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Growth strategies for veterinary clinics

Philippe Baralon, Antje Blättner, Geoff Little, Pere Mercader - 14/04/2013

Growth strategies for veterinary clinics

 

Summary

This article was kindly provided by:

 

Introduction

Would it be a good idea to expand my veterinary clinic? Is it worth the effort to develop my practice? Will I be happier with a larger clinic, or will it only lead to more problems? Will I earn more, or will costs rise to the point where I end up the same or worse off than now? And my employees ... will they be happier in a larger clinic? What about my clients and patients, will they receive a better service than at present? And when I decide to retire, will it be easier or more difficult to sell a larger clinic? And if, on the contrary, my clinic does not grow, what are the downsides?

Readers are likely to have considered these or similar issues from time to time. These are questions that arise naturally when we consider the long-term development of our businesses. In other words, these are strategic issues. After all, what we are considering is what we want our clinic to look like in ten or fifteen years from now; how we imagine it in the future.

The growth of a veterinary clinic is a personal choice, not an obligation. There is no law or any ethical or moral standard that requires us to have a larger clinic. However, most businesses (veterinary or otherwise) want to grow. The rest of this chapter will discuss the major benefits of growth for veterinary clinics; it will propose several methods or strategies to achieve that growth, and recommend some management and monitoring tools.

 


 

1/ What are the benefits of growth for a veterinary clinic?


A) It will enable my team to develop on a personal and professional level

A clinic that expands offers employees increasing opportunities for personal and professional advancement: they may acquire new skills, take on greater responsibilities, be promoted, supervise other employees. In short, they may develop with the clinic. It is easier to motivate and retain brilliant employees in a dynamic and developing environment, thereby reducing stress and economic costs associated with staff turnover.

 


B) It may facilitate the development of a referral service

Neurology, orthopaedics, ophthalmology, cardiology ... all medical specialities have one thing in common: the only way to master them requires seeing hundreds if not thousands of cases. Realistically, it is virtually impossible to acquire true speciality expertise and qualifications with the case load of a small or medium sized general clinic. From this perspective, the expansion of a clinic may lead to the acquisition of the necessary knowledge and expertise for future specialisation, which may have beneficial effects, not only from a medical standpoint, but also by strengthening our business model and attracting, motivating and retaining qualified personnel.

 


C) Economic efficiency

A veterinary clinic is predominantly a fixed cost activity, with labour and structural costs (equipment, facilities, administrative staff) typically accounting for 60% or more of the income. In any type of business with this cost structure, an increase in activity (more clients, more patients) leads to improved financial performance by diluting fixed costs. These are the so-called economies of scale: the wages of my veterinary surgeons or the depreciation and maintenance costs of my digital X-ray equipment or the costs covering my Website are the same regardless of whether we treat fifty or two hundred patients this week. We have quantitative evidence proving the existence of these economies of scale in veterinary clinics (Mercader, 2004), as well as strong empirical confirmation based on the burgeoning development of chains and groups of veterinary clinics in several countries. In short, the largest veterinary clinics - if well managed - tend to be more profitable; and these higher returns facilitate a greater reinvestment in the business (technology, trained staff), higher wages, and a better return on company assets.

 Figure 1


D) Professionalising management and business ‘systems’

One of the inevitable requirements for the orderly expansion of a veterinary clinic is professionalising the management, together with implementing systems to ensure people do the right things the right way, and at the right time, even in the absence of direct physical supervision by the owner. When there are more than ten employees (approximately), a turning point is reached, making it virtually impossible for the owner of a veterinary clinic to control everything. It becomes essential to put procedures in writing, to create a “second level” of trusted staff who will, in turn, manage and supervise other staff in addition to implementing performance assessment and control systems. Figure 1 provides a schematic view of the logical development of a clinic’s organisational chart as it increases in size.

At first glance, all this may seem more of a liability than an asset, but it may prove to be a blessing for the owner of a veterinary clinic. A business with a management team and well-established systems is less dependent on the permanent physical presence of the owner. Apart from providing greater personal freedom, this may also have significant long-term implications when the time comes to sell the business: the best selling clinics are those where the performance is not adversely affected when the owner is not physically present. The greater the segregation between ownership and business management, the greater the saleability and, consequently, the value of the business.




 

2/ How can a veterinary clinic expand?

