Does your revenue carry your team?

WELL-MANAGED PRACTICES SPEND AN AVERAGE of 22 percent of revenue on nonveterinarian salaries according to the 2006 Well-Managed Practice Study conducted by Wutchiett Tumblin and Associates and Veterinary Economics. Experts say that the industry average falls between 17 percent and 23 percent.

Anything lower than 16 percent, and you're probably not paying your team members enough, says Veterinary Economics Editorial Advisory Board member Dr. Karen Felsted, CPA, MS, CVPM, a consultant at Brakke Consulting Inc. in Dallas. "While you want most of your expenses to be as low as possible, that's not necessarily the case with team members' salaries," she says. "If all you're paying for are warm bodies, you'll get warm bodies."

Of course, Dr. Felsted says, pay rates fluctuate among communities due to the cost of living. So consider these percentages as a starting point in your analysis. "Sixteen percent could be a high number in Timbuktu, Texas, but it would be low in Dallas," she says.

Your turn

Dr. Felsted recommends considering the ideal number of team members as well as how much you're paying them. Maybe you've got the perfect team in place but you compensate above and beyond the norm because you want to keep them around. "If you're a primary care practice spending 25 percent of revenue on nonveterinarian salaries, you may be overpaying for the production you're getting in return," she says.

On the other hand, Dr. Felsted says if you have a lot of staff members and you're spending less than 16 percent of revenue on their wages, you're probably not paying them enough. "You might need a smaller team of higher-quality individuals rather than a larger team earning lower wages," she says.