By: Martin Traub-Werner
For many veterinary professionals, patient care takes precedence over numbers and practice profitability. But conversations around care and finances are inseparably linked. I recently presented a talk with my good friend and the founder of Ready Vet Go, Dr. Dani Rabwin, exploring the interconnectedness of care delivery, care costs, and the financial health of veterinary practices. Here’s a summary of our thoughts on the matter.
The five buckets: Understanding practice financials
Every dollar that comes into a practice is allocated to one of five buckets. Understanding where money goes can give non-leadership staff a valuable perspective on veterinary practice finances. The buckets include:
- Cost of goods sold (COGS): The cost to purchase items sold to clients
- Veterinarian labor: Compensation for veterinarians
- Other labor: Wages for the rest of the team
- Operating expenses: Rent, utilities, software, insurance, etc.
- Profit: Money left over for growth and reinvestment
In a perfect world, each of these buckets—including profits—would contain about 20% of the overall revenue. But in reality, a 12% to 15% profit is considered strong. Aside from wanting a larger paycheck, why should you care about profits? Practice profitability can profoundly impact the employee experience and the hospital’s ability to hire new team members, purchase new equipment, invest in education, and offer better services.
When veterinary teams understand how money flows through the practice, they’re better equipped to make decisions, advocate for raises or equipment purchases, and understand how charging (or not charging) for their services impacts the practice’s ability to make those things happen.
Where emotions and finances intersect
Veterinary work is inherently emotional. Clients are often overwhelmed or frightened by the decision-making process after receiving bad news or discovering that their pet is sick. But the actual delivery of veterinary care is clinical, not emotional.
Emotions can also extend to financial conversations with clients. Veterinary professionals want the best care for all pets, but that might differ from what the client wants. Separating emotions—without removing empathy—from conversations about care and cost benefits veterinarians and clients, and is necessary for the team’s well-being.
Your value as a veterinary professional is not linked to the choices your clients make. Your job is to provide pet owners with treatment options, discuss those options objectively, and let the client consider their circumstances and values to make a choice that works best for them.
The pitfalls of discounting
Team members may feel compelled to offer discounts based on assumptions about what a client can afford, disagreements among staff over pricing, or a lack of confidence in service value. But, discounting services might degrade their value in a client’s eyes, lead clients to expect lower prices, or cause resentments among team members on production-based pay.
The AAHA Chart of Accounts, our favorite tool to categorize transactions, provides a place to account for discounts, as they can significantly impact your hospital’s finances and practice profitability. Without tracking, you won’t know exactly how much discounting goes on under your nose. Once you know where and when discounts happen, you can start a conversation about policies and boundaries.
Aligning the team
All team members, including veterinarians, technicians, receptionists, and managers, must understand the clinic’s standards of care, financial policies, and philosophy to talk about care costs with clients. Without alignment, well-intentioned efforts can backfire. For example, team members who don’t understand why one veterinarian uses a different, more expensive protocol for treating the same condition as others in the practice might make assumptions about motivations or actively undermine that person when talking to clients.
Remind staff that you’re all on the same team. Open and ongoing conversations about practice profitability, patient care, service pricing, and clinic goals help clarify client communication. Shared expectations and the ability to separate cost discussions from emotions are also tied to well-being.
Care versus capital
Veterinary care and capital are not siloed topics—they are closely connected to one another. Profitability is necessary for practices to thrive, and the cost of care is rising. However, teams can still provide quality care to pet owners by having objective discussions, avoiding assumptions, offering a spectrum of care options, and understanding the practice’s finances.
You can watch the full webinar by visiting the ReadyVetGo website. To learn how care and capital influence team and client behavior and practice profitability, or to gain clarity on hospital finances that you can share with your team, contact VetBooks to schedule a meeting.
