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.