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Reasons for Funding- There are three types of funding you will require when setting up a practice

    1.    If you are purchasing property you will require funds for that asset. This is usually     financed over a 20-25 years period with the amount advanced being between 60-70% of the property valuation. If you are leasing or renting you may require additional funds if you have to pay a premium on the property. You will also require funds to fit it out as a veterinary surgery. These funds will almost certainly be in the form of a Loan over a fixed period.

      With the present economic situation the deposit is the biggest problem, and the banks valuation may be less than your valuation, which will affect your borrowing

2.    You will also require funds to purchase equipment to allow you to run the practice. E.g. Computer system/IT system, X-Ray machines, anaesthetic machines etc. You may choose to borrow for these from the same lender as the long term loan. Alternatively very good Hire Purchase and leasing deals are available from the suppliers. This keeps your eggs in separate baskets!

3.    You will also require funds to cover the general expenses of running the practice before you generate enough cash to make the operation self supporting plus enough for you live and survive on. This is termed working capital and will almost certainly be in the form of an overdraft from a high street bank.

This is one of the most difficult parts of the exercise. In reality you should have a provisional agreement to fund your proposal before you even find a practice. This can then be fine tuned to match your exact requirements when you are ready to purchase or lease suitable premises.

Your Business plan should have templates which include P&L (Profit & Loss Forecasts), Cash Flow and Balance sheet projections. It should be ready to go and you should just need to add in the current  figures once you have found your premises- always get it get it checked through before sending or showing it to a lender- mistakes don’t instil trust in a Bank manager.

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Say we buy a new Digital X Ray machine (inc interest charges) for     £20,000                                     

We normally take an average of 10  X-rays (2 plates each ) per week.

Our Standard charge for 2 plates is                                                     £72.00

Total  overheads PA for the practice (excluding Drugs) inc. Wages     £300,000

Practice is open 286 days per year, so overhead cost per day             £1,048

Overhead costs per hour (8 hour day) equals                                     £131.00

Time to take and interpret X Ray (20 mins)                                                     

Overhead costs per 20 minutes                                                            £43.00

Profit per plate                                                                                     £29.00

At 10 X-rays (X2) per week it would take          71 weeks/18 months to pay off

This approximation gives an indication of break-even period, although other factors would come in for it to be truly accurate.

So we could charge an additional £10 per plate to make extra profits, or pay off earlier.

Changing to a digital may well increase your X-rays taken by 50%

The Role of the Practice Manager.

The owner(s) of a practice usually has the vision of what they want to take place in their practice. This may be to

·      Have the largest practice in the Midlands,

·      To have the most well equipped practice in the area,

·      To have the friendliest client based practice in the city.

·      To have the first cat only practice in the area

The practice manager’s mission should be to help the practice by co-ordinating the overall running of the practice, dealing with all the non clinical matters, and help the practice develop to allow the vision to be achieved.  The manager can be involved in any of the responsibilities shown in Diagram 2:

The Ideal Manager should not bring problems, only solutions

When one looks at a manager, the size of the practice will determine the level of responsibility that that manager will have.  A small practice could obviously not afford to employ a full time manager and the manager may simply be involved with dealing with the office duties of the practice, leaving the owner to deal with the other sides of the practice. However, the very large practice may employ a manager almost as a managing director who plays a major part in the organisation of the practice and who will also have working under him or her, staff who have themselves had management responsibilities delegated to them.

Diagram 2.  An Example of  Managerial Responsibilities and the Relationship to Practice Size

What is needed to become a good  Manager

(2) Personality

When we talk about management and we look at veterinary nurses, what different personal qualities are necessary for a nurse to become involved in management? The qualities that are required are much the same as those needed to work as a nurse: they must be a team member and have the ability to lead a team.  All practices function on a team basis.

The nurse will always have an affinity with animals and with the welfare of the patients.  A practice manager may not necessarily have the same affinity as the nurse or the same amount of contact with the animals but should nevertheless have an understanding of the welfare of the animals and feelings for the owners to allow them to understand the profession. 

The owner must know exactly what is going on in the practice but attempts should be made to filter the information down to what is essential and present this to the owner for their opinion as required.

 The Types of Manager

There are 2 types of manager: an autocratic and a participatory manager.  The autocrat will use force to get things done, say what should be done rather than develop team ideas.  Communication will tend to be only one way and limited information provided to the team, if a team exists.

A participatory manager will work with the other staff, will delegate authority where appropriate, will communicate often using an open two way process and will provide information on what is taking place.

A veterinary surgeon/owner should always base the following view on the practice manager:

“Don’t bring me problems, bring me solutions”.

When a manager is taken on by a practice, it is important to give definite guidelines on what is expected of the position. One function which is important irrespective of the size of the practice, is that the manager should be the right hand person to the owner.

• Qualifications: the most important is to have experience in the relevant areas of management such as finance, personnel management.  The ideal qualification would be a qualified chartered accountant with an MBA, plus a personnel management qualification. Bit extreme to hope for all that lot! non formal qualifications are knowledge of business, people skills, communication skills, reference relating to accountancy skills.
• Should bring business knowledge to the partners that they would not normally have access to.
• Qualifications available:  Practice Management Certificate which can be a good baseline qualification.
• Salaries would be expected to be at the minimum that of an Assistant Veterinary Surgeon.

