The beginning of any business is the ability to keep track of income and expense, and eventually develop a net income, which means a profitable business. In veterinary medicine, we look at $250,000 gross production in the first year of operations as a decent start, although R.J. did over $2 million during the first year in his start-up trailers in Southern California.

Key references each practice should have include:

 Building The Successful Veterinary Practice: Programs & Procedures, specifically Chapter 3 for medical records and Chapter 4 for program-based budget, with the appropriate appendices.

 VCI® Signature Series Monograph Fundamentals of Money Management, which includes a CD with an AAHA-compatible QuickBooks® chart of accounts, but it includes some large animal income and expense centers. The chart of accounts is designed to be loaded in total, and then just delete or combine the ones as desired by the practice bookkeeper.

 VCI® Signature Series Monograph Profit Center Management, which includes a CD that provides a budget spreadsheet that drives the key practice indicators (KPI) for quick assessment of trends.

 VCI® Signature Series Monograph Inventory and Maintenance Management, with a "tool kit" CD of forms and checklists.

One short note about the relationship with your tax accountant. The tax CPA must understand the Golden Rule of being a CPA, which is, "He with the gold, makes the rules." You pay your tax accountant for expertise, and that expertise is not in how to run a veterinary practice. Most accountants excel at "past tense" assessments, but are concurrently very poor at developing new or improved income centers for your clients. You want to provide the accountant a monthly QuickBooks P&L and balance sheet, done in a management style as shown in the VCI® Signature Series Monograph Profit Center Management. From that, the tax accountant recategorizes and returns a quarterly "tax based" P&L and balance sheet, with the appropriate tax payment and management advice.

For a mature practice, we want total W-2 compensation, staff and doctor's twenty percent productivity, to be under forty-three percent, when we have stabilized the practice. Specialty practices can take it to almost fifty percent, due to their higher service fees. There is a the VCI® Signature Series Monograph Compensation Strategies that addresses both doctor and staff compensation programs and alternatives, as well as the accompanying CD with contracts and "Letters of Agreement" for employment.

When we look at the overhead, we want the expenses of the P&L, less the three highest variables, doctor money, occupancy costs, and return on investment (ROI), to stay under fifty percent any month, and under forty-eight percent for any quarter.

We also want, by line item, the income dollars to relate to the expense dollars by terms of the established mark-up. For example, you buy $7500 of nutritional prescription diet, the mark-up is forty percent, so the resale income should be $10,500 for the same period, with a three-week product turn-over as the goal.

To achieve these goals, no line item can ever be changed for sake of an invoice. Your software system must allow some form of "adjustment" to the bottom line total, so the discounters have somewhere they can give away "net dollars" and still be tracked. Remember, all discounts are pure net dollars. There is to be NO overhead dollars in giveaways.

We have already illustrated that we believe the best practice protocols come from using the AAHA Standards for Veterinary Hospitals. Even if you are not a member, the investment in the document is worthwhile, and you will have a great resource developed by practicing veterinarians for veterinarians, rather than a single person's opinion, like most texts. When the practice's case management guidelines start with Tilley's Five Minute Consult, the "tweaking" to the practice's formulary becomes the only initial issue. These two documents allow the practice a fast and easy baseline for improving its own programs over time. Remember the team's quest for continuous quality improvement in all zones.

Diversity Abounds

We have listed just a few of the VCI® Signature Series Monographs and some of the texts we have published over the past several years. One size never fits all, regardless of what the marketers tell us. There are monographs and texts for specialty hospitals, start-ups, multi-doctor hospitals, conflict resolution, and a host of other "needs" that are practice-specific.

Most veterinarians spent nine-plus years achieving a "license to practice", yet have spent virtually no time concurrently to develop leadership skills, human resource management aptitudes, or even the basic business skills. The need for a business team of advisors, as well as a veterinary-savvy consulting team to help translate the business jargon and needs into the delivery programs, is critical in today's market place.

If you review the VCI® Signature Series Monograph on Strategic Assessment & Strategic Response, you will see that new metrics are essential when developing new programs. Yet many of our associations still do strategic planning, as if the community even reads the plan, still using old metrics, and then wonder why there is no change, but reversion, or obsolete plans, after one year.

Whether your practice is new or old, the community has been rapidly changing, and it is not the same as when you first assessed their needs or your programs. In 2004, the AVMA aggressively initiated the think twice for life initiative with the public (go to www.npwm.com). Yet, only eleven thousand practices enrolled for the free training kit in the first year. That is only about fifty percent of the companion animal practices.

Some of your colleagues will never change, and some will follow the trail of the dinosaur. Often these people are your "advisors", when using the Internet chat rooms. Beware of advice from people who have not earned the credentials and/or have not seen the diversity of our profession.

Business Rules

The veterinary profession seems to prefer easy to use lists. So, as consultants, we provide them. The American public calls them "sound bites" during election years. Advertisers call them "grabbers" to support their marketing efforts. Veterinary publications call them "matching the attention span of our readers".

Whenever you ask for a "simple list", be aware that you are getting just the tip of an iceberg. The other seventy percent lies beneath the water and is a hazard to all ships sailing in the vicinity. In staff hiring, we call the resume of skills and knowledge the tip of the iceberg, it is the attitude that lays seventy percent below the surface that determines if someone will fit. See Building The Successful Veterinary Practice: Innovation & Creativity for specifically designed interview questions to determine attitude. Regardless, here is a list for those readers who demand a list:

Baker's Dozen of Business Rules

1.  Doctor-centered practices are obsolete and have lower income. This came from the era of the ambulatory veterinarian, driving from farm to farm, doing the essentials, while watching pennies-per-hundred-weight (cwt) costs for the producer. We now "save money" for companion animal stewards by entrusting much of the husbandry and follow-up to the practice's nursing staff.

