Last year was a good one for Canadian veterinarians. Despite challenges such as declining client numbers, companion animal hospitals persevered, reducing expenses and increasing gross revenues, leading to a climbing net income in 2014 (Figure 1). On the mixed and large animal side, there was a slip of gross revenue, but controlled expenses helped result in a small gain in net income. Meanwhile, associate veterinarians also reaped the benefits of a stronger economic landscape, as their salaries continued to climb.
Figure 1.
Revenue and net income per full-time equivalent DVM — Companion animal.
While companion animal gross revenue per full-time equivalent (FTE) DVM grew by a modest 2.2% from 2013 to 2014, net income jumped an impressive 14.5% over the same time period. Admittedly, this growth in net income does not quite undo the losses suffered in 2013, but it certainly helps to make up some ground.
The growth experienced in 2014 is all the more impressive when companion animal client statistics are measured. Despite drops in both current active and new clients per FTE DVM, by 9.2% and 18.2%, respectively, revenue and income still surged upwards (Figure 2).
Figure 2.
Current (active) and new clients per full-time equivalent DVM — Companion animal.
Setting 2010 as a baseline, the cumulative change in companion animal current active clients reached −28% in 2014 (Figure 3); yet the annual revenue per client reached a cumulative gain over the same time period of 60%. The clear inference is that veterinary hospitals are getting more revenue from fewer clients, thus maintaining or increasing their gross revenue (and income) in the face of declining clients.
Figure 3.
Cumulative change in current (active) clients and annual revenue per client — Companion animal.
Mixed and large animal veterinary hospitals were slightly less fortunate, experiencing a slip in gross revenue; however, through careful control of expenses, these hospitals were able to realize a slight gain in net income, despite this drop in revenue (Figure 4). As was the case in companion animal hospitals, this does not make up the losses suffered to net income in 2013, but it is at very least movement in the right direction.
Figure 4.
Revenue and net income per full-time equivalent DVM — Mixed and large animal.
In 2014, associate veterinarian salaries, in all types of practice, continued their climb, with a national increase of 2.6% from 2013. Utilizing 2010 as a baseline, associate salaries have grown at a faster rate than the cost of living over the course of the past 5 years; this demonstrates that associates have more than kept up with inflation, and have steadily increased their true purchasing power (Figure 5).
Figure 5.
Associate salaries and inflation — Companion, mixed, and large animal.
In 2014, proactive management of expenses helped turn lackluster revenues into positive income gains. To ensure a financially productive future, a three-pronged approach, aimed at reducing expenses, increasing active clients and visits per year, and generating more revenue per client is the best bet for many practices.
It is apparent that many veterinary hospitals are already employing at least one part of this strategy, in the form of reducing their expenses. As shown, while gross revenue inched upward, net income leaped higher; this difference can only be attributed to a paring down of expenses. Through budgeting, and strict adherence to it, expenses can be minimized, leaving more of a practice’s gross revenue to flow into net income.
Falling client numbers and visits can be a more difficult challenge to overcome; however, improved communication can go a long way to fight against these trends. Pre-booking clients for their next appointment before they walk out the door, and calling lapsed clients to get them back into the practice can help a veterinary hospital retain clients while increasing visits and compliance.
The final prong to the approach is to address economic factors underlying the decisions that clients make. By implementing Wellness Plans with a monthly payment structure, veterinary hospitals can reduce the burden that clients feel from a large, one-time bill, such as they receive when bringing their pet in for an annual examination, vaccines, anti-parasitic medication, etc. You may not be able to fix the economy, but you can help reduce your clients’ sensitivity to it.
Through these strategies, and with some co-operation from the economy as a whole, veterinary hospitals can help ensure that 2015 is even more successful than 2014.
Notes: Data for the CVMA National Economic Survey are derived from the 2014 Provincial Practice Owner’s Economic Surveys. Provincial averages are weighted based on relative population size to calculate a national average for all metrics. Cost of living is derived from Statistics Canada Consumer Price Index Historical Summary 1995–2014 http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/econ46a-eng.htm. For the purposes of this research, a Full Time Equivalent veterinarian is assumed to work 1750 hours annually.
Footnotes
This article is provided as part of the CVMA Business Management Program, which is co-sponsored by IDEXX Laboratories, Petsecure Pet Health Insurance, Merck Animal Health, and Scotiabank.
Use of this article is limited to a single copy for personal study. Anyone interested in obtaining reprints should contact the CVMA office (hbroughton@cvma-acmv.org) for additional copies or permission to use this material elsewhere.