To answer this question, we shall take and adapt a tool developed by Igor Ansoff, UCLA mathematician and professor, who is considered the father of modern strategic management. Back in 1957 Ansoff published an influential article (Ansoff, 1957), introducing his product (or service) and market development matrix. Figure 2 graphically represents the above-mentioned matrix:

Figure 2

The idea (simple but powerful) behind this model is that we can only expand our business by following four basic strategies:

1) Market penetration

This strategy involves selling more of our current services and/or products to our existing customers, i.e. increasing the uptake of our services or products. Any action aimed at increasing the frequency of patients’ visits, at strengthening the loyalty of current clients or promoting the cross-selling of services and products would belong to this quadrant of the matrix. Examples of such actions would be: establishing a protocol involving a mandatory recording of dental condition following each physical exam, with associated actions, leading to a higher rate of proposed dental treatments; systematic  recovery calls to clients who have left for no apparent reason over the last eighteen months or offering discount vouchers for first grooming sessions at the centre for new puppies. The so-called ‘health plans’, which are becoming more and more popular and accepted amongst pet owners, can also be seen as programmes aimed at increasing the uptake of our services by existing customers based on promoting the cross-selling of services and products through an increase in visit frequency and, therefore, of buying opportunities.


2) Market development

The object of this strategy is to gain new clients by offering them our current services and products. This can be achieved by intensifying promotional activities in our current geographical area, or considering  geographical expansion within our catchment area (opening a new clinic or facilitating access to our current clinic to customers who live within a specific area). Some examples of actions included within this strategy would be: improving the clinic’s Website and indexing it in the most popular search engines; advertising or publicity in the local media (radio programmes, school programmes, articles in local publications); offering clients one hour of free parking time; creating a ‘member bring member’ programme, rewarding clients who recommend us to new clients.


3) Diversification

The boldest and most uncertain business expansion strategy is to find new types of clients by offering new services. An example would be a general veterinary clinic at a local level that decides to develop a specialised service (e.g. cardiology) aimed at encouraging other veterinary clinics to refer their more complicated cases. This strategy is not easy to implement. To be successful it usually requires changing the mentality (‘culture’) of the entire team and, in many cases, it proves more efficient to develop the new activity as a totally independent business.


4) Development of new services

Offering new services or products to existing clients is one of the classic ways to expand a business. Existing clients have already established a relationship of trust as well as visiting and buying habits with their veterinary clinic and therefore will be much more receptive than the general public to a range of new services from their clinic. It has been estimated that the average annual expenditure per pet at a veterinary clinic in Spain (VMS, 2010) is approximately 210 euros (includes veterinary services, drugs and products) and that the average annual number of medical visits is only 3.1. These statistics reveal a tremendous opportunity for veterinary clinics to capitalise on a greater number of needs those clients and patients may have. When speaking of ‘new services’, we may refer to items that already exist in the market but that clients are currently buying elsewhere (e.g. grooming services or pet food), as well as genuinely novel items that clients have not been using to date. Examples of the latter would be services such as training and socialisation courses for puppies; developing a ‘crèche service’, enabling clients to leave their pets in the morning before going to work and picking them up at the end of their work day; pet neutering programmes; rehabilitation and physiotherapy for patients with articular diseases; programmes to facilitate the birth of litters at home, or health and welfare programmes for senior pets.




Introducing a new service

3/ Methodology: how to plan the successful introduction of a new service at the clinic

To quote a phrase frequently used in the business world, “failing to plan is like planning to fail”. Statistics on failure rates concerning the release of new products and services from major multinational companies – despite the resources at their disposal - are quite grim. Therefore, we must be aware that the introduction of a new service in a veterinary clinic is a complex process that requires methodical planning if it is to have a good chance of success. Here we propose a number of steps to assist in this process.

 

 

A) Consider ‘business logic’

There are many options when it comes to new services that can be introduced at a veterinary clinic. Some of the most diverse examples include home delivery of pet food, homoeopathy, physiotherapy and rehabilitation, puppy training and socialisation, genetic testing and the early prevention of genetic-based diseases, dentistry, etc. To avoid confusion or being overwhelmed by such a wide range of choices, certain aspects must be considered: What role will the new service play in our business model? How will it help us - or not - to achieve our longterm objectives, i.e. our business prospects in ten or fifteen years from now? Is it consistent with our strengths as a practice, our skills, our image, with our typical client profile? Nobody can answer these questions better than the owners with the support of the practice team. Our decision to introduce a new service should not be based on imitating other colleagues, or on an appealing idea seen or heard at a conference, but the result of systematic consideration.

