Hi, everybody. Thanks for taking some time to watch this webinar. We're going to talk about using practise data to make more confident decisions.

And my name is Karen Felstead. I'm a certified public accountant. I know it's called something different in the UK, and I, and a veterinarian as well, and I work with practises on all kinds of, of business issues.

Obviously, many of them are financial simply because of my background, but I'm a huge believer that The, the, the finances obviously are driven by what you do operationally in your practise. So there's no point in just talking about the numbers and the financial statements if you don't tie it into how you're operating the practise and the kinds of changes that you wanna make. I've included my contact information here.

If anybody has any any questions afterwards, I'm more than happy to to, to follow up with you. So, objectives for this session, one is to identify the most important financial and operating metrics to review regularly. And then I wanna talk a certain amount about the calculation of practise profitability because I think that is the most important metric.

And then we'll talk about a little bit more. About how to deep dive into an analysis of the data. Once you know how you're doing, then the big question is why, and we'll talk about using that data to identify changes that can be made in the hospital, and we'll talk briefly about the kinds of problems a practise can have if they don't regularly review key metrics.

So The big question is, why perform this analysis? Particularly when practises are busy, it's kinda like, hey, I don't have time to do this unless I'm getting, getting a bang for my buck out of it. Most people will perform some kind of data analysis because they want an overview of how well the practise is doing.

And the other reason, and it's related to this, is that practises suspect that they have problems that need solving, and that may be flatter declining revenue, it may be poor profit. Ability or cash flow. It may be doctor production that isn't as high as the practise would like.

It could be that staff costs are high or other kinds of costs are high, particularly, say, inventory costs. That's a common one I see in practises. Or, you know, there's a host of other problems that practises perceive are going on and they want to use data to help identify that problem and the magnitude of the problem and then decide how best they can, they can solve it.

And, and when we take a bigger picture look at why we perform this analysis, I think it's important to remember that good patient care is not possible without financial success. And practises often think they know how well they're doing. Because they say, oh we've got, you know, plenty of money in the bank or our clients like us or our employees are happy, but that doesn't always mean that the practise is financially successful and why money, while money isn't everything for people, you can't.

Ultimately, you can't run a good hospital without that financial success and the financial success is also going to drive the value of the practise ultimately when an owner is ready to sell. And I'm a big believer too that it's difficult to make intelligent, financial, operational, and to some extent personal decisions because the practise is usually a big asset. Of the people that own it.

If you don't actually have good quality data, you're kind of winging it if you don't know what your numbers are. So there's a lot of reasons that this data analysis makes, makes a lot of sense. I don't really think there's any downside to data analysis, except that it takes a little bit of time and you've got to learn how to, how to use that data.

So I wanna start off by talking about the key metrics. Every every practise should look at on a regular basis. And these are not the only metrics that people should look at, but I do think they're the ones that everyone should look at regularly.

So, the first is profitability, and we'll talk a little bit more about what that really means and how to calculate it. In general, most practises calculate that on an annual basis, certainly no harm in doing it more frequently. For most People, the information for the profitability calculation will come from the tax return, your profit and loss statements.

So I use the abbreviation here FS which stands for financial statements. Financial statements generally include a profit and loss statement, a balance sheet, and a cash flow statement, but most of the time we're talking about using a profit and loss statement here. And then there's some other .

Sources of data as well that, that tie into profitability, and we'll talk about that a little bit more. Certainly looking at revenue, and I used a dollar sign here, obviously, that's gonna be pounds for you guys. But what I mean is that we look not just at the, the, the revenue in pounds, but we're also gonna look at the percentage growth and we can look at that growth from the same month last.

Year, we can also look at it just from one month to the, to the prior month. I think looking at revenue is important to do on a monthly basis. That data usually comes from your practise information management system, and that's, you can usually get that data faster from your PIM system than waiting until your financial statements have been prepared either internally or by your accountant.

I think it's also important to look at revenue by category, so that's how much of your revenue is coming from dentistry, from laboratory, at least here we've got some published benchmarks with that data. I'm sure you guys do too, and I think it's important to compare, say the percentage of dentistry revenue to your published benchmarks, but also to look at it month to month to month in your own practise to see how it's trending. I think compliance is a very critical topic to review, and that's a whole series of metrics.

So you may wanna look at it and say, OK, how many people are accepting our dental recommendations or how many people are, are accepting our wellness lab work recommendations. Most of the time you're gonna get that data from your PIM system and I I think for key services that you offer, looking at That monthly makes sense. But then some practises will also look at compliance data on a more irregular basis, if there's some kind of a problem they think they want to solve.

Like they're concerned that not enough people are accepting dental recommendations. So they'll spend some time diving into that. They'll focus on that for 6 months until they feel like the, the problem has been solved, and then they may look at that data on a less regular basis.

Still continuing with the revenue theme. You also want to look at revenue by full-time equivalent doctor because that lets you compare your practise to others. Usually published data is by full-time equivalent doctor.

