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Why Is My Veterinary Practice Busy but Not More Profitable?
Four common reasons a busier veterinary practice does not earn more.
A full schedule raises veterinary revenue, but four common causes can keep that growth from reaching profit.
When a veterinary practice gets busier and profit stays flat, the cause is usually one of four things. Doctor pay may be rising with production. Doctors may be doing work a technician could do. Retail margin may be slipping through small discounts. Wellness plan payments and inventory buying may also be distorting the monthly numbers.
Each cause has a different fix, so the first job is to find the one that applies. A busy practice often responds by hiring, and that step makes things worse if the real cause is technician leverage or retail margin.
The four usual causes
- Doctor pay rises with productionProduction-based pay is common in veterinary practices. When revenue grows, doctor pay grows with it. Track production against pay for each doctor, so you can see the margin each one earns after support staff.
- Doctors are doing technician workA doctor doing tasks a credentialed technician could do is the most expensive labor in the practice. More visits then mean longer doctor hours instead of more production per hour. Staff cost per doctor hour shows whether this is happening.
- Retail margin is slippingOnline pharmacies push retail prices down. Many practices respond with small discounts that nobody measures. Margin by category shows which pharmacy, diet and product lines still earn money.
- Plan payments and inventory distort the monthly numbersWellness plan payments booked as income on receipt make revenue look larger than the care delivered. Pharmacy and diet orders expensed at purchase make profit swing with buying instead of sales. Both make it hard to see whether growth is real.
How do I tell which cause it is?
A standard P&L cannot separate these four causes. On that statement, revenue is up, costs are up and profit is flat. Nothing on it shows whether the problem is doctor pay, staffing, retail or timing.
Four reports can separate them. You need production against pay by doctor, staff cost per doctor hour, margin by retail category, and a balance sheet that carries inventory and the unearned part of wellness plans. Our veterinary practice accounting tracks cost of goods, books wellness plans as they are earned and tracks DVM production pay.
Frequently asked
Why is my veterinary practice busy but not more profitable?
It is usually one of four causes. Doctor pay may be rising with production, doctors may be doing technician work, retail margin may be slipping through discounts, or wellness plan payments and inventory buying may be distorting the monthly numbers. Production against pay by doctor and margin by retail category will show which one applies.
Do wellness plans raise veterinary practice profit?
Not on their own. A plan payment covers care the practice still owes for the rest of the year. Profit comes only as that care is delivered, so plan revenue should be booked as it is earned.