Editor’s note: First in a 4-part series
In early 2009 Bovine Veterinarian sent out an online survey using the Survey Monkey system to members of the American Association of Bovine Practitioners and the Academy of Veterinary Consultants listserves. The purpose of the survey was to ask beef and dairy veterinarians how they and their clients were adjusting to these tough economic times including strategies for cost reduction as well as revenue-generation.
The next four issues of Bovine Veterinarian will examine this feedback from the bovine veterinary community, and will feature beef and dairy veterinarians from around the country and how they are positioning themselves during this economic downturn.
This first article will outline some of the survey results, with subsequent articles exploring the information in more depth.
A total of 145 veterinarians responded, 46.9% who were dairy-only, 36.4% who were beef-only, and 16.8% who served both beef and dairy clients. Veterinarians from all areas of the United States responded, with the Midwest region being most predominant (37.1%) followed by the Northeast (15.4%) and the High Plains/West (11.9%).
The good news is that 78.1% of respondents said most of their clients have stayed about the same with the amount of veterinary services used, and 14.4% indicated that some clients have added veterinary services. However, 47.8% indicated that some clients have cut or decreased veterinary services.
One-quarter of the veterinarians said they have lost 6-15% of their clients due to retirement, selling out inventory, bankruptcy or a shift from livestock to crop production, and 65% of veterinarians who lost clients in the last couple of years indicated that those were their smaller clients.
Client cost reductions
Veterinarians were asked in what ways their clients were reducing costs on their operations.
Not surprising, the top two ways producers were cutting costs were feed costs (87%) including supplements, cheaper feeders, etc., and fewer purchases of equipment and/or more scrutiny of equipment purchase and costs (85%). Delaying or foregoing planned expansion or capital improvements to the livestock facilities/barns/parlor came in third (75%), with reduction in labor costs fourth (63%). (Chart 1)
A set of four questions dealing with animal health inputs, switching to generic drugs vs. branded drugs, reducing biosecurity tests and reducing veterinary and consulting services was also asked. Slightly more than 41% of the veterinarians indicated clients were reducing animal health inputs such as vaccines or other drugs, and 39% said clients were switching to generic vs. branded products to cut costs. About a third said clients had reduced biosecurity tests for diseases such as Johne’s, persistent BVDV infection, trichomoniasis and others. Of concern to veterinarians is that 39% of those responding said clients had reduced veterinary and consulting services. (Chart 2)
Veterinarians were asked an open-ended question about how they responded to clients who were reducing animal health and veterinary input. Several veterinarians said they have told clients that many of these practices would actually increase costs in the long-run and could negatively affect production. “Overall animal health inputs and biosecurity testing need to remain a priority,” said one dairy veterinarian. “Using preventive tests and vaccinations can limit the extent of disease that can cause further economic hardship.” Another dairy veterinarian said: “Our clients have continued to use veterinary services in an attempt to keep from culling cows and thus saving the purchase price of replacements. Medication prices are the main area in which they are shopping on price.”
On the beef side, one veterinarian who responded tries to explain to clients the risks involved and tries to show the financial effects of every decision. Another said: “Most of my clients understand that in hard economic times, the worst place to cut costs is on veterinary services. A sound herd health program is invaluable and any breach of this program can be worse than any economic down turn. Reducing morbidity and mortality and increasing pregnancy rate and pounds of calves weaned is most important when prices are marginal.”
Reducing practice costs
Beef and dairy veterinarians were also asked about reducing costs in their own practices and consulting business. Like many Americans, reduction of resources such as gas for vehicles, fewer trips, more fuel efficient choices, etc., was the leading cost reduction method (73%). Carrying less inventory also factored high (64%) as did delaying or foregoing the planned purchase of practice equipment such as ultrasound machines and other equipment (55%). Veterinarians are also holding off on practice vehicle upgrades (48%) and expansion or capital improvements to the practice (42%).
One veterinarian surveyed said he/she moved the business home to reduce expenses related to leasing a separate facility, and is also purchasing used equipment instead of new.
As with clients, labor costs are an unfortunate area of cost-cutting at a food-animal practice. Cutting staff, cutting pay/bonuses, delaying raises or new hires was indicated by 42% of respondents. Hand-in-hand with that was reducing benefits or perks for the veterinarian or employees (42%) and supporting fewer externs and students in the practice (22%). One beef practice is limiting overtime and tracking schedules to better align the workload and number of staff. Another is implementing a reduction in staff perks such as Christmas parties, or letting go of cleaning services/maintenance services and using practice employees for those tasks.
Almost a third indicated they were cutting back on attendance at continuing education (CE) or livestock-related meetings, yet they were taking more advantage (42%) of online CE and educational meetings such as podcasts and webinars. A full quarter of respondents were not renewing memberships to livestock or veterinary organizations.
