Leadership, Part Three: What Are My Reference Ranges? - The Trupanion Blog
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Leadership, Part Three: What Are My Reference Ranges?

The Business of Healing Pets, Trupanion’s blog series written by Stith Keiser of Blue Heron Consulting, takes a deep dive into the business side of animal medicine. Look for a new installment each month featuring topics such as business best practices, effective leadership, strategic hiring, and more.

Leadership: What Are My Reference Ranges?

If you’re like me, it’s not uncommon for your hospital to routinely run CBC and chemistry panels in an effort to establish a baseline for a pet’s “normal.” Of course, without knowledge of the reference ranges, the numbers themselves aren’t very helpful. The same can be said for basic P&L statement categories and Key Performance Indicators (KPIs).

In our last post, I committed to providing resources and tools to allow us as veterinary professionals to grow and improve. For those of you who bought into that idea, I hope you took the opportunity to dig into your financial statements and management software.

Let’s look at the numbers.

Now that we’ve run our “tests” and arrived at our “results,” let’s examine our reference ranges.

  • Net Income 
    •  8-10% of gross revenue
    • Top performing hospitals (TPHs):  4%
  • Total Payroll  
    • Non-DVM staff: 7% (TPHs: 17.5%)
    • DVM staff: 21% (TPHs: 16.5%)
    • Taxes and benefits: 3% (TPHs: 5.25%)
  • Cost of Goods Sold (COGS)
    • 8-25% (TPHs: 21%)

I didn’t ask you to run your gross revenue, but we’ll need that as our denominator to calculate the above. For example, if you have two full-time veterinarians at your general practice, your gross revenue, based on production averages for full-time, small animal veterinarians, is probably around $1.2 million. If your net income was $100,000, your practice has a net income of about 8.3% ($1.2 million divided by $100,000).

The reason we ran our average client transactions (ACT) and average doctor transactions (ADT) is they tell us about our thoroughness of care. They also provide insight into client compliance, staff leverage, and pricing. According to the American Animal Hospital Association’s 2017 Productivity and Pulsepoints publication, the average small animal hospital (which spans one-doctor hospitals in rural, small-town America to multi-doctor general practices in metropolitan areas) posts an ACT of $134 and an ADT of $154.

Which camp are you in?

If you’re blowing those averages out of the water, great job! If you’re below those ranges, you’re probably having one of two thoughts right now:

  1. Those numbers are unattainable in my town because of my client demographics, cost of living, etc. (Trust me, I’ve heard this one a lot and used to fall into this camp before I had a chance to be proven wrong in a few very rural practices in very financially depressed areas).
  2. Do these numbers align with my practice philosophy? Am I leading my team in the right direction, or is there an opportunity to improve?

If your knee-jerk reaction aligns with number one, bear with me because you’re not alone. I promise (yes, I said promise) there is room for improvement if you’re willing to pursue it.

If you’re in camp number two, hang tight and get ready for some fun!

I tell my veterinary students we shouldn’t strive for national or regional benchmarks just because they’re benchmarks. It’s not the numbers that are important—it’s the story in the numbers. The numbers provide a black-and-white, objective view into how we’re doing as leaders in our hospital.

Next month: We’ll dive into what the numbers reveal about the health of our practices and examine how we can start leading change.


Meet Stith

Stith Keiser is the Chief Executive Officer for Blue Heron Consulting, a group specializing in veterinary practice management coaching. In addition to consulting, Stith is a managing partner at a handful of veterinary practices and collaborates on the advancement of professional development curriculums at several veterinary schools as an adjunct faculty member. In his free time, Stith enjoys spending time with his wife, family, friends, and two dogs, a Red Heeler and black Lab, in the outdoors.

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