Editor’s note: Third in a 4-part series
Like most businesses facing this tough economic climate, bovine veterinarians are cutting back and reducing costs where they can to keep their practices viable. A 2009 Bovine Veterinarian economics survey asked beef and dairy veterinarians where they were cutting back and how they were saving money.
The top two responses were eliminating unnecessary trips/saving gas and reducing inventory in practice. Dairy veterinarian Pete Kistler, DVM, Valley Veterinarians, Inc., Tulare, Calif., says he was surprised that over 60% of the veterinary respondents said they were carrying less drug inventory and drop-shipping more. “Unless of course the clients aren’t paying promptly for their drugs, this is a tremendous lost opportunity to make ~10% profit with each inventory turnover,” says Kistler.
However, not every veterinarian has found an opportunity carrying a lot of inventory. In central Kansas, Great Bend beef cattle veterinarian Nels Lindberg, DVM, Animal Medical Center, agrees with the survey and says his number one cost-reduction strategy has been in inventory management. “I work very close with distribution on this, in a way that allows us to carry as much inventory as we need, to conduct business during peak sales times,” he explains. “Yet it allows us to work with distribution when the peak sales time ends, so that appropriate inventory levels may be put in place.”
Jessica Laurin, DVM, The Animal Center of Marion County, Marion, Kan., says she also tries to reduce inventory coming into the summer months to save on costs.
Tom Reece, DVM, MS, Food Animal Veterinary Consulting & Services, Tipton, Okla., bases inventory on client demand and the next day delivery capability of his distributor. “I have reduced services to one cattle auction from the afternoon before sale day and sale day, to only sale day,” Reece says. “That was based on the auction’s current volume. If the volume increases, this will be adjusted.”
In Hagerstown, Md., the Mid Maryland Dairy Veterinarians (MMDV) developed a drop-ship program that provides pharmaceuticals and supplies at a discounted price to the clients. “As a result, we carry less inventory, striving to order just-in-time,” notes Richard Doak, DVM. “By selling less off our trucks, we also decreased our losses due to out-dated products and forgetting to bill for items.”
Doak’s colleague Matt Iager, DVM, agrees that the program has been successful for cost reduction. “We have been able to carry much less inventory without the need to handle and label products, creating additional time for office staff to designate for more productive duties.”
The veterinarians at the Animal Center in the Sandhills of Alliance, Neb., made sure its clients and employees knew that they had made an agreement not to raise any professional fees or service fees during 2009. “Products would only be raised in price if the cost went up to us,” says Jim Furman, DVM. “We have maintained this philosophy throughout 2009, and it appears to be working for us, as we are markedly above the gross dollars income in 2008.”
Along with inventory management, accounts receivables is an important financial area of any practice. Lindberg combs over accounts receivables every month to reduce losses or cut costs in a roundabout way. “This is absolutely a must do, each and every month,” he says. “Money on the books past 30 days does us no good and has a negative impact on cash-flow.”
Many of the bovine veterinarians surveyed indicated that they have reduced general inputs into the practice as well as streamlined various activities to get the most bang for their buck. Tim Richards, DVM, Veterinary Associates, Inc., Kamuela, Hawaii, says he is “price conscious as far as quantity, but I’m still using mostly brand-name pharmaceuticals.”
Mark Thomas, DVM, Dipl. ABVP, Countryside Veterinary Clinic, LLP, Lowville, N.Y., scrutinized practice inputs. “We look at generics and how we use certain costly products,” he says. “Being price-conscious alone helps.”
Likewise, Reece says he’s always strived to adjust inputs as conditions change and has always been price conscious as well. “I will continue to be frugal in my inputs,” he says.
“The key point is to make sure you are always keeping up with the times and to make sure you optimize the balance between benefits and costs,” adds Calvin Booker, DVM, MS, Feedlot Health Management Services, Okotoks, Alberta.
Bookers notes that the three biggest tactics that improved their bottom line were 1)Trying to reduce the amount of vehicle depreciation they were incurring; 2) Making sure they continually subscribed to the most cost-effective telephone and mobile phone packages; and 3) Creating a system whereby their professional and support staff team can be as efficient as possible in delivering their company’s services.
“Our employees focus on trying to find the most cost-effective solution to meet each of our needs,” Booker says. “It’s hard to tell if the current economic conditions are driving this approach or if we hired the type of team members who always use this approach.”
Doak’s practice has reorganized its herd health clients to group herd visits in an effort to decrease gas expenses.” We reduced shipping costs by consolidating lab shipping to set days each week,” he adds. “We try to be pretty frugal. Most of our staff is part-time and we rent office space to keep our overhead to a minimum. As a whole, we try to stay as lean as possible regardless of the dairy economy. We plan to continue to do business in this way.”
MMDV practice requests clients to call between 7 a.m and 8 a.m. to better assist in planning an efficient work day. “Having eight veterinarians in a 90-minute radius allows us to utilize a particular person in that area so less fuel and miles are needed to travel,” explains Iager. “This creates more time on-farm to interact.”
