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Can a consultant help your practice?

Everyone knows you have to spend money to make money. Perhaps no one knows that better than veterinarians who pay a small fortune for their education and then pour thousands of dollars into the sophisticated equipment required for modern veterinary clinics.Yet many veterinarians still don't make much money. Should they then spend more, perhaps thousands of dollars more, for a consultant who may tell

Everyone knows you have to spend money to make money. Perhaps no one knows that better than veterinarians who pay a small fortune for their education and then pour thousands of dollars into the sophisticated equipment required for modern veterinary clinics.

Yet many veterinarians still don't make much money. Should they then spend more, perhaps thousands of dollars more, for a consultant who may tell them they aren't very good at running a business?

Why should veterinarians be good at business anyway? They were trained to treat animals, not run a corporation. "Veterinarians spend eight years becoming a veterinarian and years more getting practical experience," says consultant Thomas Catanzaro, head of Catanzaro Associates, Golden, CO. "As business people, veterinarians have no experience."

The concept behind veterinary consultants is simple. The consultants, who are usually veterinarians themselves, are trained to spot problems with your practice. They often do it quickly because they see the same problems again and again.

"What we often see is a lack of money at the end of the month," says Catanzaro. "They see that lack of money as a problem, but they don't know what is causing the problem. The things they don't see because they're in the middle of the forest, we see almost immediately."

Pinpointing problems Help won't come cheap. For instance, at Catanzaro, one level of service offers long-distance telephone, fax and e-mail consulting at $105-135 an hour, charged in increments of one-tenth of an hour.

Or clients can opt for an on-site visit in which a member of Catanzaro's team spends about four days observing the practice. That's followed by monthly telephone checkups to see how the practice is doing. "I get to meet the veterinarians, see the clients and how the veterinarians do their business."

Catanzaro's charge for a one-year consultation, which includes the on-site visit, is $9,500, plus travel expenses, food and lodging for the visiting consultant.

Although the on-site visits are costly, consultants may be able to spot problems that would be difficult if not impossible to diagnose over the telephone, such as friction between members of a veterinary practice. "It's like a veterinarian looking for lameness over the phone," says Catanzaro. "You can't tell the cause of the lameness."

Although personnel issues often plague veterinary practices - the principals at one firm hadn't spoken to one another for four years - many problems consultants see stem from a lack of business and management skills.

For example, veterinarians often try to do everything themselves, using valuable time to do minimum wage chores, while passing up clients willing to pay top dollar for their professional services. Or they fail to control inventories, stocking too much of one medicine, too little of another.

Many veterinarians fail to organize their days so they can see as many clients as possible. This is especially true for large animal veterinarians who spend much of their time on the road.

Yet another problem - overdue accounts - can run into the tens of thousands of dollars. When veterinarians fail to collect debts promptly and don't levy overdue penalties, they are extending interest-free loans to their clients and taking a chance that the client may default on the bill. Meanwhile, the veterinarian loses the use of the cash which could be invested to generate income to buy new equipment or pay other expenses.

Taking advice For veterinarians willing to change their business practices, the benefits can be enormous. They will make more money, says consultant Marsha Heinke, of Owen E. McCafferty, CPA, Inc. And in the long run, she says, the practice will be worth more. There are also non-financial benefits, such as more professional satisfaction.

Yet many veterinarians reject the advice they have willingly paid for. "A lot of the time, they're not ready to make changes," says veterinary practice consultant David Horn of Brakke Consulting.

"Many consulting dollars are wasted by desperate practitioners randomly grasping for an easy solution to complex problems that have evolved over years of management neglect," says Heinke. "To use a consultant effectively, you must be committed to the direction of the practice you wish to obtain with the consultant's advice."

The consultant, in turn, must come up with suggestions that work. One recurring difficulty is overdue accounts. "A lot of the problem with accounts receivables is that there is no policy," says Horn. "Once or twice a year, the vet looks at his receivables and takes two or three of the guys that owe a lot of money and says, 'how about a check?'

"My philosophy is not to let it get to the collection point," he says. "We need to get paid for our services at the time we perform them. When you go to a store, you write a check or get out the credit card."

Horn suggests past due accounts can be reduced by offering incentives for early payment and by instituting a system to regularly contact clients about payments. But Horn offers a word of caution for veterinarians who offer discounts - say 5%, to encourage prompt payments. He says the lost income from discounts needs to be offset by raising prices on some other services. "You can't just give away five percent of your business."

While many problems fall into clear-cut categories, consultants sometimes find the unusual. The principals at one veterinary group could never figure out why they weren't making more money.

When Catanzaro Associates set up a system to see how many drugs each veterinarian dispensed, they discovered an associate veterinarian had been giving drugs away free. "He was an associate, so it didn't affect his fee," Catanzaro says. "The clients kept calling him back because he didn't charge for all the drugs. By the end of the third day, we realized what was happening. That's huge money."

Time management One of the biggest problems is wasted time. "Your typical veterinarian tries to do everything himself," says Catanzaro. But if they hire a technician-driver, they can work the phone and handle record-keeping while the technician drives to and from appointments.

This allows the veterinarian to see more clients in a day. And if the veterinarian writes up invoices immediately after seeing a client while the technician drives, he's less likely to forget to bill for all services performed, Catanzaro says.

A second way to save time is careful scheduling. This allows veterinarians to travel the most efficient routes to make calls, much like UPS drivers do. In addition, veterinarians should pre-load their trucks with all the equipment and supplies they are likely to need for the day's appointments.

"If you have to run back and forth to the clinic to get things, that's wasted time," says Horn.

Boiled down to its essence, the veterinarian's problem often stems from a lack of business skills.

"Most veterinarians don't learn business in school," says Horn. "They don't get training in business after they become business owners. They don't ever look at their business as a business."

Financially troubled veterinary practices often get out of difficulty the same way they got into it - a nickel and a dime at a time.

One way to generate those nickels is to find small ways to save cash to cover expenses. For example, many veterinarians make at least one annual trip for continuing education. But some veterinarians have found they can get their plane tickets to conferences free.

How do they do it? They earn free plane tickets by paying for many of the practice's bills with a credit card that earns frequent flier miles, says consultant David Horn.

This method requires some planning, however. If you run a balance on the credit card and pay interest as a result, it's a loser. Moreover, some vendors offer discounts for early cash payment that may more than offset the value of using the credit card to obtain frequent flier miles.

"You have to weigh the discount versus the value of the frequent flier miles you get," says Horn.

But in some situations, credit card payments may make sense. Plus, if you pay with a credit card, you have the use of your cash for an extra 30 days. During that time, you can invest the cash and earn interest on it.

Many modern veterinary practices have first-rate equipment, but they may not be using it effectively. That's especially true with computers.

"Most clinics are computerized," says Horn. "But most veterinarians don't know what computers are capable of doing and don't use computers to maximum efficiency." Take tracking inventory on computer. Most veterinary clinic software is capable of tracking inventory and having automatic reorder points.

"Each product would have its own re-order point. For some products, you might never have less than a month's supply. Other products, you would never want more than a week's supply because it's a commodity item available from a lot of places."

Inventory control helps many ways. For example, it helps to keep veterinarians from running out of products, especially medicines that are hard to get on short notice. And inventory control saves money by avoiding bloated inventories.