The answer is ‘less than 20% of revenue.’

Apr 26, 2017 by Edward L. Blach, DVM, MS, MBA

One of the most frequent questions I get from practice owners and managers is 'how much inventory should I have in my practice?'  This is a very important question, because Direct Costs (inventory, lab costs, radiology costs, food and bedding, mortuary costs) represent the second highest expense are of most practices.  

There are many different types of practices.  Some serve companion animals, some serve equine patients, and others serve many different species.  Some are specialty centers, others are 24/7 emergency centers, and still others are primarily wellness providers.  All of these criteria will impact the makeup and structure of the practice, as well as what is needed for inventory.  Therefore, every practice must make its own decisions that will allow them to serve their patients and clients in the manner they want to do so.

However, in general, for most practices, Direct Costs should represent less than 20% of revenue.  This is a good target for most practices to establish as their normal cost in establishing a healthy and profitable practice.  Emergency clinics may have less inventory, because they don't have to stock a lot of flea and tick medications or foods.  In general, though, keep your Direct Costs under 20% unless you have specific access to benchmarks from practices similar to yours that tell you differently.

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