APL Accounting News March 2015

A Window to the Future?

Certain trends within the veterinary profession in Australia have lagged by a number of years compared to the United Kingdom and the United States. Note, we are not talking about clinical trends or standards of practice – these have always been high in Australia, but rather we are referring to COMMERCIAL trends.

A classic example – pet insurance. This has already been well received by the pet owners in the UK for about 10 years but has only started to obtain a significant market share in Australia over the last 2 years or so.

Another example is the ability to purchase medications online and from pharmacies. This has been happening in the UK and the USA for close to 10 years, but only starting to become significant in Australia now.

With the above in mind, it therefore makes sense to keep a close eye on these foreign markets and use them as a ‘crystal ball’ to prepare the profession for what may eventuate in the future.

This month we were surprised to be contacted by a dear colleague who owns a practice in the UK. Someone who was at Veterinary School with us and we had lost touch with for over 15 years. Although the reason for getting in touch had very little to do with accounting, we took the opportunity (and will continue to do this) to have a look at their business performance in comparison to Australian practices. We also took the opportunity to find out what the market environment is like in the UK at the moment.

One of the most obvious trends is that the market there is now becoming dominated by large groups and that smaller operators are becoming more and more rare. In the above mentioned scenario, a single corporate group (Vets Now) has opened up 3 clinics in the same town as our friend.

The tactic applied by these groups appears to be to squeeze out smaller operators by strategic pricing – keeping headline prices very low and then making up the difference in non-routine areas. As a result, charges for vaccinations, desexings and consultations are extremely low – the examples below are converted to $AU:

  • Puppy vaccination courses (2 vaccinations in the UK) are $90
  • Dispensing fees are under $6.00 – compared to the $14 in AU
  • Mark ups on POMS are 50% – compared to the 100% in AU
  • Desexing fees, particularly for cats are very low – $100 for a cat spay and $75 for a cat castrate.

So it seems the day to day things are going to become very cheap moving forwards as we cannot deny the current trend in Australia where a number of larger ventures have stepped forwards (and we are not talking Greencross here, because that’s old news). And with this, change is inevitable.

It’s easy pass the blame of cost cutting to the larger corporate, but is this fair? The only reason why the cost cutting strategy becomes obvious when a larger group does it is simply because the group is large! Smaller operators in the veterinary profession have consistently been applying low charge strategies for years by undercutting competitors and offering no frills services, but their tactics have only been noticed by their immediate competitors and therefore not caused a large stir in the profession.

So we believe it has nothing to do with size and everything to do with service. Large or small, there are things that will benefit your business as the tide starts to turn. We believe that both large AND small operators benefit from offering high quality services, and consistently, we see that practices that operate at higher profit margins are NOT discount based businesses. But the challenges faced by large or small operations in supplying high quality services are significantly different.

APL Accountants have always been advocates of high standards of practice and promotion of services, and the above trend solidifies this tactic. Clinics that are reliant on routine procedures and selling of product will suffer in the future regardless of their size – these are items susceptible to being ‘headline prices’ which consumers can compare.

It’s very hard for the consumer to compare treatment protocols for the less routine conditions in terms of price, however these are also extremely hard to standardise and execute to perfection in a business environment and even more so the larger the business. For example, take a diabetic patient:
The patient has to frequently visit the practice. A smaller operator can maintain better consistency with regards to offering at least a handfull of vets that usually know who the patient is and assure that the vets all say/do the same thing. Its easier to monitor what the team are doing and there are fewer people to train and inspire to do the right thing.

The smaller operator will find it easier to assure that the patient is treated consistently on each visit and that the staff are consistently friendly and kind to the pet. Therefore the larger operator would do well to spend more time focusing on their staff in this area rather than price cutting – a common reason why some larger clinics put the exciting clinical stuff in the too hard basket and resort to price cutting – probably to their detriment because they would do so much better if they had addressed the challenge.

Yes, as soon as the task at hand becomes more complex that the routine ‘burger and chips’, service starts to stand out more and the consumer has the opportunity to appreciate the better service. This is why expensive French restaurants still exist, people still eat at them AND they are profitable. Otherwise we would all be eating McDonalds burgers and fries.

So in response to the trends:

  • Focus on your service offerings
  • Work up your cases (lamenesses, skins, ears, endocrine)
  • Book in dentistry (which incidentally is still charged at high rates in the UK)
  • Book in repeat consults and check ups (make sure your clients visit you more often by having automated reminder systems)
  • Use the above more complex and rewarding interactions with pets to let your service shine.
  • Address staff turnover –  and the larger the organisation is, the harder it becomes to address this issue, and therefore the more difficult if becomes to keep consistency of service, particularly with more complex items.
  • If you are large, focus on staff retention to combat the above challenge. Spend more time in systemising your service offerings.
  • In all cases, large or small, look at the consistency of your billing! We see a lot of practices with high prices and low average invoice – how is that possible?

And if you do these things, regardless of whether you are big or small, your business will survive the change. Change is not good or bad and is immune to blame, its just different.


Bottom of the pack – Odometer reading time

Zack is a dog who is a couch potato and has an unusual life experience. His owners who were once exciting vets have now become boring accountants. They used to bring him into the exciting vet practice every day, now they bring him into a boring accounting office every day. This gives him a unique dog’s eye view on both professions.

Pictured above taking a ‘Power Nap’ at APL Headoffice!

As the CEO of APL Accountants, I get chauffeured to work every day. And in the traditional manner of being a high flying executive that has a personal driver, I sit in the back seat (front seats normally occupied my 2 serving subjects) – its just so much more posh that way. Please note however that I am no snob, and I would on occasion even offer to drive because it looks like so much fun, but my lack of opposable thumbs (dew claws) have lead me to realise that the automobile was not designed for someone of my anatomic constitution.

However, a few weeks ago one of my servants had to go on an overseas business trip. I felt bad and it looked so lonely for the driver at the front that I offered to sit in the front passenger seat. I looked at the odometer just out of curiosity, wondering how much time I spend traveling when suddenly it hit me like a bullet between the eyes! ITS ODOMETER READING TIME AGAIN AND WE HAVE TO REMIND ALL THE APL CLIENTS TO SEND US THEIR ODOMETER READINGS ON THE 31 MARCH. – that’s why I’m the boss, I get to remember all the important stuff.

So please remember to send us your odometer readings from your business owned vehicles on the 31 March.


Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.