10 Common Mistakes by Veterinary Practice Owners
As a veterinary practice owner, it is impossible to anticipate all the possible pitfalls you might encounter. Fortunately, many of them are predictable and avoidable. Here are 10 common mistakes that practice owners make:
1. Trying to do everything themselves
Being a small business owner is a hands-on job but being too involved in the day-to-day management of your own business when you’re also acting as its key employee can be counterproductive. Veterinary practice owners will get bogged down in administrative duties, distracting time and energy from their clinical work. As we discussed in our last blog post, throughput is a critical KPI for veterinary practices so time spent working on admin work instead of clinical work represents a significant opportunity cost for your business. Wherever possible administrative duties should be delegated to a dedicated practice manager, a properly trained support staff member, or ideally to a dedicated business partner like AVP who can ensure that the back end of your business can run effectively with less need for your direct attention. 2. Getting pricing wrong Price strategy is challenging to do well, and ultimately is the system that ensures that the hard work that you and your team are doing translates to both the top and bottom lines of the business. Your pricing strategy needs to match your target client base and the quality of medicine you plan on providing to your patients. There is no universal pricing strategy that will work for every possible customer so you need to figure out what your market is and price accordingly. Smart pricing is about more than just deciding whether you want to target the top, middle, or bottom of your local market, though. You can run a profitable practice regardless of where in the market you decide to participate if you use smart pricing strategy. Pricing strategy is a topic worthy of its own blog so I won’t get deep in the weeds here, but here are two key points:
Inventory sales don’t work hard for your bottom line. You’re never going to be able to compete with Chewy on price and keeping large amounts of preventatives, chronic medications, and retail items on hand adds layers of expense and complexity to your business while adding very little profit. Keep what you need on hand to get patients started on new medications and charge appropriate margins for convenience, but otherwise an online pharmacy can be a good option to help you keep your focus on the things that actually drive your bottom line instead of just the top line.
Services drive your bottom line, so don’t short-change the value of your time and skill! How you choose to price your services will make-or-break your profit margins. Adjustments to service pricing are best done with a scalpel instead of a hammer. Large, sweeping price increases are likely to catch notice and displeasure from clients and staff alike. Fortunately, even small, strategic tweaks to frequently billed services can have significant positive impact on the bottom line while remaining below the financial pain point of your core clientele because (ignoring elasticity of demand, which becomes more relevant with large fee increases) fee adjustments translate directly to the bottom line.
3. Setting goals too high or too low The best kind of goal is ambitious, but with a visible path to realization. As we have early conversations to get to know our AVP partners better one of the early topics that I like to cover is what they think their vision is for the “best possible version” of their practice, and then challenge them on why they didn’t choose a bigger or smaller vision. Occasionally I’ll speak with practice owners who may be aiming too big with their goals, but in general most practice owners sell themselves and their businesses short on what their true potential is. Growth is difficult and sometimes painful, so the natural tendency is often to settle into what is comfortable instead of continuing to achieve greater potential. Fortunately, having the right business partner like AVP in your corner can make driving growth a smoother and less intimidating process.
4. Assuming poor work-life balance is necessary for success
Most veterinary practice owners work too hard. Being a small business owner is difficult and “9 to 5” isn’t a realistic expectation for an owner, but it is possible to own a veterinary practice and still have a full life outside of it. The first step is getting point #1 above (trying to do everything yourself) under control. Empowering the leaders on your team to work autonomously is an important part of being able to truly “unplug” from the business as much as possible when you’re out of the building. Being a leader doesn’t just mean helping your team achieve success while you’re there, but also means giving them the training, confidence, and authority to succeed when you’re not there.
5. Being an ineffective leader
It isn’t easy being the boss, and it certainly isn’t something that we got much training on in veterinary medical school. Fortunately there are a lot of resources out there that you can tap into in order to hone your leadership skills.
6. Not having an exit strategy
Every business owner should have an exit strategy regardless of whether they’re 2 years from retirement or 20. Whether you’re planning on selling your practice to an associate, selling to a corporate group, or pursuing a staged exit via partnership/co-ownership with a partner like AVP. While there is a robust market for large- and mid-sized veterinary practices, the number of buyers for smaller veterinary practices is limited so it is especially important for owners of small veterinary hospitals to start planning their exit many years in advance of their anticipated retirement in order to maximize their financial return and have more control over who the buyer (and how they intend to operate the practice) will be.
7. Not setting robust long-term business plans
What do you expect your business will look like in a year? How about three years? Five? Ten? What’s your plan for getting there? These are important questions to have concrete answers for! Success is built on a foundation of good planning.
8. Innovating too little...or too much
The best practices in medicine and business are always evolving, and those who don’t adapt and innovate get left behind. It is possible to do too much innovating, however. This especially applies to significant investments in equipment or training that is aimed at adding new services. Adding new revenue centers is overall a good thing, but costs must always be balanced by upside and it is common for practice owners to get in the habit of buying “toys”. Expensive equipment or training requires a clear utilization plan that will offset up-front and ongoing costs in a reasonable time-frame in order to eventually become a profit center. Most veterinary hospitals in the current market have enough demand for their services that having “loss leaders” doesn’t make sense.
9. Failing to differentiate
Successful businesses almost always have “their thing” that they strive to do better than their competitors and allows them to differentiate themselves in a sea of options available to consumers. You don’t have to excel at everything; it is enough to be competent at all of the core functions of your business and then make sure to excel in at least one or more aspects and highlight the things you do best to your customers.
10. Not putting important things in writing
Having detailed employment contracts with key employees (including all associate veterinarians) and a detailed employee handbook will save you from a bunch of potential headaches. Any business relationship is set up for success when all parties involved are clear on what their incentives are, what is expected of them, how they will be held accountable, and what the consequences are for nonperformance. It is tempting to rely on trust alone when things are going well, but unfortunately the nature of your relationship with an employee can sour quickly when things aren’t going well and if the terms of their employment (including how it can be legally terminated and potential non-compete/non-solicit/non-disparagement terms) aren’t clear then you could find yourself in financial and/or legal peril.