Measuring the right metrics
As the veterinary industry grows and diversifies, it is becoming more and more apparent that clinics need to adjust their businesses to meet the demands of today’s pet owners.
Practices typically lose as many clients as they gain monthly, and amid the day-to-day chaos, we have found that most veterinarians and their staff haven’t actually defined what success looks like for them. This results in a lack of control within the business and asks the question, how is improvement possible if you aren’t measuring the right metrics to identify progress?
Today’s veterinary practices are facing an influx of competition and challenges that make it difficult to really focus on growth. To illustrate this, IBISWorld are forecasting that corporates will make up 18% of total industry revenue by 2020. Add to this the complexities of being in an industry in the midst of rapid technology disruption and change which means that there is more to learn than ever before. Practice retail is revenue is being undercut by pet owners who can now purchase food, grooming services and even vaccines from external non veterinary businesses and online stores, often because this usually is the cheapest, most convenient option.
How do you define success in such an environment? Does it mean seeing more patients on a daily basis? Generating more revenue? Running your practice more efficiently? It might surprise you to know that more than 55% of veterinarians don’t measure KPI’s*. The edge this gives in a competitive industry means that this is changing rapidly. Improvement starts with visibility—and you can’t change your business’ outcomes unless you monitor your business’ trends.
Clinics that do measure performance manually are most likely accustomed to pulling monthly or yearly reports from their practice management software to help evaluate overall performance, track expenses, manage inventory and much more. But are those the right metrics?
Start With the Right Metrics
A successful veterinary business monitors a range of key performance indicators (KPI) to increase efficiency and profitability. Improvements to practice performance occur only when data is collected and interpreted using these KPIs.
If your goal is to grow your customer base and number of transactions, focus on customer retention rate (the number of customers from last year who returned this year), new customer conversion rate (the percentage of new customers who returned for additional visits) and your new customer versus lost customer ratio (the number of clients gained versus lost).
If your goal is to grow existing revenue, focus on revenue retention percentage (the amount last year’s clients spent this year), average number of transactions per client/patient (the number of times clients visit each year) and average transaction value (the average cost of a visit).
Review Your Business Processes
Analysing KPI’s also helps identify ways to grow your practice’s average transaction value. Take, for example, identifying missed charges, which can be traced to surgical, dental, diagnostic or any treatment performed under anesthesia. Such line items as the actual anesthesia service charge, consumables, hospital charges, medications, surgical suite fees and boarding can slip through the cracks. Knowing how to track these charges can recoup tens of thousands of dollars each year, falling directly to the net profit line.
Identifying missed opportunities is another way to grow average transaction value. For example, what percentage of your primary visits includes the sale of parasite prevention medication or prescription pet food, or diagnostic test recommendations? Should you add these services to more visits? Doing so not only grows your average transaction value but also provides better care for your patients and helps to screen for undiagnosed, untreated disease.
Once you have identified key KPIs and process improvements, you can begin to review information veterinarian by veterinarian, species by species and clinic by clinic. Why is that ability important? It allows you to track inconsistent standards of care and determine areas where individuals can improve. Then you can begin to align those standards with those of your high achievers, which in turn also drives revenue growth.
Technology Makes It Easier
Tracking and measuring KPIs over time can be hugely time consuming—particularly if you must locate the data within your practice management software and perform calculations to derive ratios. Technology can automate this process saving this time and improving the accuracy of these results. For example, Sparkline Scorecard, a business intelligence tool from Covetrus, automatically calculates and displays over 40 KPI’s in an easy-to-read manner on a monthly basis. It saves a huge amount of time and as a result highlights opportunities to boost revenue and profit. Data is colour-coded to help pinpoint strengths and weaknesses within the practice, allowing owners to focus on what needs immediate attention.
Does it make a difference? More than 99% of practices currently utilising Sparkline have identified missed charges within surgical procedures, such as fluids and anaesthesia. One practice, an excellent example of this is Strathmore Vets who recaptured missed charges across 354 surgical cases, increasing the average transaction value by 34%, which yielded a profit increase of more than $50,000 per year from surgery alone.
Amid all the challenges you and your staff face on a daily basis, don’t let the health of your business slip through the cracks. You can’t rely on a yearly report to tell you everything that’s happening within your business, and in your chaotic daily routine, you don’t have time to keep pulling new reports and weeding through the data to find what you need. Imagine what you could accomplish if you had the entire health of your practice right at your fingertips, with the areas of improvement highlighted for you.
* Our 2016 Australian Solutions Research Survey.