Latest News August 2022

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Economic downturn – The resilience of the veterinary profession will once again get tested

The last few months have seen interest rates go up and had global governments talking about a recession. We have also seen a dramatic increase in everyday goods such as food and fuel – so inflation is on the way up.

We have also been telling you for the last 3-4 months that the growth in the veterinary industry has stopped after experiencing a huge boom in the first 2 years of the COVID pandemic. 

The month of July brings the same news – a further drop in the revenue of veterinary practices compared to July last year, and an even more significant reduction in the number of patients seen and invoices raised (see chart at the end of this article). 

So does it mean that you need to panic? Absolutely not, there are a lot of things that you can do to mitigate the effects of a recession in a veterinary business, and in fact do even better. Research shows that recessions are good at weeding out the weak businesses, leaving the better ones to come out stronger when the economy improves again.

Many of the clinics that we have been working with have had an excellent 2 years and now have a buffer of savings. Wages have gone up but so has invoicing and productivity – so your teams are working better. We are confident that a small downturn in the industry will easily be accommodated in well run veterinary practices.

Remember also that assessing your service quality vs pricing is critical in times like this – If you are an independent/privately owned practice your only option is to maintain profits by providing better service, don’t reduce your prices. If that sounds counter-intuitive then understand that all your suppliers prices are going to increase. Wages have already increased and other generally fixed costs like electricity, telephones, software and rent are likely to increase. If you drop your prices whist all your supplier costs increase this will have an exponentially negative effect on your profit margins. This is why we are regularly assessing and benchmarking the prices and invoicing habits of many practices whilst also carefully monitoring their wages and cost of drugs. In many practices we are now having to review this every 3 months(we also make sure that their clients numbers are not declining because of higher prices, and they never do).

Another reason why independent practices cannot compete on price is ‘supply chain squeeze’. Large equity companies now have significant interests in both corporate veterinary practices and wholesalers. How do you think corporate practices have managed to halve their drug costs in countries like the UK? By having control of the supply chain from manufacture of some products, owning wholesalers and owning veterinary clinics, they can afford to give product to their veterinary practices at cost whist offsetting this discount by charging independent practices more. Furthermore in times of supply shortage, they can provide drugs and supplies to their clinics whilst withholding supplies to competitor practices (If you don’t believe that this can happen, then read the next article). 

Fortunately when it comes to pet owners, service always seems to win against price. So once again, focus on your service!

Veterinary industry tracker comparing Jul 1, 2021 to Jul 31, 2021 to Jul 1, 2022 to Jul 31, 2022 (most recent month)

Covetrus sale – have you thought about this?

Whilst you are all busy in the clinic getting on with your veterinary work major financial transactions are happening with your suppliers being bought and changing ownership. Late in May a deal was signed that Covetrus will be sold to two parties – TPG Capital and Clayton, Dubilier & Rice (both private equity companies).  Have you heard that name TPG Capital before a few years back? Yes you did, they are the company that bought Greencross.

Is this the start of supply chain management? What will happen if there is a shortage of food, drugs or even software support people? Would a supplier preferentially supply a group of clinics that they own rather than you? What prices will they be charging their own group of clinics compared to what they charge you – for every $ extra they make from you they can charge their own clinic that $ less. 

It’s time to think hard about who you use as your supplier as supporting a competitor who controls your supply chain may not be the best strategic option.

Owners of private practices need to think about a longer game if they want to maintain profitability in the future. Is it wise to support equity companies and their subsidieries who care only about shareholders and put a squeeze on independent businesses because they control the supply chain?

For those of you who are interested in financial markets read this article in VIN https://news.vin.com/default.aspx?pid=210&Id=10962381

Furthermore you will see as quoted below that some large operators have a lot of pressure to raise finance, so your business will certainly feel a ‘squeeze’ if times get tough:

Covetrus was rattled in its first year by earnings that disappointed Wall Street and a tanking stock value. A pair of pension funds filed a class action, accusing the company of making false and misleading statements to inflate and maintain the share price artificially. 

The case is nearing a $35 million settlement, judging from a motion plaintiffs made on May 9.

Dog Tales! Last impressions count!

We have a good friend that we do dog dancing with, she is of course a border collie so a much better dancer than us but we still love each other.

She had a very small lump on her back just under the skin which the vet thought should be removed. Her mom is a really good mom and booked her in straight away. We think the vet probably did everything well in the surgery as she was back home that night and very happy, but her mom was horrified and no longer confident in the care she got. When our friend was fetched from the vet they had put a dressing over the wound as it bled a little when they got her out to go home, and said to leave this on for an hour. When her mom removed the dressing the wound was still bleeding, she got blood all over the house whilst trying to find a new dressing. But more than that the wound is raggedy and lumpy bumpy, not all neat and tidy like when we have had stitches.

Our mom and dad chuckle to themselves and say ‘it will heal up the same anyway and once the hair grows back nobody will notice’ – the vet just didn’t take the extra 5 minutes to make the wound look neat and tidy.

Remember however that the pet owner does not see the ‘bear hugger’ warmer, the pulse oximiter, the iv fluids on an infusion pump and the nursing care given in recovery – they only see the end result. This means that the few last sutures placed in a hurry can leave them wondering how competent the surgeon is.

As part of our quality control, Strudel is having his anal glands removed this week so all paws crossed here that his surgeon takes his time to make his back end look even better than it does does right now. If not we’ll certainly let you know.