John Sheridan BVetMed CVPM DMS MRCVS It’s all in the Numbers

The Numbers - The third of your ‘hidden practice treasures’ “Not everything that counts can be counted, and not everything that can be counted counts” ― Albert Einstein "In God we trust, all others bring data.“ - Dr W. Edwards Deming There may be some performance issues which can’t easily be measured but the likelihood is that if there are any significant problems which impact on service to clients, professional standards, patient care, staff morale or financial performance; they will show up in the numbers somewhere.

So we need to know what key performance indicators influence profitability and what numbers to monitor: every practice owner, manager, consultant, accountant or advisor will recommend different KPI’s only you can decide what KPI’s are most appropriate for your practice but these are some suggestions

Some key numbers to review current financial performance From your management accounts – just three cost headings and ‘real’ net profit as % of revenue – how much profit did you really make last year and what’s your target for this/next year? Top line growth Revenue per ‘vet team’ FTE ATV (ACT) Working capital numbers Business value – ‘goodwill’

So how much profit did you really make last year? Where can I find out? Not from your practice financial accounts – why? International Benchmark service online or seek advice it’s quick, easy and it’s free Now decide what margin you will make – this/next year We will consider in some detail in the next session

Working Capital Ratios– are you using your working capital efficiently? Liquidity cash is king! current assets (less stock?) / current liabilities should be greater than 1 Stock days (current stock/purchases) * 365 aim for 3 weeks or less but categorise rationalise your stock short term benefit of a parsimonious month! Debtor days (debtors/revenue)*365 what should it be? categorise small animal / large animal / equine prevention is better than cure Gearing total liabilities/total assets who owns your business?

Business Value– it’s never too early to plan for retirement value always linked to profit is there a healthy market for buying/selling practices in Hungary? what is your business worth now? multiple of net earnings (EBITDA) do you need a professional valuation do your own sums every year

Some key numbers to review your team performance Consulting Room Occupancy and Veterinary Productivity the objective is to monitor the available consulting slots, surgical and other procedures and the availability of veterinarians in your practice in order to review consulting room occupancy and veterinary productivity make some assumptions about the working hours per day and the average hours taken in your practice for a house call and a minor, intermediate and major surgical operation or other procedure use a simple spreadsheet tool such as this one:

Compliance – record and review data from 100 consecutive consultations on a spreadsheet consulting charge procedures recommended procedures completed in subsequent four week re-examinations recommended re-examinations completed in subsequent four weeks

Here are some results Procedures – compliance only 17/35 = 48% - Can you see the potential for growth? Re-examinations – compliance only 28/46 = 61% - Can you see the potential for growth? So monitor these numbers!!

Here’s an example:  General anaesthetic 8  Surgery3  Dental4  Lab tests12  Diagnostic imaging3  Others2 Consider the impact of increasing dentals from 4 to 6 or diagnostic imaging from 3 to 5 – just do the sums – we will consider specific examples in a later session Procedures achieved per 100 consultations

Just 3 key numbers to control the costs the cost of drugs and supplies the cost of all your people the establishment and overhead costs that’s it!!

Here they are: ‘ model practice’ % Revenue100.0 Less costs Drugs and supplies20.0 The vets (inc owner)20.0 The support staff20.0 The rest – establishment and overheads costs 20.0 Profit % % How do these compare with your practice?

Net Promoter Score - a question for your clients How likely is it that you would recommend our practice to your friend or colleague? Clients respond on scale 0 to 10 Promoters (score 9 to 10) - loyal enthusiasts who will positively refer Passives (score 7-8 satisfied but not enthusiastic) Detractors (score 0 to 6) broadly unhappy –likely to be detractors Score – ignore the passives – take the percentage of clients who are promoters score and subtract the detractor score

John Sheridan BVetMed CVPM DMS MRCVS Thank you