The Canadian veterinary economy chalked up a third consecutive year of strong growth in 2018, with both companion animal hospitals and mixed and large animal hospitals enjoying increases in revenues and net incomes. After setting records in 2017, these key metrics once again surged to new highs this past year.
Companion animal hospitals
Revenues for Canadian companion animal hospitals grew by 1.4% in 2018, to a national weighted average of $591 757 per full-time equivalent (FTE) DVM. While this may seem like a modest rise, compared to the 2017 growth of 8.6%, it does represent a new high water mark. Despite this rising revenue, companion animal hospitals displayed considerable discipline in their expenditures, managing to trim expenses by 0.6%, to a national weighted average of $402 048 per FTE DVM (Figure 1). The mild uptick in revenue combined with well-controlled spending resulted in a considerable jump of net incomes, by 6.1% to a national weighted average of $189 709 per FTE DVM.
Figure 1.
National weighted average revenue, expenses, and net income per full-time equivalent DVM for companion animal hospitals in Canada from 2014 to 2018.
As is commonly the case, the headline national figures obscure regional disparities; some provinces surpass the average, while others fall behind. Companion animal hospitals in Saskatchewan and Newfoundland & Labrador had increases in revenue and net income well above the national weighted average growth rate. On the other side of the coin, Alberta, Nova Scotia, Prince Edward Island, and British Columbia saw their net incomes decline year-over-year.
Typically, when revenues are expanding, the dollar amount of expenses will grow as well. This stands to reason, as a hospital that is seeing more clients and pets, providing more services, performing more surgeries, selling more medications and pet foods, will incur a greater cost in the generation of this revenue. It is for this reason that expenses are expressed as a percentage of gross revenue, allowing for a meaningful comparison across both provinces and years, while the amount of gross revenue may fluctuate widely.
After hitting a high of 69.6% in 2016, Canadian companion animal hospitals have been able to significantly decrease their non-DVM expenses as a percentage of gross revenue, falling to 68% in 2018 (Figure 2). On a revenue of $591 757, this equates to expenses falling by almost $9500 per FTE DVM.
Figure 2.
National weighted average non-DVM expenses as a percentage of gross revenue for companion animal hospitals in Canada from 2014 to 2018.
This would seem to indicate a shifting focus among Canadian companion animal hospitals. In previous years, much emphasis was placed on boosting revenues, sometimes to the detriment of prudent expense control. As a result, both revenues and expenses expanded, resulting in slower growth in net incomes. Today, companion animal hospitals continue to strive to grow their revenue, yet also appear to be taking budgeting seriously, as evidenced by the decline in expenses. This is great news for net incomes.
While the financial metrics were all positive, client metrics were less encouraging. Both current clients per FTE DVM and new clients per FTE DVM declined in 2018, by 3.2% and 4.1%, respectively (Figure 3). While these figures remain above the lows of 2015, the decline does raise some cause for concern.
Figure 3.
National weighted average current and new clients per full-time equivalent DVM for companion animal hospitals in Canada from 2014 to 2018.
Combining the financial metrics with the client metrics paints a picture of the average Canadian companion animal veterinarian doing more with fewer clients. Certainly, some of the revenue growth has been a result of fee increases, yet another portion has been through increased compliance and greater spending by each client.
Increasing revenues aside, a shrinking client base will eventually limit this growth. Retaining current clients, attracting new clients, raising fees, and improving compliance, all in tandem, will allow veterinary hospitals to expand at a faster rate. To retain current clients and boost compliance, pre-booking routine appointments and implementing Wellness Plans are 2 strategies that have been shown to be impactful. For attracting new clients, providing great service to current clients and encouraging recommendations, as well as ensuring a positive online presence, are a hospital’s best bets to endear themselves to those pet owners seeking a veterinarian.
Mixed and large animal hospitals
Mixed and large animal hospitals across Canada also had an exceptionally positive year, with revenues and net incomes surging. The national weighted average revenue climbed by 13.2%, to $535 851 per FTE DVM, far surpassing the previous record high set in 2017. While expenses also increased by a substantial 15.6%, this was not enough to stop the jump in profitability; net incomes grew by 8.7%, to a national weighted average of $178 987 per FTE DVM (Figure 4).
Figure 4.
National weighted average revenue, expenses, and net income per full-time equivalent DVM for mixed and large animal hospitals in Canada from 2014 to 2018.
Unlike companion animal hospitals, the headline positive news in mixed and large animal hospitals extended almost universally to the constituent provinces. Revenues expanded in all provinces measured, with above-average growth in Manitoba, British Columbia, and Saskatchewan. The only mild hiccup was in Alberta; revenues increased, but were outpaced by growing expenses, resulting in a slight decline in net incomes.
After a few years of declining expenses, mixed and large animal hospitals saw a slight tick upwards in 2018, with non-DVM expenses as a percentage of gross revenue rising to 66.5%. This remains below the companion animal figure of 68%, and well below the recent high of 69.4% in 2015 (Figure 5).
Figure 5.
National weighted average non-DVM expenses as a percentage of gross revenue for mixed and large animal hospitals in Canada from 2014 to 2018.
While companion animal veterinarians appeared to focus on expense control in 2018, their mixed and large animal colleagues seemingly directed their attention to expanding revenues. Fortunately, the escalation of expenses remained modest in mixed and large animal hospitals. Moving forward, it will be important to continue controlling expenses through budgeting and monitoring of expenditures, to ensure that revenue growth translates into greater net income.
As in previous years, positive results can breed complacency. A veterinary hospital that is busy and growing may not see the need to implement strategies such as Wellness Plans or budgeting. However, the cyclical nature of economic expansions dictates that the next downturn or recession will eventually arrive. Make hay while the sun is shining to better prepare for any storm clouds on the horizon.
Notes: Data for the CVMA Practice Owners Economic Survey are derived from the 2018 Provincial Practice Owner’s Economic Surveys. Provincial averages are weighted based on relative population size to calculate a national weighted average for all metrics. For the purposes of this research, a full-time equivalent veterinarian is assumed to work 1750 hours annually. Note that, due to data gaps in 2014 and 2015, Quebec is omitted from the calculation of the national averages for all years presented.
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.