It is easy to say, 'manage your inventory'. But what is the true impact of doing so? In many veterinary practices, inventory as a percent of revenue (inventory costs/total revenue) exceeds 30%. For a practice with $1 million in total revenues, that means your inventory is over $300,000.00. Many veterinarians ask, "Does it really matter if it's $300,000.00 or $200,000.00? I just need to make sure I have what I need to provide care."
The impact of reducing your inventory costs from $300,000.00 to $200,000.00 in a $1 million per year (revenue) practice means that you've reduced your costs by $100,000.00 while still producing $1 million in revenue. That $100,000.00 drops to the bottom line as profit. Managing inventory has helped you add $100,000.00 in profit to your practice. And in addition, since most practices are valued using a multiple of earnings formula, typically about 5X earnings, managing inventory has also increased your practice value by about $500,000.00, assuming that level of profit can be maintained over multiple years.
Therefore, proper inventory management is one of the most impactful ways you can improve profitability and the value of your practice.
