12 keys to a great business plan

Rest assured, the next 10 years will be very different from the last decade for small businesses.

A veterinary practice is a quintessential small business and must make some adjustments if it is to remain successful.

It's true the economy has some people spooked, but for those of us who have been through some challenging times this is just another chapter in the book of "When the going gets tough, the tough get going."

We do not want to get caught sleeping like the Big Three automakers did in Detroit.

It is possible to thrive during a down economy. The key is to pay attention and not take success as a given right; instead, we must do the right things.

All things run in cycles. Business cycles generally have a lifespan of three to five years, which means that about every three years we need to re-address our business plan, mission and direction.

If you are successful and thriving today, it is because of the last three years. But what you are currently doing — even if you are successful today — does not assure your success in the next three to five years.

If we address and tune up our business plan annually, we are unlikely to be surprised with our success as we pass through these cycles.

Start with a self-assessment.

That means, in a sense, "fire" yourself. Yes, take a deep breath, then promise to rehire yourself after you answer the question: When you come back, what will you do differently?

This is a nice mental exercise to stimulate thinking and analysis of the current business plan.

Hard as it might be to consider, about 95 percent of our activities each day are rote.

Change that by examining your daily routine, and try to see where you can improve your professional skills.

Next, take a fresh look at where you are, where you're headed and whether you are on the track you want to be.

Determine where you want to be five, 10 and 20 years down the road, and put that in writing.

For any business plan, there are essential elements.

In clinical veterinary medicine, there are 12 essential elements, and things work best when all of them are in synch.

Let's walk through the essential 12 areas of the practice business plan:

The practice format

The format covers four areas: services offered (outpatient, inpatient, ancillary); means of conveying services (traditional clinic, outpatient, house call, specialty, central hospital referral); styles of fees (discount, middle market or premium); and the type of clients you want to attract (diligent, accepting, annoyed).

Now ask: What could you be doing differently with your practice format?

Outpatient services

These services are offered in a house call; at a specific outpatient facility that might have a basic waiting room, examination room, plus or minus a treatment room; or at a full-service veterinary clinic. The typical practice generates 70 percent of its revenue from the outpatient zone.

Now ask: What outpatient services could you add, which need more compliance and which needs to improve in market share?

Inpatient services

These services take place within the inpatient zone — the operating room, the radiology department, the wards, the dental area, the isolation ward, the critical care area, the laboratory.

Question: Which of them need further development? Which need greater client compliance?

Ancillary services

Ancillary services include boarding, grooming and over-the-counter sales. A question that often arises when times are soft is, "Should we add to or develop these areas?" That's because, once started, they are somewhat difficult to discontinue.

Question: Are ancillary services something you wish to develop or delete?

Client services

This area involves the "packaging" of offered veterinary services. It includes billing policy, hours, appointment policy, emergency services, follow-up services, walk-in services, urgent care, telephone services, Web sites, ethics and the all-important euthanasia service. The cleanliness of the facility is a client service.

Ask yourself: What will you do to improve customer service, aka client services?

Marketing

Veterinary practices are "destination" businesses, wherein customers "set out to go to the vet," as opposed to "top-of-the-mind" businesses, which rely on impulsive buying of their products and services.

In a "destination" business, clients must be informed of services being offered. Many of us believe the public already knows all that we offer. This may be true with spaying and vaccinations, but not so with more complex veterinary issues.

Advertising is generically considered marketing, but there is only a small bit of truth to the myth. Marketing is the entire spectrum of what we will call "client education" to inform potential purchasers of our services. Point-of-sale messages are essential.

Question: What will you do to improve consumer education about the services you offer?

Personnel management

First, do not lay off people. Remember that customer (client, guest) service begins with excellent support staff. Income is linear with support staff, so decreasing staff poses a danger.

Excellent service during the downturn pays dividends, because "winter is followed by spring."

Look to the ratio of staff to veterinarians. The national average is about four per veterinarian. Efficiency improves at eight staff members per veterinarian.

Look at front-office and soft-labor time vs. hands-on duty time. The personnel need to be in a ratio of about 1:1 to ensure a smooth-running practice.

Question: What will you do to improve personnel skills?

Operations

These are duties almost never seen by the client, but clients do see the results of poor operations.

Operations management is that part of the business plan that specifically addresses "how" things get accomplished.

It involves worksheets, patient-care protocols, credit policies and duty protocols, but these are only an introduction to operations management.

Question: What will you do to improve the operations of your practice?

Financial management

We tend to think of finances as expense analysis, but it is really income and expense analysis.

Despite the huge amount of information out there, veterinarians generally have a poor understanding of fixed expenses, variable expenses, veterinary salaries and gross profit from net profit.

A down economy is an excellent time to study these issues.

Ask yourself: What will you do to control fixed expenses and address restructuring debt to decrease the short-term burden on your practice?

Fees

Decades pass by, data are published, yet who among us has really considered the cost to produce an inpatient service vs. an outpatient service?

How much of a subsidy does the inpatient zone take from the outpatient profits?

In general, 70 percent of our income is from the outpatient zone, while 70 percent of overhead typically is in the inpatient zone. This is upside-down, and it's a practice killer at every level.

Challenge: Get a stop watch and start tracking the cost of labor to produce the 10 most common outpatient and 10 most common inpatient services. Then reset fees according to the cost of labor

Infrastructure

The infrastructure of a practice includes the basic components of sanitation, maintenance and inventory.

When neglected, this area manifests itself in offending smells, peeling paint, poor landscaping and traumas from malfunctioning equipment and bloated inventory.

Ask: What will you do to improve the infrastructure management of your practice?

Quality control

Whoever heard of quality-control management in a practice?

The quality-control area of hospital management addresses medical and customer-service issues.

The concept behind quality control is, "That which is monitored is addressed."

Therefore, monitor medical records, worksheets, follow-up appointments, differentials, treatment-care plans, fee collections.

Yes, monitor monitor monitor. Many times just monitoring an issue is enough to correct it.

Question: What do you think is currently the weakest part of your practice?

When you decide, then set up a monitoring system to address it.

These 12 essential elements are the first 12 chapters of the two-volume set: Management for Results & More Management for Results. If you have a copy, get it out and follow along.

Next month: 10 specific steps to take during a down economy.

Dr. Riegger, Dipl. ABVP, is the chief medical officer at Northwest Animal Clinic Hospital and Specialty Practice. Contact him by telephone or fax (505) 898-0407, Riegger@aol.com , or www.northwestanimalclinic.com. Find him on AVMA's NOAH as the practice management moderator. Order his books "Management for Results" and "More Management for Results" by calling (505) 898-1491.