One veterinarian said he/she will reduce CE expenses by attending only local or state meetings, or a national meeting if it’s close to home. (Chart 3)
Increasing practice revenue
The economic downturn doesn’t have to mean total gloom and doom, however. Veterinarians were asked in what ways they have attempted to increase revenue in their practice and/or consulting businesses. By far the greatest was seeking new clients (75%) followed by charging more for mileage or trip charges (66%), and adding new services (62%) for food-animal clients.
Veterinarians with mixed practices increased costs for small-animal and equine services (49%) and some increased other parts of the practice such as small animal services, boarding, grooming and the like (34%). Others (48%) increased their emergency call charges.
Just over a third (35%) of respondents said they were working more hours per week as a way to increase revenue, and 19% said they added new veterinarians or technicians to help generate revenue. About 9% are seeking alternative veterinary employment such as university, pharmaceutical or corporate employment.
One veterinarian indicated he/she is doing more client education, website newsletters, mail newsletters and client meetings to generate more income, while another is relying on the steady small-animal revenue to get his/her mixed practice through tough times in the dairy industry. (Chart 4)
Riding out the wave
Over 80% of veterinarians responding to the survey said they were optimistic that the economy will stabilize in the next few years for both them and their clients. Veterinarians were asked their suggestions for other food-animal practitioners for “riding out the wave” of these economic times.
One business-minded veterinarian said: “Many veterinarians need to revisit or remake a practice business plan using real time economic indicators. Few have revisited it since getting the small business administration or bank loan after buying into or building a practice. Most successful businesses revisit the goal markers at least annually.”
A dairy veterinarian uses his/her moments of spare time to figure out ways to save costs, review budgets, do the extras for the clients who are less affected by the economic downturn, drum up new clients and go over marketing strategies. “Everyone needs to raise their fees, but now is not the time to do it,” this veterinarian said. “For clients, go over where they are cutting corners and explain future implications. Find ways to help them cut costs while minimizing the impact.”
“This is a good time to focus on the profit centers of your business,” said a beef cattle veterinarian. “Eliminate those that don’t make money, i.e. driving 25 miles to go out and castrate two calves. Add ones that make more money such as nutrition consultation services.” A dairy veterinarian adds, “Diversify your practice services. Specialized practices devoted only to dairy may perish.”
Another beef veterinarian offered, “The most important issue is to focus on providing services that provide real world value and cost-benefit to producers, not necessarily services that we think should be valuable or services that have been paid for in the past. Food animal practitioners have to figure out how to provide services with a team that includes non-veterinarians.”
And probably the most sage piece of advice? One veterinarian said: “Do common things uncommonly well.”
Next issue: How clients are reducing costs and your role in their strategies.
Practice profile: Meet the Mid-Maryland Dairy Veterinarians
Throughout this economic series, Bovine Veterinarian is going use as a common thread the practice strategies of the eight-veterinarian Mid-Maryland Dairy Veterinarians of Hagerstown, Md. “Our primary objective has been to practice quality dairy herd production medicine that enhances our clients’ ability to efficiently produce a high-quality product,” explains Matt Iager, DVM, of the group that practices in four states. “Our ‘one team approach’ is important as we maintain a strong relationship with allied management advisors, such as Extension, feed companies, bankers, nutrient managers and others to facilitate a total integrated management approach.”
The worldwide economy has affected dairy producers in the Mid-Atlantic region, Iager notes. “We have just reiterated our common practice philosophy which is ‘if the client is profitable, we will be profitable,” adds Richard Doak, DVM. “We earn our income by investigating and solving problems in addition to preventive herd health instead of the traditional undercharging for services and high drug costs.” Each of the team members may have a specialty that provides a “center of excellence” for internal referral, including embryo transfer, ultrasound, mastitis and milk quality, milking machine evaluation, nutrition, records or production management consultation.
The practice annually hosts a client appreciation day/symposium on various topics. It provides quarterly newsletters, a client education reference manual, small seminars throughout the year, and foot trimming training seminars. Iager says all of these teaching tools provide value to dairymen. Team meetings on dairies focus on strengths, weaknesses, opportunities and threats particular to each dairy. Open communication between all farm team advisors is a key to success.
The practice likes to hire new veterinarians just before they are actually needed so the quality of service, availability, and teaching continue to improve rather than having lesser quality service prior to hiring. The practice also provides veterinary students a three week externship during their senior year of veterinary school.
“High-quality services, diversified dairy philosophies, large array of centers of excellence and the multitude of teaching capacities has helped us weather the economic storm,” adds Cory Meyer, DVM. “Our strategy has been to use as many educational tools as possible to prevent problems before they occur, and have more profitable clients.”