Businesses need key parameters

All managers need to monitor certain key indicators that tell them if their business is meeting their goals, and if it is moving in the right direction for the future.

Dairy practitioners have widely divergent goals, so it is difficult toidentify a list of key parameters that are appropriate for every practice.However, profit is needed in almost every situation if the business is goingto continue, and a stable or expanding client base is also crucial.

The following items are ones that I think every owner or manager shouldtrack at least monthly. I have suggested some goals that were appropriatefor me when I was in practice, but your own numbers may differ dramatically.The initial value is less important than how it moves in the future. Knowingthis information will help you know where your practice is headed, and allowyou to make decisions to alter that course if needed.

Gross variables

1. Gross income per doctor per day: The actual number will varya great deal among successful practices, depending on the level of dispensingthat is done. My goal was $1,000 a day, with roughly one-fourth comprisingdispensing or lab fees and the rest service.

Suggested goal: $1,000 gross income per doctor per day.

How many hours?

2. Billable hours per day: To know this number, you must identifyan hourly rate for your time. In most cases, using this rate as the basisfor charging is the best way to bill for your service, but in any case itis needed to determine your billable hours. Take your daily service incomeand divide it by your rate, and you will see how many billable hours yougenerated that day. This is essentially a measure of your productivity.Do not include weekends or holidays, unless you strive to work a full dayon those occasions. Personally, I like to see very low numbers on thosedays.

Suggested goal: Six to seven billable hours per doctor per day.

Tracking total hours

3. Percent billable hours: While total billable hours measuresproductivity, the percent of total hours worked measures efficiency. Youwant to generate high billable hours by being efficient with your time,not by working long days. To know this figure, you need to know how manytotal hours you worked. Include driving time, truck stocking time, telephonetime, and desk cleaning time -in short, all working time.

Suggested goal: 65 percent of total hours worked.

Production medicine cost

4. Percent production medicine: This value will differ substantiallyfrom doctor to doctor, and from practice to practice. The initial valueis less important than the trend it follows. I believe the most secure practicesare those that provide both production medicine and sick animal services.Those that provide mostly one or the other are more susceptible to changesin client philosophy and the overall dairy economy.

A challenge with this measurement is defining what constitutes productionmedicine. My answer is that production medicine services are those thatimpact herd management vs. individual animal management. In general, reproductiveexams are not production medicine, as the results of a palpation usuallyimpact that cow, but not overall management. The same principle appliesto sick animals, surgeries, dehorning, etc. By contrast, record review,discussions of timed insemination programs, ration balancing, milking equipmentevaluation and housing discussions impact the entire herd, and fall underproduction medicine.

Suggested goal: 20 ­ 50 percent production medicine.

Sustainable clients

5. Percent of net from sustainable clients: This will be kindof a "soft" number. To derive it, you will need to look over yourclient list and make a judgment call about their future. Then make a realisticestimate of the percentage of their gross billings that represents profit.You can then build a spreadsheet that would track this number on a regularbasis.

Suggested goal: 80 percent of net income from sustainable clients.

Practice mission

6. Is the practice mission being fulfilled? Obviously this isnot a parameter that uses hard numbers, but rather causes you to step backand ask yourself if the overall strategy is working. If the first five parametersare right on, but you are frustrated and tired, then changes are due.

Many of you will take exception to both the indicators I listed, or thevalues I suggested. That is a good thing. It is important to identify afew key measurements that will tell you if you are meeting your goals, ormoving in the right direction. They should be important to you, and relativelyeasy to monitor on an ongoing basis. You should set-up programs that willgive you these numbers consistently each month. Your billing forms may needto be modified to make this easier.

Of course it does little good to produce the numbers if you do notuse them to make changes. If your percent billable hours is low, then determinewhere you are wasting time or giving service away. If production medicineis non-existent, find a way to get some programs started.

Know your business

The goal is to give yourself the means to know what is happening inyour business and to make adjusments in a timely manner, rather than beingvaguely aware that things are not as they should be, and eventually havingto lay off staff, move or do work you do not enjoy.