 


B) Quantify, investigate, and do not (only) rely on intuition

Some of the questions we should try to answer - together with our team - concerning any new service we are considering are:

• Realistically, what percentage of our present customers may be interested in this service?

• Why would they show any interest in buying it if they have not done so to date?

• How will the new service be priced?

• What are the fixed costs - investment in equipment, advertising, training, space - and the variable costs – staff time, supplies, etc?

• What is the break-even point - i.e. the minimum number of units of the new service that needs to be sold - so as not to incur a loss?

• How long will it take - realistically - to achieve that level of sales?

• How are other veterinary clinics that have introduced this service faring? What volume has this service achieved in proportion to the total size of their clinics?

Figure 3 displays an economic analysis template that can be used to assess the feasibility of investing in a new ultrasound machine. The same format, with appropriate adjustments, can be used to study investments in other equipment. It assesses fixed costs (investment in equipment, maintenance,  financing) and variable costs (staff time, overhead allocation, consumables) linked to the new equipment/service. This type of template offers the possibility of simulating different price scenarios and calculating the minimum volume (number of procedures) needed to at least cover the costs. It may be a useful tool to increase our understanding and that of our team of the economic implications of launching a new service. The decision to acquire the new equipment (and therefore to introduce the new ultrasound service) should not be based solely on financial criteria but a responsible manager should take them into account and share them, in advance, with the clinic’s team.

 Figure 3


C) Specify: who will do what, when and with what resources?

It is a well known fact that the day-to-day tasks at a veterinary clinic can be all consuming. If we are not careful in setting deadlines, tasks and supervisors, any plans to launch a new service will run into trouble. The template in Figure 4 shows an example of retroactive planning (i.e. based on the target date for launching the service and defines who should do what and when).

It is not enough to simply draw up the template: you must assign the ‘players’, notify the people involved, reach agreements with them and establish a regular schedule (ideally monthly) to monitor the project’s progress. A common mistake when assigning responsibilities to team members such as veterinary assistants, nurses or reception staff, in the preparation phase of a new service is to assign parts of the project to people who are already fully occupied with daily tasks. When are they supposed to dedicate time to the new project? In their free time? Or when there are no clients in the clinic? We only have two realistic options: either free the said people from work for a certain time each week, to dedicate it to the new project, or assign a person with a different profile (an administrative assistant, someone from marketing/ communications, i.e. a manager) to lead the task. This person should head the project, but they mustn’t forget to seek the support of a multi-disciplinary team when appropriate to do so (e.g. a veterinarian, a nurse, receptionist, administrative staff, etc.) in order to ensure all relevant information is gathered and that everyone feels involved in the process. Otherwise, our team will be the first in asserting that ‘the boss’ was wrong in coming up with the idea of launching a new service, without considering their opinion. Both the choice of the project leader and the make-up of the multi-disciplinary team will vary depending on the nature of the new service that we are proposing to introduce.

 


D) Communicate, communicate and communicate

Although the owner of the clinic may have a clear understanding of the new service, this does not imply that this view will be understood clearly by the practice team and clients.

It is essential to involve the team in the design phase (what will the new service include? What is the rationale from a medical point of view? Whom does it target? How much will it cost? How will clients be informed?); in the implementation phase (Who will do what? Will any training be required? When will it be launched?); and in the monitoring phase (How is it progressing? Should we make any changes?). If we don’t do the above we risk generating the typical depressing situation in which clients ask a member of the team about a service that has been announced in the waiting-room or on the Web, and they get a response such as “you’ll have to talk to the veterinarian, I’m afraid I don’t know anything about it”. It is also essential to inform our clients about the new service in an efficient and attractive manner. There should be a budget (however small), dedicated to the launching of any new service, to cover a number of promotional activities. Examples include: a note on the Website, a specific e-mail campaign targeting a specific client segment, a poster in the reception area, a folder or brochure to be handed out by the veterinary surgeon in the consulting-room or by reception staff, and other similar activities. For example, many businesses spend between 10% and 20% of the revenue expected during the first year of the launch of a new service on promotional activities. If we want good results, it is advisable to rely on media professionals to design and produce these types of materials. Start with the name of the new service, because often the best way to kill a new service before it is even launched is to give it an unattractive name. Receiving outside professional assistance should not imply excluding our own team from the process. A good advertising agency will have the sense and emotional intelligence to seek the support of our team and make them part of the process in creating the promotional materials. Another alternative that should be explored is to involve commercial partners such as pet food or pharmaceutical manufacturers we regularly work with. If they are in a position to offer us promotional material that has been professionally designed and tested, why reject it and insist on trying to reinvent the wheel?

