3 tips to help you analyze your income
Veterinarians: You look forward to that paycheck, but do you look at anything but the amount? It's time to study your salary before you spend it.
Whether you're a veterinary associate or owner—paid on salary or on production—it's important to review how much you're making and why. Veterinary Economics Editorial Advisory Board member Gary Glassman, CPA, shares his insights and formulas on how to understand your income.
1. If you're an associate, you may not have much control over personal income. That is, unless you're paid on production. Once on production, your compensation is tied to the amount of veterinary income you produce and you typically have a better chance to optimize your earnings based on the amount of hours you work. If you spend time studying your patients and educating your clients on appropriate care, you're more likely to produce a better revenue base. This revenue base translates to even more income for you.
2. If you're paid on salary, it's good to know that your wages are in the correct range for your market. Calculate your wages as if you were paid on production even if you're not. In order to do this, ask your owner to share your production numbers. Once you have that number, multiply that production by 20 percent to determine what your market pay should be. The range of percentages used in production pay is based on how much a practice owner provides in benefits. The more benefits you have, the lower your production pay percentage. Total compensation including benefits should not exceed 25 percent of veterinary production for a practitioner working in a small animal hospital.
3. If you're an owner, your personal earnings depend on many factors. Forexample, you may get paid for your veterinary services and management time, along with a return on investment (ROI) dividend for the privilege of ownership. If you can distinguish these components, then compute what portion of your pay represents production and management to determine the true profitability of your hospital. Pay for veterinary services should be around 21 percent of your production and not much different than what an associate doctor would earn. Management pay can be anywhere from 1 percent to 4 percent of hospital sales, depending on how much other management assistance you have. If your hospital employs a full-time hospital manager paid approximately 3 percent of the gross income of the practice, then your management pay would be 1 percent of the gross revenue. Earnings beyond these two components are considered an ROI, and that amount is an integral part of determining the value of your clinic.