And trying to just to compare dollars of, of revenue for the practise as a whole isn't overly helpful because practises are of different sizes. When we look at revenue by full-time equivalent doctor, you wanna look at total practise revenue, and then you wanna look at medical revenue and the difference between total practise revenue and medical revenue is gonna be things like boarding or grooming. We generally exclude.

Prescription refills in our medical revenue here in the US, although that's not true with, with every practise. And then you also wanna compare revenue per individual doctor because some doctors are more productive than others. Sometimes there can be valid reasons for that, but sometimes there are areas that can be improved.

Again, you're gonna wanna look at this information monthly and this data is gonna come from your, from your PIMs, your practise information management system. Related to revenue by full-time equivalent doctor is transactions in ATC and we would look at those similarly. So we would look at practise, total practise transactions by full-time equivalent doctor and we'd look at total practise average transaction charge.

Then we'd look at medical transactions by full-time equivalent doctor, and we'd look at medical ATC and then we would look at it by individual doctor, both the transactions and the ATC. I do wanna make a comment here about transactions versus visits. Transactions or invoices, and I tend to use those terms interchangeably.

A visit means a pet actually visited the hospital. They came in for one reason or another, saw a doctor, had an exam, had a procedure done. A visit does not mean that the owner came to the hospital and bought a bag of food or got a prescription refill.

And you can certainly look at visits. That's a valid thing to do. The one thing I would say about visits is they tend to be defined differently by different practise management systems.

At least we have that, that problem in the US. May not be as much of a UK issue, but you You need to understand if your practise management system gives you visit information, what does that mean? We have some very strange definitions of visits and some of the practise management systems that are available in the US and they, and the term is used, but it doesn't really represent visits.

So any of those can be a valid way of looking at the data, but you wanna make sure that you understand the definition. Accounts receivable, most most companion animal practises are not carrying a lot of accounts receivable these days. They're using, outside third-party payment plans, but you still see it and, and if, if you're a practise that has accounts receivable or if you're a mixed animal or a large Animal practises which often have more accounts receivable than do companion animal practises, then not only do you want to look at the total dollar or total pound amounts, but you also want to look at the ageing, and that's really the most important piece there because, you know, if you've got What?

50,000 pounds in accounts receivable, and it's all current and you're pretty comfortable that people are gonna pay it off. That's a whole lot better situation to be in than if you have 50,000 pounds in accounts receivable and most of it is 90 days past due or 120 days past due. Obviously, after looking at some of the metrics that, that drive revenue, we also want to look at expenses.

Most of this data is going to come from your practise, or from your profit and loss statement. You'll get some information from your, from your PIMs in order to, to say look at doctor efficiency, doctor product. Because that's where the production information comes from.

But most of the expense information is coming from the P&L. Obviously, you're gonna focus your time on the higher cost. So where you spend the most money and that's gonna be doctor labour cost, staff labour cost, cost of goods sold, which is primarily drugs and medical supplies, laboratory cost.

And then rent and some other facility costs. And it doesn't mean you never look at other expenses, but you wanna spend your time where it's going to be most productive. I think you should look at every expense at least once a year, but the small expenses, you'll look at once a year, you may do.

Price shopping on credit card merchant fees, on insurance, but you do that once a year and then you move on until another year has gone by. Whereas things like cost of goods sold, drugs and medical supplies, labour costs, you'll look at on a much more regular basis. Client numbers, and I think this is important to review regularly too.

And so commonly we'll look at the number of new clients that a practise gets on a, on a monthly basis. You can look at the number of active clients as well. I think the best definition for active clients is a client that comes into the hospital at least once a year.

I think here In the US we're starting to see people define active clients over a longer time period, so they're saying, well, it's a client that comes to the hospital every 15 months or every 18 months. That doesn't make sense to me because most of our medical recommendations are made on a yearly basis. We want pets to have an exam once a year.

We want them to have vaccinations once a year and. So to me, an active client should correlate with the timing of the medical recommendations. I also feel that when we stretch out that active client definition, honestly, we're making the practise look better when it really isn't any better.

It just means clients aren't coming as frequently, and that's often not good for the pet as well as not being as good for the practise. We can calculate lost clients and 2 we want to have some understanding of what's the source of our clients and that then ties into marketing activities and, and what we want to understand about our marketing activities is OK, what are we doing? What do we do to attract clients and what are our response or success.

Right, so when we spend money on a marketing programme, which of those programmes brings in more clients? We can also calculate client acquisition costs. I don't think we have a strong sense in the US of what a reasonable client acquisition cost is, so how much should we spend on, on marketing.

But I think it's, it's helpful to compare the cost of various programmes, and, and how many clients we brought in there. I think you also have to think carefully about any of your, your online marketing because what's difficult about online marketing is. That you can get thousands of likes or thousands of page views, but if half of those are outside of the area that you draw clients from, that's not particularly helpful.