Furman’s practice is a family affair and his wife Penny, the office manager, keeps her finger in the finances of the business. “We have had accountability to the penny for all of the 33 years we have been in business for ourselves,” says Jim Furman. “We pay our own bills monthly, and I still do all of the ordering of drugs and supplies for the clinic. We feel this gives us a better pulse on the total finances daily of what is going on and what is needed and what is often not necessary in the line of making a living.”
Furman’s son Tom Furman, DVM, has picked up on this practice philosophy and the two discuss all major purchases that are needed during these times. “We still plan to go forward with new equipment after evaluating how it will pay for itself,” Jim Furman says. “Projections are not always right, but we never miss the mark much.”
Lindberg’s Kansas practice has experienced exponential growth since he has purchased it, and he says he looks more at controlling costs than cutting them, though he has cut down on a few things, namely charitable donations, which he says will probably increase again once the economy improves. “I consistently look for ways to reduce costs,” he says. It helps that he has a quality office manager in place who is asked to consistently shop prices on all supplies across the board. “She also shops prices between distribution, as you may be surprised at some of the differences.”
All of these things are “commodities” to Lindberg, not services. “We always cut costs on any ‘commodity’ if possible,” Lindberg explains. “We also shop some services to ensure proper charges, and as with anything, depending on the service, it may be worth paying a premium.”
Though Laurin has not cut any staff, she says the practice’s overhead on employees has been creeping up over the years with the expanded services she offers, and that was one of the areas she has been looking at harder this last year. “Overtime hours and part time staffing are places that I will look to reduce when needed.”
Laurin increased mileage charges when fuel was near $4 per gallon, but did not reduce those charges when fuel prices decreased. “This has definitely given me a buffer now,” she says. “The drop in gas prices this year has given us a savings of literally thousands of dollars this year.”
Major repairs to Laurin’s facilities have been put off or have been done by her employees
instead of hiring someone out-of-house. “We do simple things to look at costs such as scrutinizing the cost of toner on our laser printer versus an all-in-one printer, and emphasizing to staff which printers save money.”
Another area Laurin is a stickler about, and which also saves money in the long run, is having good maintenance practices for equipment and being sure things are cleaned promptly and put back correctly.
Bovine practices don’t run by themselves and all types of people are critical to a practice’s success. In this economy, however, sometimes hard decisions are made regarding this valuable resource. In his Hawaii practice, Richards has had to cut lay staff hours and part time employees. He’s maintained employee benefits, but has decreased young hires such as high school kids, which he says means efficiency is down some.
Laurin has reduced overtime hours and cut some bonuses and raises. “This year we will not hire as many high school students during the summer as before,” she says.
“The federal government’s increases on minimum wage in our clinic jeopardized those part time hours. I have dropped one full time staff equivalent this year.” Laurin says these decisions have forced her to look at who has been underutilized. “It does increase work-related stress for some of our employees by requiring them to take on more responsibilities than before, especially in the busy times of the year.”
Because Reece’s staff is of part time employees, they work based on his need for them. Feedlot consultant Booker says his practice tries to take advantage of normal attrition rates to assess its needs and replace outgoing personnel with new team members who possess skills to meet company needs rather than just replacing the skills that have left. “Our philosophy has always been to try to make our practice as efficient as possible,” Booker explains. “The current economic situation has made us further emphasize this approach.”
Similarly, Lindberg believes his employees are the lifeblood of the practice. “I am fortunate to have some very good ones in place and I must take care of them,” he states. “With our growth, it gives me no reason to reduce their earnings or rewards. I do ask that each and every one of them be very productive, creative and efficient in their various duties at the clinic.”
Furman says The Animal Center had a staff meeting in January and all employees were assured that they would have a job through December 31st. There would be no raises planned at this time. “This was announced, as The Animal Center has given raises every year for the past 33, if only a cost of living raise,” he explains. “This was done to inform our employees how grave Dr. Tom and myself felt that 2009 could turn out to be in this economic environment. We have great employees and did not want them worrying about their job needlessly during 2009.”
However, Furman continues, employees were also told that if 2009 turned out to be a normal year, or better than anticipated, they could count on a bonus at the end of the year and recommitment to their jobs for 2010.
California dairy veterinarian Kistler says, “The founding partners of Valley Veterinarians always ran a lean business, provided a modest monthly salary and kept strong cash reserves to purchase vehicles and equipment outright. The partners expect the end of the year bonus to be smaller, but our day-to-day operation isn’t affected.”
Continuing education is critical to keep up with skills and the latest information in veterinary medicine. But small and large veterinary conferences have seen a downward shift in attendance due to the economy as veterinarians cut back on travel and meeting expenses. Hawaii veterinarian Richards usually wins the award for the attendee who traveled the farthest when he attends CE meetings on the Mainland, and it isn’t cheap. He says he has cut back on his CE.
