Demographics: science of success

About the middle of the last century, shortly after the second consecutive war that was designed to prevent all future wars, the brain trusts of the universities of our land decided to add a hefty scoop of veterinary colleges to their intellectual diets.

This was not so much altruistic as it was to generate income and addto the alumni support for their alma mater.

Gejillions of veterinarians passed from academia to the trenches of ourincreasingly pet-fixated society creating a glut that began in the '70sand continues today. Somewhere into the late '70s the world of advertisingopened up to our profession. Prior to that, newly hatched graduates maybe astonished to hear, the sending of a reminder for vaccination was groundsfor a hearing before an ethics committee. The result was a highly competitivemarket, into which, for the first time since Noah did his animal husbandrybit, the words "discount" and "coupon" were introduced.

Since then, progressively, insurance companies entered the market andWall Street consolidated to skim some of our profession's deservedly earnedprofits off the top.

Retiring boomers

Those of our colleagues who graduated in the '60s, '70s and '80s -theBaby Boomers-are now at retirement age. In fact, the number of retireesis not quite to the level of newbies entering active practice. (To staveoff a dozen letters to the editor, the term newbies is affectionate, aswe all was one.)

In addition, it is evident that 80 percent of all future newbies willbe of the non-testicular variety. They are expected to labor some 30-50percent less than the testicular version, which means that the 40-hour workweekmight be in sight in the foreseeable future.

Most of these new practitioners of either variety have expressed theirlack of desire to purchase a practice but to seek employment as employeesor independent (and that is an understatement) contractors.

What's it mean?

What does this mean for our profession? Huh? Well, the veterinarian/patientratio shouldacouldawouldaoughta diminish toward rightsizing.

The recession is still playing havoc with that ratio, as the number ofclients seeking our services has dropped 20 percent at the same time. However,when happy days are here again, there should be fewer full-time equivalentveterinarians and that will allow the law of supply and demand to dry offand function after the decades of flooded workplaces.

Then, for the first time in a quarter century, veterinarians will beable to set and get fees that will support their hospitals and maybe, justmaybe, hire staff for more than just minimum wage. Discount vaccinationset al will fade into the pages of yesteryear.

Buyer's market

That's the good news! The bad news is that this demographic shift ismoving the practice sales market from a seller's market to a buyer's market.Just as thousands of hard working, worn down, burned out colleagues beginto look longingly at the world of retirement and nursing homes, and tryto sell their practices, this shift is causing the value of veterinary practicesto fall.

The totally wrong estimation of a practice's worth of the '80s and '90swas one year's gross. The totally wrong estimation of a practice's worthof this new millennium is 70 percent of one year's gross. Both are entirelywrong, even as a starting point, and just as damaging as the nonsense thatsays "one year of a dog's life is seven of a human's." The factis that the value of a veterinary practice today, even in the minds of thosewho must make a rule just to have a rule, has depreciated 30 percent.

Why? Why not? It's just easier today to start a practice from scratchthan it was in yesteryear. Just open up a block from the oldest geezer intown and when he/she has to close because no buyer wants to buy an old practicewith marginal profits and new competition down the block, the newbie willget those clients anyway! They will succeed!

Clear impact

The impact on retirees is clear. Unless their practice has optimal management,netting 35 percent or more, it will be difficult to sell at all, at anyprice.

An optimal practice is one that is well managed, with all of its systemsfunctioning well, does no discount procedures, has high gross and net revenues,and uses state of the art equipment.

A quality practice is always marketable, commanding a fair price becauseit generates a fair profit with little or no risk to the buyer.

Science of success

Demographics is the science of success for all businesses today. Marketsare defined by who is buying and what they can afford. Veterinarians whouse demographics to market their services almost invariably see immediateincreases in bottom line revenues. The days of setting a fee for a practiceor a surgery or a prescription as equal to what the practice across towncharges or what the veterinarian you bought the practice charges are over.

Isn't it time you visited the AVMA's Web site for veterinary economicissues? Perhaps you have an attractive corner picked out and a sign madesaying "Will spay for food."

Dr. Snyder, a well-known consultant, publishes the Snyder AdvisoryLetter, a newsletter for practice productivity. He can be reached at 2895SW Bear Paw Trail, Palm City, FL 34990; (800) 292-7995; vethelp@bellsouth.net;FAX (772) 220-4355.