Steer your practice in the right direction

When asked whether they'd choose to own a practice again, 98 percent of participants in the 2005 Well-Managed Practice Study say they would. The more intriguing question posed to these 100 successful practice owners, many of whom have owned for 20 or more years: What would you do differently? Almost universally, they say they'd do things sooner. They'd focus on developing management skills earlier, hire management consultants sooner, not procrastinate when making changes, and plan for growth more proactively by expanding and enhancing their facilities earlier.

Why didn't these practice owners take these steps sooner? As you know, dealing with the daily issues of practice and the emergencies that arise can and will exhaust all of your available time—unless you make planning for the future a priority. And that's why you want to keep your eye on the horizon.

Ask yourself: What's your practice's purpose for the long run? Your purpose helps define the work you do to build your practice's financial strength. How do you determine your purpose and build team members' awareness of the goals you set? Strategic planning.

Figure 1: How will your practice grow?

While many practice owners are just warming up to the idea of strategic planning, 71 percent of the 2005 study participants have made the commitment. And when we asked what their biggest positive result from strategic planning was, their answers were overwhelmingly consistent:

• A clear plan of action helps owners more effectively respond to changes

• Better team focus on practice goals

• Better follow-through on implementation of new strategies

• Improved teamwork and communication throughout the whole clinic team

• More clarity about what they want to accomplish, how they'll get there, and how they'll know they're off track.

As a result, Well-Managed Practices (WellMPs) enjoy an outstanding success rate in accomplishing what they set out to do. As Dr. Leo Bishop of Animal Hospital of Nashua in Nashua, N.H., says, "Strategic planning was the foundation of our success in expanding our facility by 12,000 square feet. We wanted to accommodate our growing general and emergency practice and to start a referral practice." Regardless of your vision, mission, or goals, it's likely that financial management and decisions related to fees, revenue, expenses, facilities, equipment, and technology will be part of your plan for getting there.

Navigating strategic planning

Setting appropriate fees

Owners of WellMPs build their financial strength with a sense of purpose and within the framework of their overall strategic planning for the practice. For example, when making decisions about fees, they consider their clients' perspectives.

"For clients, consumption isn't an isolated moment of decision about purchasing a specific service or product, but a continuing process," says Dr. Sheldon Rubin of Blum Animal Hospital in Chicago. "Every time we come in contact with a client, it's an opportunity to validate the client's decision to choose our practice and pay our fees. During the strategic planning sessions for our practice, we define everything we do from a client's perspective, and then look for ways to improve every single day, so clients continue to return to our practice."

Figure 2: Benchmarks for operating expenses

WellMPs avoid across-the-board fee increases. Instead, owners review fees twice a year and selectively determine which fees will remain the same, which they'll adjust, and how much of an adjustment is warranted to attract the target client base identified in their strategic-planning sessions.

"We know that setting fees appropriately and charging for all of the services we provide is critical to our practice's financial success, and it gives us the resources we need to continue to elevate patient care," says Dr. Deborah Beck-Ross of Penn Animal Hospital in West Grove, Penn. "We're also aware that if we don't continue to raise the bar, there'll be a limit to what clients are willing to pay. So our strategic plan includes a decision to attentively monitor the quality of client service and the level of patient care to ensure that both reflect our fee structure."

Figure 3: Planning for growth

Growing revenue

Like fee setting, revenue growth requires purposeful action and decisions, which doesn't happen without strategic planning and thinking, says Dr. Roland Lenarduzzi of Manvel Animal Clinic in Manvel, Texas. "In the good old days, there were fewer competitive issues, and the client base was very loyal. It was simpler," he says. "Now with the information and technology resources available to clients, increased bonding with patients, employment issues, and more competition, revenue growth requires our ongoing attention."

The most exciting thing about revenue growth is that there's no limit. Yes, you may set some self-imposed limits on certain components. But there are so many facets to revenue growth, the potential is almost unimaginable.

