A good practice management system can help you seal the deal
Maybe you’ve devoted your entire career to building your veterinary practice, and now you’re ready to retire and enjoy the fruits of your labor.
Or maybe the stress created by the veterinary staff shortage is taking its toll on you and your relationships, and you’ve come to the decision that it’s time to retire for your own mental health.
Regardless of the reason you’re considering selling your veterinary practice, information – and how you present it – is the key to getting a fair price that reflects its actual value.
Whether the buyer is a corporation or a mid-career veterinarian who’s ready to stop being an employee and start being an owner, they’re going to want proof that they’re investing in a veterinary practice that is profitable and has the potential for growth.
How veterinary software can help you prove your practice's value
There are a number of factors that a potential buyer will want to look at. A good, cloud-based practice management system (PIMS) will have features that make it easy:
Patient care
Patient care, of course, should top the list. It’s your practice’s reason for being, after all. But there are many aspects of patient care that can affect a practice’s financial health, and a good PIMS can help you show a potential buyer that you have a good handle on the finances of patient care. Here are some examples:
- Maintaining complete and accurate patient records in your PIMs tells prospective buyers everything they need to know about the products and services you provide for your patients. This information provides the baseline for other conversations about financial health.
- Using a customized template to make and record diagnoses and treatments helps you maintain the same standard of patient care every time.
- Automatically generate messages that let pet parents know it’s time for their pet to renew vaccinations or refill medications, showing attention to both patient care and opportunities for generating revenue.
- Generate automated requests for feedback. Being able to show a potential buyer rave reviews is a huge bonus, but you can also make the most of negative feedback by documenting how you resolved the situation.
Revenue capture
Because most vets are so devoted to their patients, it’s easy to “forget” to charge for the seemingly little things that don’t take much time. But that’s misguided thinking. This blog post from DVM360 breaks it down well. A few key points:
- In the interest of patient care and not wanting to “nickel and dime” clients, some veterinarians don’t charge for skin cytology because it’s such a simple procedure.
- If you would typically charge $40 per cytology, and you do just five per week, that’s $10,400 in lost revenue for the year.
- Even simple procedures have an associated cost: supplies, equipment, staff training and labor (testing, if you do it in-house, or properly packaging the sample if you send it to a lab), etc. So, not charging for those procedures could actually result in a loss for the clinic.
And what about clients that call or text you outside of clinic hours? Do you have a set rate for those unscheduled “appointments”? Having a set fee for telemedicine and posting it on your website is a great way to capture additional revenue (and it may even cut down on those intrusions into your personal time).
Being able to show that you don’t throw away opportunities to capture revenue proves that you’re living up to your fiduciary responsibilities.
Inventory management
Inventory management is a huge part of running a financially successful veterinary practice. You never want to be in the middle of a surgical procedure only to realize you’re out of a necessary item. Likewise, if a significant percentage of your practice’s revenue comes from selling medications, food, and other items to clients, being out of an item means a lost sale.
On the other hand, if you have too much inventory, you have operating capital tied up in items that aren’t generating revenue. And if those items have an expiration date, that’s money you may not be able to recoup.
While keeping extra inventory on hand was a smart move during COVID due to supply chain disruptions, most logistics are back on track now (although you might want to maintain extra inventory of any products that are known to be in short supply).
Since inventory management is so important (and something any prospective buyer will want to understand), a PIMS should either have a native inventory management feature, or it should allow for easy integration with a third-party product. Set up properly, it can handle tasks like:
- Keeping track of how much of each item you have on hand
- Showing how much you pay for each item and how much you charge for it
- Establishing automated re-orders for items that have a high turnover, are critical to operations, or generate significant revenue
- Tracking expiration dates and prompting staff members to rotate products (selling older products first) and discarding expired products
- Receiving and paying invoices from vendors
- Documenting compliance with local or federal regulations regarding controlled substances
A key part of inventory management is being able to prove that you’re not paying more than you need to. You do that by performing regular price shops, and you can use your PIMs both to remind staff members to conduct those shops and to record that they were done – and what the results were. You can add a custom field, for example, to document why you went with a higher price (better quality, for example).
Being able to show an interested party that you have your inventory well under control could be a significant factor in the ultimate decision.
Invoicing
Invoicing patients is a necessary evil. And, if not done right, it can be the source of lost revenue.
A PIMS that integrates invoicing and allows clients to choose their method of payment (including on-file credit cards and digital wallets) shows prospective buyers that you know collecting payments is important to financial health and that you make it easy for clients to pay. You can also use your PIMS to demonstrate that you have a process in place to help you avoid missed fees by using a checklist in exam rooms.
Business intelligence
With a PIMS that has a strong business intelligence feature, you can do more than produce snapshots and reports of the items listed above. You can offer a potential buyer insight into things like:
- Trends: Not only will business intelligence identify trends, it will also help you explain them. If you’ve seen an increase in new patients over the last several months, is it due to population growth in the area? Are existing clients adding new pets to their families? Or, did something cause a competing clinic to lose customers? These are all examples of trends a prospective buyer can see as potential for continued growth. (And they’re all things you can learn from a well-designed patient intake form.)
- Anomalies: If there were a few months where profit dropped significantly, is it because you upgraded or invested in new diagnostic equipment? That’s a temporary drop that will help lead to increased revenue in the future.
- Profit margin: The average profit margin for a veterinary clinic is 10-25%. If your practice’s profit margin differs significantly from this range, business intelligence can help identify the reasons, giving prospective buyers tangible factors to consider.
- Practice growth: Buyers look for a practice with an annual growth rate of 5-10%. So do the banks that loan them the money. If you haven’t tried to grow your practice because you're maxed out, you’ll want to show buyers planning to bring in additional vets and vet techs that the opportunity is there. One way to do this is to use a VOIP phone system that integrates with your PIMS. That will allow you to capture missed sales – people who would have become new clients but went elsewhere because the wait to be seen at your practice was too long. And that represents more than just a missed new puppy visit; it represents lost revenue from the pet’s entire lifetime. So if you intentionally haven’t tried to grow your business for personal reasons, use your PIMS to show potential buyers that the opportunity is there.
Turnkey transition
One of the most important things your PIMS can do for you is to reassure a potential buyer that they can walk in the first day and get right to work taking care of patients instead of trying to untangle a mess of ad-hoc processes you cobbled together along the way.
The bottom line: Every bit of effort increases your practice's value
If you’re thinking, “Oh, no. I haven’t done all of that!”, don’t worry. Consider this a blueprint for getting your practice ready to sell. Sure, there’s some work involved, but each step you take will increase the value of your practice.
Even if you do have everything in place, selling your veterinary practice isn’t always easy, of course. There’s usually a lot of legal due diligence that has to happen before everybody signs their name, especially if you’re selling to a corporation.
There are multiple ways of assessing the value of a veterinary practice, and they involve a lot of acronyms! But a lot of practices don’t even get to that step, because they’re not organized enough to present the kind of data it takes to make a great first impression. But with a good, cloud-based practice management system, you don’t have to be one of them. You’ll have everything you need to make your practice shine.