2.  Be client-centered and listen! We need to set practice hours based on the community demand for services. This sets the doctor and staff shifts, based on "front door swing rate". We are also bound by the Practice Act in most states and provinces to do only what is needed, and prohibited from doing anything that is not needed. Medical rulings in courts across the land have shown the client only has the ability "to access" or "not access" the needed care, and anytime a practitioner gives options, that practitioner become personally liable for the wrong choices by the client. Clients do not have the ability to understand what waiving a level of care means, so practices must clearly state the need, then fall silent and listen to the client.

3.  Speak for patient "needs". Good medicine is good business! Pediatricians and veterinarians are very similar in that their patients do not talk to them about pains and feelings. Clients seldom understand the patient needs, much less the professional needs of the attending provider. That must be stated clearly. In today's marketplace, wellness surveillance testing abilities are increasing, and the practice must add those screening procedures to the "need" list, such as for blood pressure, lead II ECG, in-house SNAP tests for parasites, etc. In most cases, this adds twenty to thirty percent of the caseload into the "day admit" for differential "work-ups", a profitable process, since most of it is done by staff.

4.  Provide exceptional service. Client perceptions exceed expectations. The facility appearance, smell, sounds, and staff attitude set the tone for the relationship with the client. A team-based healthcare delivery system has many more people focusing on client satisfaction, those perceptions and exceeding expectations, which build the "legendary service" reputation in the community.

5.  Become a great communicator. In most cases, veterinarians have not graduated as being skilled communicators. In fact, recent studies show the difference between a successful practitioner and unsuccessful practitioner is life skills, communication skills, and the ability to hear the question behind the question of clients and staff alike. Most every new graduate and the zone coordinators should be required to take a Dale Carnegie or Toastmasters communication course as part of their first year employment expectation.

6.  Staff is your first client. The veterinary staff deserves to know the what and why from the leadership for all programs, protocols, and policies. In this manner, they can further develop the who and how at the zone level. In wellness care, as well as preventive medicine, staff must have the healthiest animals in the community, feed the appropriate premium diets, and set the example. They need to understand and accept the why to achieve this internal compliance.

7.  Always build on strengths and train to a level of being trusted. We hire for specific strengths that impress us, so it is only natural that we expect those traits to be "showcased", as we redesign a zone's operations. The traditional habit of making everyone accountable for everything, some call this cross-training, is again a "small thinking" system. Staff must learn one zone at a time and be able to meet outcome expectations, those duty standards. This is when they are trusted to complete the mission with on-going CQI efforts. Before attempting skills for a second zone, competency and productivity in the primary zone must be demonstrated.

8.  There are always two sides to every story, so do not react to just one. Human resource management issues are a challenge to most practices, and each person comes with individual perspectives of "fair" or "reasonable". This starts the "story" in each person's mind. When there is a difference of opinion, first ensure the parties are addressing the practice outcome desired and not some hidden agenda. Second, never listen to one-side of any story. Have all parties together and have each share the relative perspective, in relation to the desired outcome, and never the person. In simplest terms, consider it an onion causing tears. Peel back the conflict issues until you can find a common outcome agreement deep in the center, then slowly build outward layer by layer the core values, standards of care, mission focus, duty standards and personal relationships needed to make the outcome acceptable to all.

9.  The front door must swing. This is a simple way of stating that client access drives the practice's shifts and subsequent staffing decisions. Individual "I can't do that" or "I can't work those hours" is just a decision for that person to not work, and they may become part-time employees. Practices cannot grow with arbitrary hours based on children's day care, supper time, the sun's position in the sky, or other non-client factors.

10.  An annual program-based budget is essential. The commitment of the providers to the programs of the practice is reflected in the procedures per FTE provider. The completed procedures become dollars in the budget actuals, which are compared to the projected, which the promises were made by the providers at an earlier date. The annual program-based budget is nothing more than the dollar projection of the healthcare delivery vision of the doctors and staff of the practice. The quarterly review is done to determine if people are keeping their promises, or if there needs to be an adjustment, based on a front door swing rate change from what was anticipated.

11.  Save fifteen percent of every paycheck, off the top, every time. No one can retire comfortably in America without significant savings, and even selling a practice does not cause adequate retirement money to be accumulated. Learn to put money away every paycheck, before you ever see it, and you will never miss it. Teach each staff member to put money away with every paycheck, before they ever see it, and they will thank you as the money compounds. Bring in a certified financial planner once a year to help them learn how to invest properly for their future.

12.  Know your numbers and trends. In spite of the veterinary publications, gross income and act are the poorest tools any practice has to develop spendable net income. Transactions per doctor per month, visits per year, sales per FTE staff, number of new clients, dentistry procedures compared to outpatient visits, IV TKO (intra-operatory fluids compared to anesthesia rates), recovered pets/clients ,and even net income are better measurements and mean something, when planning the next month. It must be available from your practice software in real time to make the most meaningful decisions.

13.  Have fun every day! We are in the greatest profession in the world, and have the skills and knowledge to do many community outreach activities that add pride and fun to the practice day. Many practices try to conserve money by under-staffing, and thereby limit healthcare delivery, client-centered service, and in turn, doing fun things as a community practice. If you are not having fun every day, if you do not look forward to tomorrow's programs, stop and reassess why you are cringing. The person in the mirror each morning should be smiling and anxious to have another wonderful day in veterinary medicine.