For example, if you find that you've topped out on the fee side, you can expand your services, and you can increase your client base. If you've got more clients than you can handle, you can hire another veterinarian.

There's no one answer to revenue growth because it's a web of interactive forces. That's one reason you need a purposeful revenue strategy. Your strategy will guide your decisions about which areas to pursue.

And even in a market with a high level of competition, a practice can differentiate itself. In this year's study, participants shared some unique ways that they reach out in their communities and bond potential clients to their practice. For example, one practice conducts a lunch-and-learn where the veterinarians visit a local business and educate the employees over a brown-bag lunch. This technique raises community awareness of their practice and about animal health care in general. Other practices sponsor fundraisers for the humane society; sponsor local sports teams; participate in community programs, such as Adopt-a-Highway; write articles for the local paper; and serve as the local television station's veterinary reference for news stories.

The 2005 Well-Managed Practice Study examines the results strong practices achieve when it comes to fees; revenue; expenses; facility, technology, and equipment; and strategic planning; and sets benchmarks for other practices that strive to provide high-quality care and a good work environment. The authors also offer recommendations and tools to help you reach your practice goals. Call (800) 480-0579 or visit www.vmpgstore.com for more or to order.

There are a lot of great ways to promote your practice. But before you race out to try them, sit back and think about how you want your practice to run. Do you want to build a big practice with many people, or do you want it to be small and cozy? Do you want to welcome a continuing stream of new clients or do you want to see the same clients several times a year? The answers to these kinds of questions should guide all of your decisions. (See "How Will Your Practice Grow?" on page 60 for more.)

Tracking expenses

The process of strategic planning lets you and your healthcare team clarify your vision for the practice. Then you'll strive to build that vision together. How does this planning impact the day-to-day activities of your practice? How much will it cost to achieve your vision? How do you know when you're on track?

"Any of us who've experienced life when cash flow is inadequate, versus life when cash flow is good, know that many other pieces—unrelated to finances—fall into place when cash flow is healthy," say Drs. Alex Byron and Michael Hood of Greenfield Animal Hospital in Southfield, Mich. "So as part of our strategic planning, we develop a budget that lets us quickly see when our expenses fall out of line. This approach also lets us make educated decisions about the changes we make."

One key measurement of expense management is the profit-to-revenue ratio—the percent of revenue that remains after all operating expenses have been paid, before compensation to owner and associate veterinarians. WellMPs are achieving profit-to-revenue ratios of about 37 percent to 41 percent. (See "Benchmarks for Operating Expenses".) The expense and profit statistics for the 2005 WellMPs look like this:

Tracking expenses and profits helps you get past such problems as trying to figure out how to make payroll and how to develop strong healthcare teams with significant tenure. The end result: You'll enjoy a more positive work environment that's focused on the future instead of constantly battling today's cash-flow issues.

Leveraging your facility, equipment, and technology

The 2005 WellMP Study participants recognize that they need to reinvest to keep their hospitals moving forward. As one respondent says, "Our goal is to leverage our facility space effectively and use technology and equipment to increase our practice's efficiency and make it easier to practice medicine. We let technology give us more time to do what we love most: practice medicine."

Your facility is the first and last thing clients see when they visit your practice. Imagine their impression if it's a cramped space. Imagine the inefficiencies when clients and doctors are ready to start patient exams but are forced to wait longer because there aren't exam rooms available.

The average WellMP has about 5,600 square feet and four exam rooms. Several are planning remodeling and expansion projects that nearly double their size.

Do you feel your facility holds back your growth? Ideally, you'd start planning about five years before you think you'll need an expanded facility to determine how much you'll need to grow your revenue and transaction numbers to meet the new financial demands. (See "Planning for Growth" for more.)

Your technological solutions—or lack of solutions—also could be holding you back. Yet many veterinarians resist change in this area, either because it's an unknown or they believe it's a nuisance to set up. But the truth is, updated office technology offers improved efficiency—and can reduce frustration for team members and improve clients' perceptions of your practice. For example, practices can communicate with clients more effectively by using each client's preferred approach and by reaching them at times when they're available and receptive. This improves your clients' scheduling rates for recommended health care.