On the other hand, enterprising veterinarians are still finding ways to get as much or even more CE through distance-education or online opportunities. For the past few years Reece has been involved in two distance-education projects: a graduate degree program from the University of Nebraska and a graduate certificate program from Purdue University. “These more than fulfilled my required CE,” says Reece. “I go to state and national meetings such as my state VMA, AABP and the Western Veterinary Conference because I want to.” Reece has finished the Nebraska program with an MS in epidemiology and will finish the Purdue program in August. “That program is being expanded into a graduate degree program in veterinary homeland security and I will continue with it,” he says. “I am contemplating a future distance graduate program from Kansas State.”
Thomas and Booker’s practices both feel strongly about CE for staff and try to invest wisely in it. Laurin’s practice has a contracted amount associates can spend up to each year on CE, and they try not spend it all if they don’t need to. This year, she says, her associates are attending the local state meeting.
Lindberg believes veterinarians can’t afford to cut too much CE. “CE meetings are always more than just CE, and hold many more opportunities than just educational sessions,” he explains. “These meetings provide us with learning, networking, mentor or mentee opportunities that are priceless.”
Furman is convinced that continuing education is still vital to his practice. “We don’t feel we can educationally get behind waiting for the economy to improve,” he states. “What is best for our clients and their livestock is ultimately best for us.”
MMDV’s eight dairy veterinarians continuously strive to increase their knowledge base and have meetings to discuss their findings with each other. “Current topics and relative science help us suit the needs of producers and keep us abreast on changes to dairy production medicine and surgery,” Iager says. “National publications, like Bovine Veterinarian and Dairy Herd Management are excellent reference tools, and national organizations like AABP, AETA and NMC allow us to focus our attention on herd prevention and improved management.”
Cory Meyers, DVM, adds that MMDV constantly strives for continual improvement even in the midst of an economic downturn. “The worst possible business scenario is for a practice to become complacent in a difficult business environment,” he says. “CE opportunities provide an avenue to enhance your service offerings and elevate your knowledge base. Not only do you increase your revenue generating potential, but, more importantly, you and your practice become a more valuable asset to your clientele.”
Maintaining status quo
Running lean and mean isn’t always what it’s cracked up to be. Richards notes that, “as we have become more efficient, quality of life has gone down.”
Being prudent and fiscally responsible isn’t just a good idea when times are tight. Thomas says he’ll continue an overall scrutiny of the practice going forward. “Just as with our dairy producers, when things are good we get a bit lazy and less efficient,” he says. Booker believes his practice will learn some important cost-reduction strategies in this process, but he hopes to continually learn new ones in the future as well.
“Any business that stays healthy has to continue smart practices in both good and lean times,” states Laurin. “At least once a year I look at the budget and try to cut something on a regular basis, to keep efficiency. It does seem that the larger a clinic gets, the more inefficient it becomes, meaning that by offering more client services, more non-charged services are also offered such as newsletters, e-mails and thank you notes. All of these are good, but they also increase overhead. Sometimes, those non-charged services really need to be evaluated for their return on investment.”
The Furmans have asked their staff to keep themselves busy during the slower times, even if it is just paying more attention to cleaning up around the practice. “We also made a recommitment to client service, to give more than the client would expect,” Furman notes. “We have always tried to do that in our daily practice, but it was a good time to reaffirm the commitment from all employees. We have continued to do this even during some slow times, but found that clients are still surprised when they get more than they expected in service.”
Interns/externs still in demand by practices
Some good news from the 2009 Bovine Veterinarian survey is that only just over 20% of respondents said they are cutting back on intern/extern/student programs. Tim Richards, DVM says that recently some student housing has become available, and he is actually trying to increase the number of veterinary students at his Hawaii-based practice to give him a bit of technical help.
Nels Lindberg, DVM, is just starting to offer intern/externship programs to veterinary students, and is looking for a piece of real estate that could offer a studio type apartment for any student to stay in for free. “Currently they stay in my camper,” he says. “This is another area practices should not cut back on, because these are win-win situations for both parties if approached right.”
Mark Thomas, DVM, Dipl. ABVP, says his dairy practice in New York has the largest pool of interns/externs in the spring and summer of 2009 than they’ve ever had.
Instead of cutting back on having students participate in the practice, Jessica Laurin, DVM, is seeking more local students who might be able to stay with friends or relatives nearby her east-central Kansas practice.
The Mid Maryland Dairy Veterinarians have always been supportive of veterinary students and younger dairy enthusiasts as they grow, says Matt Iager, DVM. “We like to start early and see students develop. We are asked many times how we are able to find new associates and quality veterinarians, and most of the time the answer is by offering externships from veterinary medical college clerkship programs. In 2009, we have senior students scheduled from Virginia Tech, Cornell, Mississippi State and Iowa State.”
Colleague Richard Doak, DVM, adds that the practice will continue to take externs. “We believe that it is critical for the future of our practice that we identify the best veterinary candidates early and make sure that they are well acquainted with our practice. We have students who rode with us back as undergrads. We want to have the opportunity to hire the very best candidates and externships are one of the best ways to get to know the student while they experience what we believe makes our practice an exceptional place to work.”
Canadian feedlot veterinarian Calvin Booker, DVM, MS, feels the same and says his practice looks at these programs as long-term investments in the profession. “Paying it forward, if you will,” Booker says.
Next issue: Increasing revenue in tough times.