Q&A: Research before you build a veterinary practice

I'm looking to find out how many veterinary clinics can thrive in a specific city. How can I figure this out?

There are three ways to go about calculating how many veterinary clinics can thrive in a certain sized city, say Monica Dixon Perry, CVPM, of VMC Inc. in Evergreen, Colo., and Mark Hafen, AIA, a Veterinary Economics Editorial Advisory Board member and founding member of Animal Arts architecture firm in Boulder, Colo. Your first step is to look up AVMA studies on pet statistics in your area and answer the following questions about the city:

> How many households have a pet?

> How many of those households visit a veterinarian?

> What's the average number of veterinary visits annually per pet-owning household?

> What's the average expenditure for veterinary services per year per household?

> What's the average expenditure per visit?

Now start calculating. Here are three ways to figure out how many clinics can thrive in a certain city.

1. Determine the amount of income derived from a population. Let's use AVMA statistics for a city with a population of 40,000 people. Each household contains an average of 2.7 people. That comes to a total of 14,815 households in the city being researched.

> According to the AVMA, 59.5 percent of the 14,815 households own pets, which means 8,815 households own a pet in this city being researched.

> 76.5 percent of households with pets take their pets to the veterinarian, which means 6,743 households—or 18,207 people—take their pet to the veterinarian.

> Each household spends $366 annually on veterinary care, which means $2,467,938 total is spent every year.

> Let's assume that a full-time equivalent FTE veterinarian generates between $500,000 and $800,000 in gross revenue annually. (Typically an associate veterinarian grosses approximately the lower number, while veterinary owners gross closer to the larger.)

> On the low-earning end of the earning spectrum, $2,467,938 ÷ $500,000 = 4.9, which means 8,815 households (or a population of 40,000) could support 4.9 FTE veterinarians. On the high end of the spectrum, $2,467,938 ÷ $800,000 = 3.1, which means a city of 8,815 households could support 3.1 veterinarians.

Summary: Based on $500,000 to $800,000 in revenue, this city of 40,000 people could easily support between 3.1 and 4.9 FTE veterinarians total.

2. Determine the number of veterinary visits vs. appointment slots per practice. Using our previous example, a city has a population of 40,000 and 8,815 households, 6,743 of which frequent a veterinary practice.

> The AVMA tells us each household visits the veterinarian 2.8 times per year, totaling 18,880 visits per year.

> If we assume a five-day workweek with 15 to 20 appointments per day per veterinarian, the average number of appointments per year would be 3,900 to 5,200, or an average of 4,550 appointments.

Summary: These calculations tell us that 4.1 doctors could stay busy in a city of 40,000.

3. Determine the number of active patients per doctor. Sticking to the city of 40,000 people where 6,743 households frequent a veterinary hospital. According to management consultant Mark Opperman, CVPM, owner of VMC Inc., you need 1,900 to 2,000 active files to support one FTE veterinarian. The total number of active files equals the number of pet-owning, veterinarian-visiting households in the specific city.

Summary: With 6,743 active files in this city, the population can support 3.4 to 3.5 veterinarians.

These specific numbers are not magic. Look at the balance of pet owners in your city, the spending patterns of your population, and your ability as a veterinarian to produce the work. "A good veterinarian is part entrepreneur. You have the ability to develop a strategic business plan that will let you optimize the potential of any particular market," Hafen says.