages varied a little between the two groups.

The first change that would cause pet owners to take their pet to the veterinary practice more often was “if I knew I could prevent problems and expensive treatment later.”  The second was “if I was convinced it would help my pet live longer” and the last was “if I really believed my pet needed exams more often.”  These are all points we must include in our client education efforts.  (The fourth of the top four items was about price—”I would take my pet to the veterinarian more often if each visit was less expensive.”  We’ll talk more about price a little later.)

Of course, if we’re going to convince pet owners that preventive care is important, we (as a profession) have to believe in it.  How do veterinarians feel about preventive care?

The majority of those surveyed in the Bayer study agree (either completely or somewhat) that wellness exams are the most important service the practice performs. This belief was one of the attributes that was associated with practices that were experiencing an increase in patient visits.  Obviously, this makes sense; a lack of belief means that practice owners won’t put the time and attention into making preventive care a focus of the practice.

However, while most practice owners find wellness care to be a critical component of their practice, 65% of them also said that pet owners don’t share that belief.  And 43% were concerned that pet owners feel they are only recommending exams to make money.

Clearly we need to focus on conveying the above benefits to pet owners.  What has been most effective in your practice?

Dr. Karen Felsted.

Read all of Dr. Felsted’s blogs here.


Dr. Karen Felsted: Do Pet Owners Even Understand the Need for Veterinary Care?

One big reason the Bayer Veterinary Care Usage Study has gotten so much press is that it is one of the most actionable studies ever done in veterinary medicine.

A very surprising finding was the number of pet owners who really don’t understand the need for veterinary care, which of course means we have to do a better job in educating them. This is something veterinarians and team members have been focusing on in the past but evidence from the Bayer study indicates we need to do more of it and do it differently.

 

Take a look at the above chart; as you can see, many pet owners are confused and misinformed.  About 1/3 of pet owners surveyed in the Bayer study agreed with the statement (either completely or somewhat) that “except for shots, I would not take my pet to the veterinarian.”  While another 1/3 didn’t agree with that statement, they didn’t disagree either.  So that means we have almost 2/3 of pet owners who are not firmly committed to visiting a veterinarian for anything other than “shots.”

Another statement pet owners were asked about was “I would only take my pet to the veterinarian if it was sick.”  Again, about 1/3 of pet owners agreed with this statement and another 18 percent were neutral; that means that over 50 percent of pet owners are not firmly committed to visiting a veterinarian for preventive care.

The last set of bars shows that about 1/4 of pet owners agree with the statement that “routine checkups are unnecessary” and another 1/4 are neutral meaning they don’t disagree with the concept.  Again, about 50 percent of pet owners aren’t firmly committed to the idea that routine checkups are important.

These are big numbers—the majority of pet owners really don’t fully understand why veterinary care, particularly preventive care is necessary.  In addition to the information shown here, it was also noted that many pet owners believe older pets need less care and indoor pets need less care—this clearly doesn’t make sense!  Certainly indoor pets are less likely to get hit by a car or get into a fight with another animal, but they are still just as likely to be diagnosed with cancer, diabetes, or kidney disease.  We all know that as we get older, we are more likely to become ill—things just don’t work as well as they used to.  However, pet owners don’t seem to be translating that knowledge about themselves to their pets and they think that as pets age they need less care.

The responsibility for education falls on veterinary practices—both veterinarians and other team members.  What do you think we should focus on to better educate pet owners?

– Dr. Karen Felsted

 


Dr. Karen Felsted: Strong Client/Doctor Relationships Drive Veterinary Visits

The Bayer study identified a number of attributes that practices who continue to grow during this challenging economy have in common.  One of these is that clients in the growing practices generally see the same veterinarian every time they visit.  But this isn’t what happens in all practices but any means.  As you can see from the graph below only about one-third of the practice owners in the study completely agreed that this goes on in their practice with another 19 percent somewhat agreeing with the statement.

Think about when you take your kids to the pediatrician or when you visit your own doctor.  Do you want to see just whoever happens to be there when your appointment time is?  Or would you rather see a doctor you have a relationship with and who has a personal understanding of your health and your history?  I have asked this question in numerous seminars and about 95 percent of the attendees want to see the same doctor.  Why is it any different with people and their pets?  A pet owner is much more likely to agree to a recommendation even when it is expensive, complicated and scary if they know and trust the doctor who makes it.

There are a couple of reasons why practices don’t encourage seeing the same doctor every time—one is that it sometimes doesn’t fit the appointment scheduling method used in the practice and another is because practice owners are afraid that if associates have too much of a bond with clients, they will steal them away if they go to work at another practice.  While these can be legitimate issues within a practice, there are better ways to deal with them than by discouraging the building of these bonds.

See all of Dr. Felsted’s blogs.


Dr. Karen Felsted: Are we Sure the Recession isn’t the Whole Problem?

It would be great to think that the recession has been the most significant cause for the
declines in veterinary visits and when the economy improves, life will be good again but it just isn’t so. We know that veterinary visits started declining about 10 years ago, well before the 2007 recession. And while technically the recession ended in mid-2009, it doesn’t seem that way for many pet owners and many practices. According to the Bayer study, 51 percent of practices reported a drop in visits during the first two years after the recession ended with 1 out of 6 reporting declines of 10 percent or more. Another 14 percent of practices were flat and 34 percent were growing.  Revenue trends followed suit with 42 percent of practices reporting lower revenues in 2010 than in 2009.

 

veterinary visits May 2009 to May 2011

 

But what is really significant when you look at the data in the Bayer study is the
information about the 34 percent of practices that have reported growth in the post-recession period.

Only 15 percent of the practices surveyed in the Bayer study said the recession had had little or no impact on their local area.  Another 51 percent said the recession had had a moderate negative impact and about a third said it had had a significant negative impact. It would be easy to assume that the practices who are growing are located in areas not impacted much by the economic challenges. However, that just isn’t what the study showed.  Actually, two-thirds of the practices that continued to grow were in areas that were moderately or significantly negatively impacted by the recession. What this tells us is that its still possible to grow in this economy. It’s important not to use the recession as an excuse for the lack of growth.

What do you think these practices have in common or are doing that sets them apart?


Dr. Karen Felsted asks: What do you think is causing the decline in veterinary visits?

Using the Bayer Veterinary Care Usage Study to Bring More Pets and Pet Owners into Your Practice

You’ve probably heard about the Bayer Veterinary Care Usage Study; you’d have to have been living in a cave not to. The study was released last year and identified the most significant reasons veterinary visits have been declining and, more importantly, what you can do about it. This study is arguably the most actionable piece of work ever undertaken in veterinary medicine and many of the findings are easy to implement in your practice.

Let’s talk first about some of the trends we’ve been seeing in veterinary medicine over the last decade. There is all sorts of evidence that demonstrates pet visits, new clients, active clients, transactions, patients per veterinarian per week and the percentage of pet-owning households who visit a veterinarian have all been declining over the past 5-15 years. Whether you look at pet owner studies or veterinary practice activity studies, you see the same downward trends. What is particularly concerning is that these downward trends in veterinary care usage occurred during a time when the pet population was increasing.

One of the most important things to remember is that all of these declines started before the recession. The recession certainly exacerbated the situation, but its not the root cause of the decline in the use of veterinary care. Unfortunately, we as a profession largely ignored these declines because our practices seemed to be otherwise doing well financially—revenue was growing at a rate well above inflation and veterinarian compensation and take home earnings were also increasing.

Before we get into the findings from the study and the changes that practices should focus on, let’s hear from you. What do you think has been causing the decline in veterinary visits.  And what do you think has been the most significant factor?