Seventy-seven percent of WellMPs use the Internet to offer client education, and 20 percent of respondents with Web sites let clients schedule appointments online; 12 percent let clients access patient information. Imagine the time your receptionists could save! Granted, not all clients will use the Internet, but it's likely you'll see more and more of your younger client base expecting Internet capabilities so they can do business with your practice.

As part of your strategic plan, decide which technologies will meet your strategic goals. These decisions will guide you and help you make wise investments for the future of your practice.

Starting with strategic planning

All decisions—whether about fees, revenue, expenses, facilities, equipment, or technology—start with strategic planning. And 71 percent of WellMP participants schedule an annual strategic planning meeting off-site, with follow-up meetings throughout the year to monitor implementation and measure progress.

While owners are the key participants, 52 percent of practices include associates and 72 percent include managers in the meeting—a positive trend since the implementation of the plan involves everyone from ward attendants to doctors. In fact, the most frequently stated benefit of the strategic-planning process is that everyone works better together. As one participant reported, "The communication that takes place because we sit down and talk about ideas and goals for the future of the practice is the greatest benefit. We're now all working toward the same goals."

Owners of WellMPs know their visions are lofty and their entire staff must be onboard to achieve their goals and address the internal and external challenges they identified as potential roadblocks during the strategic planning meeting. And they say the effort to plan is well worthwhile. Just consider what these WellMP owners had to say when asked: "What's the biggest positive change in your practice as a result of strategic planning?"

• "We developed a protocol for increased staff training, delegation, and accountability," says Dr. Earl Cornprobst and Cheri Cornprobst, hospital administrator, of Temperance Animal Hospital in Temperance, Mich.

• "We made the decision to enlarge our facility, which lets us spend more time with our clients and do more for patients," says Dr. Pamela Ogden of Oakwood Hills Animal Hospital in Eau Claire, Wis.

• "We designed a better workflow system for doctors and staff members," says Dr. Peter Farrell of Burnt Hills Veterinary Hospital in Burnt Hills, N.Y.

• "We have a system for accurately projecting doctor and support staff needs tied to client demand for services," says Dr. Richard Frey and Jon Cunnington, hospital administrator, of Loomis Basin Veterinary Clinic in Loomis, Calif.

• "We developed an improved method to compete with Internet pharmacies," says Dr. George Richards of Vermillion Veterinary Ventures in Danville, Ill.

• "Strategic planning helped us ensure a successful ownership transition," says Dr. Jeff Grady of Grady Veterinary Hospital in Cincinnati.

• "We've added 24-hour on-call emergency services," says Dr. Allen Dunbar and Chanda Holschbach, hospital administrator, of Packerland Veterinary Center in Green Bay, Wis.

• "We changed our surgery schedule from mornings on most days to a full day for doctor surgery. Our increase in gross revenue for that year was the highest it's ever been. In summary, we became more efficient with doctor time," says Dr. Gary Olson of Clinton Parkway Animal Hospital in Lawrence, Kan.

You also have the tools to make your practice whatever you want it to be. But having a mission that's current, alive, and well isn't enough to keep everyone in your practice focused and working toward the same goals. That's where strategic planning comes in. Start now to draft your blueprint for success.

Cynthia R. Wutchiett, CPA

The bottom line

All decisions start with strategic planning. And the more planning you do, the better your practice's health. Two key benefits:

• Better focus on key goals

• Improved teamwork and communication.

Veterinary Economics Financial Editor Cynthia R. Wutchiett, CPA, is president of Wutchiett Tumblin and Associates in Columbus, Ohio. Denise L. Tumblin, CPA, is co-owner and vice president of Wutchiett Tumblin and Associates. Susan J. Flemming, MBA, is a valuation and management consultant with Wutchiett Tumblin and Associates. Jennette R. Lawson, CPA, is a consultant with Wutchiett Tumblin and Associates.