May 2009
AAHA and VetPartners are pleased to introduce the first issue of our new e-mail newsletter, Economic Bulletin. Our first article is an overview of what you can do to do well in the current economy, presented by AAHA Executive Director John Albers, DVM. Future issues will provide expert insight into timely economic topics that are pertinent to your practice. We look forward to helping you manage your practice through good times and bad.
Doing Well in a Tough Economy
John W. Albers, DVM
Abstract
Many in our profession and industry recognize that these are tough economic times, and that things may actually get worse before they get better. Moreover, the long-held belief that companion animal veterinary medicine is “recession resistant” or even “recession proof” is being tested. Indeed, while the bulk of the data available shows that practice revenues are generally still increasing, there is no doubt that growth is slowing (and declining in some cases) and that client visits have decreased.
So what should you do? There are two basic options. One, you can hunker down, stop spending on anything that is non-critical, cut staff and hours, find ways to offer less costly treatment options to your clients, demand discounts from suppliers, and cancel that planned trip to next year’s veterinary conference. Alternatively, you can take proactive steps to ensure that your practice remains successful and is well-positioned to resume strong growth as the economy improves.
Do more than survive: How to do well in the recession
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How to do well in the recession
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Here are five recommendations, gleaned from the literature citing the learning from a wide variety of industries in previous recessions.
Focus on Your Strengths
The key is to focus all of your resources on your areas of greatest strength, whether that is quality care, exceptional client service, technology, or something else. Now is not the time to diversify. If you don’t already board or groom, or provide other ancillary services, don’t start now. If exceptional client service is a strength in your practice, ramp up the attention you pay to the clients who do come in. If high quality care is your highest objective, keep offering the best care to every client; don’t assume that they are impacted by the economy to the point that they won’t accept your recommendations.
Rein in Costs – But Prudently
Cutting all costs across the board can be a big mistake. While it may result in short-term gain, it can negatively impact long-term strategy and results. Focus on rooting out inefficiencies, but maintain the resources to sustain your core strengths.
Staff Costs
The most common short-term strategy is to cut staff. However, consider the impact on the morale of remaining staff: in most cases of layoffs, productivity and service levels actually decline. Further, this economic malaise will not last forever and at some point practices that cut staff will have to hire to meet increasing demand. Think about the costs of severance, the loss of knowledge and skills, and the cost of recruiting and training new employees.
You should be open with your staff about the realities of the economic situation. Invite them to be participants in the solutions. Remember that they may be experiencing significant personal hardships, particularly if they are facing mortgage problems or have a spouse whose job is in jeopardy. Look for ways to reduce their stress and you can improve trust and productivity.
Further, I would suggest that this is not the time to cut back on staff training and continuing education. Both involve using resources to focus on your core strengths; both motivate staff and lead to better results. In fact, a slowing of client activity can be a great time to enhance team skills and collaboration – both of which will pay huge dividends when the economy improves.
Drug and Supply Costs
Subjecting your suppliers to a squeeze on their margins can be a short term “win” but a long term loss. Remember that they, too, face economic stress, and if you squeeze them now they are likely to remember that when the economy improves. Rather, work with them; ask them to help you with inventory control; ask them if there are ways that you can reduce their costs of serving you, and whether there is a way that you can share in the savings. Taking these steps, rather than demanding discounts, will ensure your suppliers’ loyalty and in the long term that will be far more valuable than the percent or two you might be able to squeeze out of them now.
Should you Discount Your Services?
Experts suggest the answer is no. Price can be an important determinant of perceived value and discounts just to boost sales can cause clients to question the value of the service. Some authors have referenced the reaction of Starbucks to their earnings decline, which was to begin offering lower priced options, like a $1 cup of coffee. They point out that when times improve, Starbucks may have difficulty convincing customers to once again pay $4 for a latte.
Stay in Touch with Your Clients
As indicated above, now is the time to focus lots of time and attention on the clients that are bringing in their pets. But don’t forget about the clients that may be staying away because of economic pressures. With the possibility of extra staff time, maybe now is the time to update and enhance your website or put out an informative newsletter. Don’t forget to say thank you! You want to be sure that these clients come back when the economy improves.
This would also be a good time for staff to review patient records for compliance. Almost all practices have many clients who have received a recommendation for their pet’s care, but who have not yet followed through. Now would be a great time to contact them and schedule that appointment or refill that prescription.
Time for an Acquisition? Maybe.
In the business world, focused acquisitions have shown to actually reduce risk in tough economic times by strengthening the core. Is there a nearby practice interested in selling? Do the clients of that practice value the kind of services and quality you provide? Could you acquire the clients and decrease overall expenses? While making an acquisition during lean economic times may seem counterintuitive, many times making the right acquisition can be smart. Be careful, however, to be sure that the acquisition will strengthen your core business and not detract from it. As mentioned earlier, this is not the time to diversify.
Summary
This is a time that will test your skills as a practice owner and manager. Don’t let “recession” become a self-fulfilling prophecy for your practice. Remember to focus your resources on your areas of strength. Remember that your employees, your clients, and your suppliers are in the same boat; work with them, take care of them and you will emerge from this recession positioned to resume strong growth and a great economic future.
Dr. Albers serves as AAHA Executive Director and can be contacted at john.albers@aahanet.org
Questions or comments? E-mail EconNews@VetPartners.org.
VetPartners is a professional organization consisting of members who consult to the veterinary profession and whose mission is to promote excellence and ethics in veterinary consulting and advising through continuing education, communication, collaboration, and collegiality and to establish and improve business practices and standards. For more information visit www.VetPartners.org
AAHA is the only organization that accredits animal hospitals throughout the U.S. and Canada. AAHA-accredited hospitals voluntarily choose to be evaluated on 900 quality standards that encompass all aspects of pet care — from patient care and pain management to team training and medical record keeping. Visit www.aahanet.org for more information.
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