What are you really bringing in?

Many years ago, in the good old days of the late '70s, when inflation was 15 percent and the gas lines were long, I got a call from a practitioner from the great and sovereign state of Ohio.

He said, I heard you at the state meeting and I've enjoyed your column in DVM Newsmagazine. I'm in Florida for the next few days, and I'd like to take you out to lunch. Translation: I've spent a lot of money on this vacation and if I meet with you, I can write off the trip as tax deductible.

That was all right for several reasons, not the least of which is that I get hungry sometime around noon anyway.

We went to a very famous delicatessen about a mile from my hospital, and we settled in and ordered. After some polite chit-chat, he said … "I'm not trying to pump you for free information, I make a very good living in Ohio."

"Oh," said I, a veteran of many such conversations, "what's a good living in your area?"

Bringing in the bacon

He replied, "I make about $75,000 a year." (Remember, this was 25 years ago and that's pretty darn good in my book.)

"Not bad," I replied, "but, by the way, how much is rent in your area?"

His answer was simple. "I don't pay rent. I own my building, and it's all paid off!"

I continued my inquiry, "Well, how much do other landlords charge for rent in your area?"

"That's easy… about $12 per square foot," he said.

"How big is your place?"

"With boarding, 4,000 square feet," was his answer.

"So that means that if you were paying yourself rent, you would pay $48,000 a year and your total compensation is $75,000, so you actually earn as a veterinarian $75,000 minus $48,000 which equals $27,000 a year."

Call the paramedics

I got a little concerned as he stopped breathing, at the same time a mouthful of chopped liver and corned beef sandwich was migrating down his esophagus, but he got his act together and realized he had lost his appetite.

It had just never dawned on him that his associate, just four years out of school, was making more professional income than he was.

I've had about 300 repeat episodes of this kind of conversation over my 30 years of lunches with colleagues, and I keep asking myself why?

Not why don't veterinarians examine why their income is so low, but why do they all lose their appetites when they realize how many hundreds of thousands of dollars they have lost by not having good financial advice?

Getting past the W-2

The sad fact is that veterinarians make such a poor living that they are unwilling to look at anything but the total dollars on their W-2.

Looking at this another way, one could say that if he or she were paid $75,000 as a veterinarian, his or her building was an investment of about $300,000 for which he was receiving no interest at all.

There was a happy ending to this story. As I consulted in his practice and got him about 30 percent more productive, he sold the practice 15 years later at about $300,000 more than he would have received if he had not had that lunch in Florida.

Examine the numbers

Take a look at your own numbers.

Every practice owner should receive as proper compensation 20-25 percent of personal production (not boarding or OTC) plus 12-15 percent of the value of his/her equity in real estate and equipment, plus 10-15 percent of gross revenues as compensation for management risk.

Of course, you could just add your last year's actual overhead with 10 percent added for inflation. You would then have a projection of your total needs for the next 12 months. If you divide the total by 95 percent of the number of transactions you have been receiving for the past 12 months, you will have a projection of the Average Transaction Fee you need to attain success in the next year.

Of course, you really do not have to do this mathematical nuisance problem. Perhaps you just don't have the time or energy for this kind of nonsense.

But then again, there is no requirement for you to live better than you are or even to retire with a good pension.

While I still have your attention, I must tell you that I've gotten a half dozen calls a week about PetMed Express and PetMeds.com. Save yourself a phone call and just log on to veterinaryproductivity.com for the solution to this increasing problem.

See ya next month!

Dr. Snyder, a well-known consultant, publishes the Snyder Advisory Letter, a newsletter for practice productivity and is available for in-practice consultation. He can be reached at 2895 SWBear Paw Trail, Palm City, FL 34990; (800) 292-7995; vethelp@gate.net; FAX (561) 989-8558. M