Frequently, practice owners and managers inquire about how to move their practice forward. How do I grow our practice? How do we afford to hire another veterinarian? How do we add new services to satisfy the demands of the market?
All of these questions are answered similarly. Improving profitability will provide the ability to accomplish all of these objectives. Profit cures a lot of ills. It isn't and shouldn't be villainized, as profit is what delivers better medicine, better jobs, new equipment, new facilities, and opportunity.
To improve profit, focus first on managing labor and inventory. Align labor costs and cost of professional services (inventory, radiology, laboratory, feed and bedding) with revenues. Labor costs are typically approximately 30% to 45% of revenues in the healthiest of practices. COPS are typically 15% to 20% of revenues in healthy practices. These two expense categories represent approximately 45% to 65% of practice expenses as a percent of revenue in healthy practices, depending upon the structure of the practice. By focusing in these areas, you will improve profitability which will provide the cash flow and profitability to help accomplish the practice's growth objectives.