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Let’s be honest. Key Performance Indicators (KPIs) don’t sound all that exciting, right? And, frankly, analyzing these kinds of metrics can even be somewhat intimidating.
Think of KPIs as essentially a report card.
KPIs give you veterinary industry benchmarks that you can measure yourself against.
They let you know where you can improve and also show you where you absolutely need to improve.
All about day-in and day-out performance and functionality, KPIs alert you and help pinpoint problem areas. After all, you can’t solve a problem you don’t even know exists! As helpful as KPIs can be, they are no easy task to assemble. Putting together a good KPI report can take substantial amounts of your time and effort on a regular, methodical basis. Most financial experts agree that KPIs should be evaluated both monthly and quarterly for maximum benefit.
Looking for an escape route from assessing KPIs?
If you’re in a partnership with AmeriVet, we’ll help you keep track of and understand your KPIs.
Because that’s one of our responsibilities in a partnership. By the way, we’re really, really good at this. And here’s what you might find exceptionally mind-boggling: we actually like to do it. Working on KPIs makes us as happy as a pup with a squeaky toy!
What you’re being graded on: The metrics of those Key Performance Indicators.
Total veterinary practice revenue
This is your starting point. The most basic—and absolutely fundamental—piece of information that you need as a business. Without it, you simply can’t move forward. By the way, here’s some advice that could prove to be a big help: Invest in some veterinary practice management software that includes what you need for assessing your KPIs. You won’t regret it!
Revenue centers as a percent of total revenues (also known as ‘revenue by source’)
This is where you break down your total revenue into smaller components. When you have this information gathered, you’ll be able to see which areas of your business are high or low performers. You’ll compare revenue from every single area of your veterinary practice: professional services, retail sales, boarding, renting equipment and space to a groomer, and so on. Take note: This is also when you might find out that (yikes!) something is broken—and really needs fixing.
Now, while you’re going over these numbers, give the creative part of your brain permission to come out and play. Do you have any interesting ideas on ways to improve any of these areas so that they generate more revenue? Do any of your team members have suggestions? Have you kept tabs on what’s “hot” in terms of generating revenue for others in the veterinary industry?
Production by provider
There are two big questions that need to be answered here: How much is a veterinarian paid in salary? And how much does that veterinarian generate in revenue for the practice? Now, no two veterinary practices are exactly alike, so don’t take this next metric as something set in stone. But, generally, in the veterinary industry, DVMs generate revenue that’s 4.5 to 5 times their wages. Of course, there are all sorts of variables that could impact this metric, including: the DVM’s level of experience, the practice location, and the type of animals treated at the practice. Of course, once you come up with answers to these two questions, you’re going to be able to give yourself a grade on the state of productivity in your practice. You’ll also be able to compare the operational productivity of both your staff members and your doctors. You may be pleasantly surprised by what you find… or it may not be the grade you were hoping for. But just remember: it’s better to know than not know!
Expenses in relation to total revenue
That old axiom is true: You have to spend money to make money. As the owner of a vet practice, you have expenses; it’s part of running a business. Of course, you also have to find ways to keep those expenses down—while keeping revenue up. This particular KPI can help you see if there are areas where you can keep expenses to a minimum. And it can even allow you to get into the nitty-gritty things, like how much labor cost goes into each kind of transaction. So you’ll be able to figure out how and where to cut, while still keeping the quality of your service high and your clients happy.
It may even give you the urge to shake up the status quo when it comes to the cost of goods. This could lead you to finding new and better vendors that you may not even know exist right now. Or perhaps it could motivate you to re-negotiate contracts so that the terms are a little more favorable for you. In other words, knowing this KPI could turn you into a ‘change agent’—a disrupter—in your own business. And that could be really profitable!
Total number of transactions & the average transaction charge
In a perfect world, each transaction in a veterinary practice results in revenue. When you track this KPI, you’ll find out how many transactions you have each month, and you can also break that total down to show the areas of your practice in which those transactions occur. Once you’ve got a fairly substantial transaction history compiled over time, you’ll be able to make some comparisons. And draw some fact-based conclusions about how your veterinary clinic is doing financially. You’ll know for sure if you’re turning a profit—and what your profit margin is.
These conclusions might lead you to make some changes, like exploring a price increase for certain services, doing a more effective job of communicating/marketing your current products and services, or even looking into adding something new to the mix.
Finally, when it comes to this particular KPI, here’s a piece of advice: Reach out—and listen. Talk to your team. Do some “detective” work and see what your competitors are up to. Find out what your clients have to say. Chances are, somewhere along the way, you’re going to hear some really interesting news you can use!
Total number of active clients
This one is pretty obvious. It’s all about getting a grip on how many pet owners use your veterinary clinic on a regular basis. This KPI will help you predict your future income—and figure out if it will be enough for your business to be profitable. You might also be able to see patterns developing. For instance, if your veterinary practice boards animals, you’ll be able to tell at what time of the year this happens the most. This would allow you to plan ahead for it—and maybe even do some targeted marketing / advertising that potentially could increase boarding in the historically slower months.
Total number of new clients/patients—along with your client retention performance.
Back when you were in school, you completed a class, got a passing grade in it, then moved on up to the next class. It’s pretty much the same way when it comes to bringing in new clients. You may have a good, solid base of clients (good for you!), but you can’t stop there. It’s essential to always be looking for ways to bring new clients in and find ways to hold onto them. This KPI is key to maintaining your profitability.
Monitoring your veterinary practice’s Key Performance Indicators regularly and consistently can be hugely beneficial because it puts you fully in control.
