Don't make resolutions. Set goals instead.
Resolutions and dreams are a vision of an endpoint. There's nothing wrong with looking to the finish line for motivation, but it is missing a critical component that you need in order to get there: the plan. Goals are dreams attached to plans. So, as we move into the start of what we're all hoping will be a better year now is a good opportunity to set some goals for your veterinary practice and look forward to the year ahead and beyond.
KPI? KIS (keep it simple)
There's a long list of KPIs (key performance indicators) that you can track for your practice to try and grow in 2021, but should you be following them all? No! Here are a few things to keep in mind:
1) Not all KPIs are equal when it comes to impact. Some KPIs like throughput, average transaction value, and charge capture rate can play an especially large role in your practice's bottom line. All KPIs are important to a degree, but some numbers matter more than others.
2) Information overload is real. It is easy to miss the forest for the trees when you're putting too many numbers in front of yourself.
3) Too much change all at once is disruptive and chaotic. Trying to fix five problems all at the same time is just as likely to create 10 new ones. Fixing one problem at a time allows you to track and identify whether the change you've instituted is accomplishing the goal and identify any new challenges that it might have created.
With this in mind, your best bet is to compare your hospital's KPIs to industry benchmarks and pick one or two to focus on that you feel best matches the overlap between "impactful KPI" and "our hospital could do better at this".
Budget smarter
Writing up a practice budget for the year is about as much fun as paying your taxes, but also just as likely to run you into problems if you neglect to do it. A few key points about budgeting:
1) Have a mentality of plenty, not scarcity. Veterinary medicine is a thriving, growing industry. The practices that are succeeding in this landscape are seeing an opportunity to improve their cash flow not by cutting expenses, but rather by driving revenue growth. Don't strangle your business' ability to meet rising demand! Expenses like staffing are easy to see on your budget in front of you, but opportunity costs like under-staffing that don't show up on your balance sheet can hurt you much more in the long run by resulting in unrealized revenue.
2) Do your homework. Before setting your own practice's budget look at benchmarks for successful practices in the industry to provide you with a guideline.
3) Don't forget marketing! It is tempting to neglect marketing considering that your competitors are probably doing just as little as you are and you may already be struggling to handle the caseload that you've got, but driving in new cases is a key component to growth! If you're struggling to handle the cases that you have, return to point #1 in figuring out your budget (especially when it comes to hiring new associates and support staff to better leverage the associates you have).
Don't only look one year ahead
“The best time to plant a tree was 20 years ago. The second best time is now.” If you don't already have a concrete plan for retirement, the time to plan is now. Whether you're 2 years away or 20, every business owner should have an exit plan. A few points on retirement planning:
1) Don't assume a corporate buyer will be there. Many small practice owners are operating under the false assumption that they will be able to sell their practice easily to a corporate buyer when they reach retirement age like they've seen so many of their peers do. However, most corporate buyers have acquisition criteria involving minimum gross revenue, minimum cash flow/EBITDA, minimum local market factors, and a minimum number of full-time doctors (not including the exiting owner). This leaves many smaller practice owners "stuck" when they reach retirement without a plan in place and they find that the corporate market for their practice is sluggish or non-existent.
2) Don't assume an individual buyer will be there unless you cultivate one yourself. The new generation of Millennial veterinary graduates are facing unprecedented debt-to-salary ratios and as a whole are making work/life balance a higher professional priority than Gen-X and Boomers. These two factors are leading to fewer new graduates seeking to own veterinary practices (especially small and/or rural practices). Finding an associate who is willing and able to earn/buy-in equity over time is a good tool for avoiding getting "stuck" with a practice that you can't find a buyer for later.
3) Know your options: Selling 100% of your practice all at once isn't your only option! Partnership-style acquisitions like AVP offers can provide a "best of both worlds" scenario in terms of financial upside and operational support. Allowing an associate (or associates) to earn/buy-in can offer a similar upside, especially for small practices that are unlikely to find a corporate buyer. However, both of those plans to maximize your exit involve planning at least 3 years out from the time you're looking to fully exit.
4) Don't assume practice valuations will stay this high forever. We're moving into the "middle innings" of consolidation in the veterinary profession and practice valuations are being lifted by enthusiasm among large investors to buy veterinary "platforms" (large groups of practices) at a premium with the plan of continuing to grow those platforms (driving down their effective purchase price). Over the next 5-10 years, as more of the larger practices driving those platforms leave the market and become consolidated, individual practice valuations will likely fall back to pre-consolidation levels (albeit, larger practices and groups of practices will continue to be valued at a high premium). There may not be a better time to sell a veterinary practice than in the '20s.
5) Don't come to market "underdressed". Showing up to the market to sell your practice unprepared is like showing up to a black-tie event in shorts. You want to show buyers the best possible version of your practice. Taking the time to learn the ways that buyers value veterinary practices and taking 3-5+ (ideally more) years to spruce up your practice's key metrics can dramatically increase the return you can get for your practice when you eventually decide to sell.
6) There's more to picking a seller than finding the largest number. You've put a tremendous amount of work into building your practice. The role of your practice in the community, the job security and job satisfaction of your employees, and the quality of medicine at your practice after you've left for retirement all are things that need to be taken into consideration when choosing a buyer for your practice. Take the time to understand who your prospective buyers are, what they believe, and how they operate. A little more money in your pocket isn't worth selling the soul of your business. You won't be able to hold a buyer accountable after you sell, so it is important to find a buyer or partner who aligns with you ethically and philosophically and will hold themselves accountable for the way your practice operates after you retire.
From the AVP team, we hope your 2021 is a successful and much better year than the one we left behind us. If you'd like to discuss your exit strategy and how a partnership with AVP may be the right choice for you and your practice, please don't hesitate to contact me at bill@associatedveterinary.com