You’re having trouble hiring an associate...now what?
Any practice owner will tell you: It’s hard to find a good associate right now. This leads to a series of inevitable follow-up questions:
Is there a veterinarian shortage?
Can I afford to pay what associates are looking for in this market?
How can I make my practice attractive to veterinarian job seekers in a competitive market?
What can my practice do to keep up when I can’t easily “throw” more associate vets at rising caseload?
Is there a veterinarian shortage?
The answer to this question is nuanced. When it comes to small animal general practice veterinarians the answer appears to be that there is a small absolute shortage in the market. However, what most clinics are feeling is the strong relative shortages that exist.
Rising student loan debt is driving relative geographic shortages of general practice veterinarians, as practices in rural and low-income areas are only able to pay associate veterinarians as much as local economic factors can support. While cost of living is lower in these areas as well, taking a higher starting salary in a more affluent area with the goal of living frugally is generally the most prudent choice for debt-saddled young veterinarians.
Every generation has a different set of personal priorities that reflect in their relationship with their work. Millennial veterinarians on average tend to value work-life balance and scheduling flexibility which has led to increasing numbers of younger veterinarians pursuing part-time work or relief work (especially with the help of third-party groups that aid them in some of the more difficult aspects of relief work like managing benefits, taxes, scheduling, and cultivating relationships with practices). There is also a rising expectation among associates that their work week will be capped somewhere around 40 hours for full time employment (a good thing, in this author’s opinion) which means that a “full time equivalent” veterinarian translates into fewer clinical hours worked than may have been the case in the past. This gap is amplified by contemporary standards of care including more detailed recordkeeping, meaning that veterinarians are spending a higher proportion of their time writing/typing records rather than performing clinical work.
The primary takeaway is that there is a small absolute veterinarian shortage, but the degree of shortage is not evenly distributed across the country geographically and across socioeconomic demographics. The shortage is extreme in most rural and low-income areas. The annual total graduating class from accredited veterinary medical schools continues to trend upwards and appear to be on pace to eventually catch up with and erase the current shortage in the next decade or two, including the addition of several new accredited veterinary medical schools, but this course correction will take time.
Can I afford to pay what associates are looking for in this market?
For busy practices, the answer to this question is a resounding “yes” and to a greater degree than your balance sheet may suggest.
Reshape your thinking: Opportunity cost is an “expense”. Cost/benefit analysis for whether it makes sense to hire an associate should be built around what you think your top line will become once you’ve added and ramped up an associate, not by what your top line is today. A failure to hire will cost your business much more in the long term than the cost of paying what a good veterinarian is worth in a competitive job market.
Incremental revenue (adding money to your top line) is high quality revenue. Your fixed costs are already accounted for, so you can expect a higher percentage of profitability on incremental revenue than the margins on your current revenue. All your variable expenses (COGS, increased support staffing, etc.) still need to be accounted for, of course, but washing out fixed expenses (at least 6-10%) makes driving incremental revenue a lucrative goal. If you have the caseload and the space in your facility to accommodate adding an associate, you can expect improvement in both the amount and the margin of profitability at your practice by adding one.
Acquisition cost is small compared to upside, even with “corporate sized” pay and benefits. This is reflective of the point above about the high quality of incremental revenue. By our own internal calculations at AVP we’ve determined that at most practices the “break even” point for an added associate to become profitable at most practices even with a highly competitive compensation package is at about 60-80% utilization, depending on the individual practice’s margins. The cash burn of ramping up an associate (again, even accounting for top-end compensation) is shorter and smaller than most practice owners appreciate.
You must make a reinvestment to improve your practice. Practice owners are good at appreciating that facility and equipment improvements cost money (i.e. a digital x-ray unit costs money that then gets recouped through its utilization) but then will balk at the idea of making a similar up-front investment in hiring an associate veterinarian who will ultimately generate revenue and profit for the business. “Cash in pocket” tools like signing bonuses, relocation bonuses, and retention bonuses can be a great incentive to set you apart in a competitive job market if you make them palatable by thinking of them as an investment rather than an expense.