What is needed to become a good  Manager ?

 (1) Abilities: 

Financial Knowledge:

If we look at the financial side, a knowledge of accounts is essential for a practice manager because even if he or she does not actually undertake the production of the accounts themselves, they must be able to understand them and deal with problems that relate to them.  One of the most important things in developing a profitable veterinary practice at the moment is to have monthly management accounts whereby the viability of the practice can be seen on an on-going basis, rather than a historic one.   Courses are available throughout the country which will offer training  in both bookkeeping and accounting.

Office Skills

An organisational ability is essential, the manager will be involved with organising rotas, interviews and  locum cover. Dealing with clients by phone or letter, and utilising computer systems, such as word-processing and spread sheets. Again course are available in these subjects.

Personnel Skills

The manager should also be involved with staff.  Veterinary practice is a “People Business” and staff are the most important asset. Therefore, the manager should be approachable but also should take the lead and deal with, for example, holiday and illness cover.  A manager can also deal with organising

training courses for the nursing or reception staff. As far as recruitment of non veterinary staff is concerned, the practice manager should be involved to the extent of filtering initial applications and interviews

, and then presenting a short list of 3 or 4 potential candidates to the partners.

The practice manager should ensure that staff meetings take place, and organise  the type of meetings, say brainstorming, demonstration or discussion meeting.  They should assist in helping out with staff personal problems.  They should be a role model to all the staff, by working hard and getting enthusiastic about a new service or project. Being positive is a contagious condition.

Organisational Skills

They may be involved in ordering pharmaceuticals, non pharmaceutical supplies, and inventory control. Organising regular Partners Meetings. There should be both Management and Partners meetings at least twice a month.  Management meetings involve the management team.  “If you haven’t got time to do this, you’ve got problems!”.

Quality Control skills:

They should deal in the first instance all complaints that come to the practice, they should ensure that the clients not only obtain a quality service from the practice but perceive that they have obtained a quality service. The manager should keep a check on client satisfaction and follow up any complaints: 65% of problems stem from poor human relations. They should be  involved in the maintenance of the building: both interior and exterior, ensuring that it is kept in good condition and that when work is needed, this is organised and quotes are obtained.

Marketing Skills

For a practice to maintain its position, it must replace 15% of its client base every  year and the practice manager should be involved with appropriate marketing to achieve this level. For example, making sure say that the building itself is marketed well by its décor, that the parking is adequate, well lit, and accessible to handicapped people.

From Diagram 3 it can be seen that almost 20% of the client base come because of recommendation. To maintain this input an ability to market the practice is essential. The practice manager can  can play a part by

Ø  ensuring the corporate image of the practice is maintained, for example, logos on sweatshirts  and  conformity of staff uniforms

Ø  The practice undertakes reminder cards for new clients and for vaccines.

Ø  The practice produces a newsletter for the clients to read.

Ø  Developing Focus Groups to obtain a client view

Ø  In house surveys of the clients needs and perceptions.

Ø  Public relation involvement with the local press and associations

Diagram 3: REASONS FOR USING A VETERINARY PRACTICE

In many practices, you will see that the owners/veterinary surgeons tend to take it upon themselves to be accountants, clerks, personnel managers, purchasers, salespeople, typists and whatever else they feel they must do because no-one else can be trusted to undertake the task as well as they can.  On average, you will find that a person trained in accounting, bookkeeping, typing or woodwork will tend to be more proficient at their skill than the average veterinary surgeon, whose training is based on animal care.  Similarly, a veterinary surgeon’s earning capacity is far more efficient when undertaking veterinary work than when repairing doors or typing letters.  Modern practice requires delegation of duties to allow it to succeed. It is a well known fact that the major reason many sole ownership businesses never expand is because of failure to delegate,

DELEGATION AND RESPONSIBILITY WITHIN  A PRACTICE

In a practice, there should be a delegation of responsibilities from the owner downwards.  The diagram shows the responsibilities of each member to each other. The practice manager should play a pivotal role in maintaining co-ordination between the owner/veterinary surgeon, the veterinary, nursing and clerical staff.

QUESTION TO CONSIDER WHEN SETTING THE PRICES

1.    Have you got the information to make accurate decisions?

2.    What Image do you want to convey with the price?

3.    What prices are competitors charging for comparable services or products in your area?

4.    Do you want to access a particular market? (Penetration Pricing)?

5.    With product pricing you have to make the decision on whether to classify the product as shopped (competition based) product and base the price on your competitor’s prices?

6.    Should you use discounts to attract clients? Could this start a price war with local practices?

KEEP YOUR STAFF ON YOUR SIDE

Once you have produced your pricing strategy it is essential that all the fee costs are explained to your staff.  They can subconsciously communicate their view that the practice charges are high and so it is worth investing time in giving a comprehensive breakdown of how the costs come about – having reception or nurses responding to the pricing structure with comments such as:

“I realise that it’s expensive”

“I’m sorry but these are the new prices we have to charge”

“I know our fees seem to have gone up a lot” 

All of these responses can be disastrous for the practice image.

Getting the price right involves looking at the service, product, and the local economy and making sure your staff are involved with the decisions.

If you need a speaker for your association or group on veterinary management or business, please contact Malcolm@thevba.com