 


E) Prioritise: less is more

One of the challenges facing any good manager is in making efficient use of the scarce resources available. Our time, the time of our employees, our attention and monitoring capacities, our promotional budget. All these resources are scarce and are diluted among our many projects. It is therefore preferable to focus on one (best option) or two new services per year: plan them carefully, provide the appropriate follow-up and support them with resources. We all find motivation in results and success. If we accumulate a number of failed operations in relation to new services, our team will receive each new project with less enthusiasm than the previous one.

 Figure 4

 

 

4/ After the launch: follow-up and assessment of the new service

Many new services introduced by veterinary clinics are not consolidated due to the lack of proper follow-up procedures. Once the excitement and the novelty are over, it is easy to lose interest. If the management does not implement a methodical system to monitor the new services, the message the rest of the team will receive is a lack of commitment towards the project. To avoid this mistake, we suggest the following actions:

 


A) Do not disband the multidisciplinary team after launching the service

The best way to prove the project does not end with the launch of the new service is to keep the multidisciplinary team together (consisting of one person from each “department” in the clinic) for at least 6 months after the launch. The team may meet briefly at pre-set intervals (e.g. 15 mins/month), when required by the project leader, to take stock and monitor any practical issues related to the new service. For example: What do the members of the team think about how the new service is working? Are we actively promoting it to clients? Do they ask about it? How do clients react when they are offered the service? Are the promotional materials fit for purpose? Does any member of the team need training/coaching to feel more comfortable explaining or providing the service? Do we need to make changes to the content or operation of the service?

 Costomer Satisfaction


B) Customer satisfaction: ask the first clients who have used the service

It is important to ensure the new service is launched properly. A five minute call from the receptionist to the first group of clients to use the new service, with a view to confirm that everything has gone according to plan, will enable us to correct any mistakes and improve processes. This task can be arranged weekly: reception staff must generate a list of clients who have used the new service for the first time, call them, and write down the information obtained. Two or three closed questions (such as “Would you recommend this service to a friend or acquaintance?” or “Did this service meet your expectations?”) together with an open question (such as, “Would you like to make any comment or suggestion with a view to improving this service?“) may provide valuable information.

 


C) Quantify and share information

In the planning phase leading up to the launch of the new service, it is important to define certain measures or indicators that will enable us to assess the results. Some examples: What percentage of ‘target customers’ do we hope to offer the service to during the first year? What ‘acceptance rate’ (percentage of customers who are offered the service and take it up) can we expect during the first year? What ‘repetition rate’ (percentage of customers using the service at least a second time, in relation to those who tried it)? This indicator only makes sense in the case of services that are repetitive in nature, such as Senior Pet check-ups.

 

 Monitoring

 

Conclusion

The successful launch of a new service at a veterinary clinic requires creativity and inventiveness combined with discipline, attention and method in equal proportions. A brilliant idea is useless if we fail  in the execution phase. In fact, a well executed standard idea will provide better results than a brilliant idea that is poorly implemented.

We must strive for excellence before launching a product (design, planning, financials and numbers), during the launch phase (communication, procedures for measuring customer satisfaction) and after the launch phase (follow-up with our team).

 

This article was kindly provided by Royal Canin.  If you would like printed copies of this material or other Focus publications please contact your Veterinary Business Manager:

 



REFERENCES

1. Economic analysis of Spanish veterinary practices. An internal survey performed by P.Mercader for AVEPA (Spanish Small Animal Veterinary Association) in 2.004.

2. Ansoff, I., Strategies for Diversification, Harvard Business Review, Vol. 35 Issue 5, Sep-Oct 1957, pp.113-124.

3. Veterinary Management Studies (www.estudiosveterinarios.com). A benchmarking service available for Spanish veterinary practices.

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