Hiring is expensive, so that means turnover is expensive too. This is a separate topic that I’ve covered in another blog post but can’t be repeated enough! Staying tuned in to the job satisfaction of your associate veterinarians and being proactive in addressing dissatisfaction can spare you from needing to navigate the time-consuming and expensive process of hiring a new associate more often than is necessary.
How can I make my practice attractive to veterinarian job seekers in a competitive market?
It is a common misconception that “corporates” are paying more to associates because they just have a lot of money to spend that you don’t. To the contrary, larger corporate groups are highly averse to making decisions that they feel would be unprofitable. They’ve done the math (see above) and realize that paying more for associates is a profitable decision in the current market. That financial conclusion isn’t fundamentally different for an independently owned practice compared to a corporate owned one.
Take-home pay is only one of many factors that a job seeker is looking for: Benefits, work-life balance, amount of support staff, manageability of caseload and expectations, and mentorship headline a very long list of factors that a veterinarian job seeker will be weighing and where you can add value to your job description. Avoid vague descriptions (“good work-life balance”) and stick to concrete promises that you’re prepared to deliver on (“Good work-life balance ensured by a schedule of 32 clinical hours per week with an expectation of an approximately 40-hour work week including record-keeping and call-backs. All after-hours calls are automatically referred to local ERs.”).
Ownership is a powerful motivator. You should never give away equity on day 1 to a new hire (although giving them an opportunity to buy in at a fair valuation is a good option to consider) but including a small amount of vesting equity in your practice as a retention bonus is a great way to align incentives, improve retention, and start building your retirement/transition plan. Business owners have a fundamentally different relationship with their work and motivation calculus, so turning an employee into a minority stake co-owner unlocks a new level of willingness to “go the extra mile” and see a high-upside future for themselves with your practice. If you’re not prepared to give up true equity in your practice, performance-linked incentives like profit sharing or performance bonuses can sweeten a job offer by helping candidates see how their hard work will directly translate into financial success at your practice.
A happy colleague is the best assurance. If you have an associate who is satisfied with their job and willing to speak with applicants, set them up for conversation (private, in a forum where they can both be assured you won’t be listening in).
What can my practice do to keep up when I can’t easily “throw” more associate vets at rising caseload?
Most practices aren’t getting 100% possible utilization out of their veterinarians. Adding another veterinarian is an easy way to add a lot of caseload capacity in one fell swoop, but it’s not the only way to improve productivity. Fully leveraging your veterinarians with skilled support staff in sufficient numbers has been proven to increase productivity: An AVMA study concluded that the typical veterinarian's gross income increased by $93,311 for each additional credentialed veterinarian technician per veterinarian in the practice. As discussed above, incremental revenue is high quality revenue regardless of whether it comes from hiring an associate or from hiring more support staff to leverage the vets you already have. Hiring veterinary technicians is similarly challenging to hiring associates in the current job market, but “paying up” to a top market rate for adding a technician represents a smaller total expense compared to an associate veterinarian.
Most veterinary practices also have significant operational inefficiencies that get in the way of getting full utilization out of their veterinarians. Taking time to analyze and optimize the processes and workflow within your practice will allow you to accomplish more with the same number of staff and without asking them to work harder (you’re simply recapturing wasted effort on inefficiencies into productive work).
Operating a business is very difficult! Being “just good enough” as a business to stay afloat is a huge challenge, and only gets more challenging if you’re looking to truly reach your business’ full potential. Hiring and retention of key staff including associate veterinarians and licensed veterinary technicians represents an additional challenge for veterinary practice owners in the current job market. Fortunately, the AVP team and our bench of skilled advisors are experts at taking veterinary practices to the next level in their business operations. We specialize in forming equity partnerships with excellent clinicians, forming a symbiotic business relationship that frees up more time for practice owners to focus on ensuring their hospital delivers the best possible medical care while AVP focuses on maximizing business performance and profitability. Please contact me at bill@associatedveterinary.com to find out more about how our equity partnerships work and the value that AVP brings to the table as a partner.