Is future retirement controlled by guilt today?

I am always amazed at the great majority of our profession who cannot seem to grasp the concept that their practices are businesses that are supposed to make a profit! Sure, practice feeds our egos, but profits feed our families.

One veterinarian told me he took home $90,000 from a $300,000 practice and only worked five days a week. He was shocked, to say the least, when I advised him that his practice would sell for less than $100,000, if he could find a buyer at all. He could not plan any retirement based on selling his practice.

Located at a shopping center, there was no appreciated property to add to his wealth or lack thereof. His $300,000 gross included some $60,000 in diets, grooming and over-the-counter products, leaving just $240,000 in professional income. Certainly, in the event of ill health, he would have to pay 25 percent of $60,000 to a rent-a-vet to cover the practice. Adding benefits including Social Security and Medicare taxes would add another 20 percent, bringing his total rent-a-vet costs to $72,000 and leaving ($90,000 minus $72,000) or $18,000 net profit (before taxes.) This practice with its 30-percent-net before veterinary salaries would be appraised at about four times net or $72,000 at the most.

Of course, his equipment would have some value if it hadn't been 20 years into a 15-year useful life.

What really shook him up was the question: Do you have $2 million saved for retirement? He did not!

Why $2 million? Today, you are lucky to get a 5-percent return on your money.

Two million dollars at 5 percent brings in an annual stipend of $100,000, which, in five years, will buy what $81,000 will buy today.

The same $100,000 in 10 years will buy what $67,000 will buy today.

Of course, there are Social Security payments at retirement. That's no reason to rejoice. This guy is a bachelor, and the best he can hope for is $1,800/month or $22,000 per year. In 10 years, that would be about $14,000 in today's purchasing power.

So if you take the $67,000 in purchasing ability and about $14,000 per year in Social Security benefits, you total $81,000 a year in real money to live on.

Any accountant can chop this up, but you simply cannot depend on any comfortable retirement on less than $2 million in the bank.

So, how do you do it? How do you save enough to retire on, especially if you have kids to feed and put through college?

You must plan, just as you must plan for profits. You have to designate profits to go for retirement as well as plan for college and all the expenses that comes with.

Where must those profits come from? Answer: your clients.

You cannot beat up your staff any more than you already do. They are not likely to embrace a deduction from their wages for your retirement!

You can't beat up your suppliers to give you lower prices for drugs and supplies so that you can put the extra savings toward your retirement fund.

So, your clients must pay for your retirement. They must pay ever-higher fees as inflation brings your costs of business ever higher. There is no solution in sight.

Thirty years ago, I had the highest office call in town at $6. A case of dog food was $8.

A gallon of gasoline was a quarter. New grads were lucky to get $15,000 their first year. What makes you think that your costs will ever stabilize?

Do you know that every supermarket chain prices their items by zones? Price a half-dozen items at your favorite supermarket. Now go across town to another store in the same chain. The food prices will be higher or lower according to the average family income within a three-mile radius of each store. The same jar of jam might be 10 or 20 cents higher or lower at a different branch of the same company. Why? Because it works.

It works for pet practices, too! That's why we have prepared fee schedules for more than 3,000 small animal practices to date. It works. Stop trying to be the same as the next guy. It does not work!

So what is the guilt theory? Too many practitioners charge too little because they cannot keep up with the literature as fast as it arrives. That's natural, and no one really expects you to. It is impossible and no cause for guilt. What physician even tries to keep up with it all?

The only thing you need to know is the rule of three. If there is a third visit for the same condition that has not responded to usual and customary treatment, it is time for re-evaluation. If the lab you used for diagnosis was in-house only, a commercial lab profile is in order. If that sheds no light, then it is time for the pet to be referred to a specialist. There is never any guilt in referral when you do your best!

Dr. Snyder, a well-known consultant, publishes Veterinary Productivity, a newsletter for practice productivity and is available for in-practice consultation. He can be reached at 2895 SW Bear Paw Trail, Palm City, FL 34990; (800) 292-7995; vetprod@bellsouth.net; FAX (772) 220-4355.