So you've got to work with your, your online people to be able to figure out a way to analyse that data that's, that's useful. Human resource metrics, some of the ones that we tend to look at are the number of staff on a full-time equivalent basis compared to the number of full-time equivalent doctors. I think it's helpful to know that, but at least what we struggle with here in the US is that just because people have a lot of staff compared to full-time equivalent doctors, and we tend to think more staff is better because it can let doctors be more efficient.

But there has to be the demand for those services, so you can't just look at that metric, you have to correlate it with revenue, with profitability, with all of the metrics as a whole. We're starting to focus more on efficiency and productivity because honestly, we haven't focused on that very much in the last 20 years. And so one of the efficiency metrics that I particularly like is our per transaction.

So we take the total number of hours worked by non-doctors, the total number of hours worked by doctors, we total that and we divide it by the number of transactions or invoices, at least here in the US and again our goals and may end up being different. We see somewhere between 2.5 to 3 hours per transaction.

And of course, that seems kind of ridiculous when you've got a pet that's only in the hospital for a half an hour or 45 minutes, but it's all of the other work that goes on behind the scenes to make that happen. Now, I wouldn't say that 2.5 to 3 hours per transaction is a goal.

The best practises I've seen are at 1.5 hours per transaction. And so a goal is probably closer to, to 2, but I tend to see 2.5 to 3.

We also want to look at the percentage of employees who leave a practise, say every year and so that's . Not only do we want to understand what that percentage is, but we also wanna understand why are people leaving. If they're leaving because their spouse got transferred to another city, nothing we can really do about that.

If they're leaving to go to work at another practise because they get better compensation, better benefits, a better work environment, that's something we need to pay attention to and see how do we need to change in order to keep the people that, that we have. So those are baseline metrics. Those are the things that practises should look at on a regular basis.

But that doesn't mean they're the only metrics you ever look at. You will also want to look at different metrics if you know or think you have some kind of a problem within the practise, or if you're starting some kind of a new initiative, and I mentioned, let's say a dental programme because you're concerned that not enough people are accepting the dental. Then you'll, you'll track a whole bunch of, of dental metrics to see how is that programme working, what was our baseline when we started, are we seeing improvement?

And you may add some of those to the baseline metrics that you review regularly, or you may just look at some of these metrics until either the problem is solved or you've had success with the initiative or you've decided it was a bad initiative and you're not going to, to, to keep up with it. So let's talk a little bit about profitability here. Profit is the amount left over after all of the normal and necessary expenses of the practise are paid at a fair market value rate.

And in theory, if we had financial statements, a profit and loss statement that was prepared totally using standard accounting methodology, then. The net income, the bottom line number on the profit and loss statement would be the same as profitability, but unfortunately, in most small businesses, the, the bottom line on the profit and loss statement often is not the same as true profitability. And so we'll talk about the adjustments you have to make in order to know what that true profit number is.

So the profit. Number is really the only number that indicates from an economic perspective, the successfulness of all of the choices made in the practise. You can look at revenue, you can look at transactions, those are all valuable metrics to look at, but you can have a very high amount of revenue and still not be a profitable practise if your expenses are too high.

You can have a tonne of new clients. But not be a profitable practise. So you can't substitute any of those other metrics for profitability.

And I wanna mention too, we tend to use the term profit profitability or earnings, but there is also IBITA. IIDA is earnings before interest, taxes, depreciation and amortisation, and that's a standard accounting term. We haven't until the last few years used it as much in, in veterinary medicine.

But it's, it's starting to be more common. You see it in webinars, you see it in, in articles. In general, I think that profitability and IBITDA are, are essentially the same thing, except that IBITDA does not include any kind of expense for investment and equipment, and most of the people that I know when they do their profit calculation includes some kind of an equipment reinvestment reserve in getting to the profit margin and I.

I think that that makes sense. The other thing that's important is all of these numbers have to be adjusted and so let's say that you're a practise and the owner compensation, it's a small practise, so it's only one owner and the owner just randomly takes money out of the practise when he or she needs it. So that money that they take out is probably not going to be a fair market value compensation.

So if that. Veterinarian went and worked at another practise that they didn't own and how much would they be, be paid? So one of the things that we do in the profit adjustment is make an estimate of what the value is, the fair market value of the owner compensation, and we make an adjustment for that.

And you've got to do those adjustments, whether or not you're calculating profits or you're calculating IBITA. If you just take financial statements that have been unadjusted. And we know that net income, the bottom line does not represent profits, just calculating IBIA doesn't do anything for you.

So the adjustments are very, very critical. When we talk about the importance of profitability, obviously there's a short term and a long-term impact there. So the short term, if you have more, a higher level of profits, you have more cash flow and that's available for owners personally or to reinvest in the practise.

And by reinvestment, it's not just equipment, it's paying people better, it's better benefits, it's a better facility, it's all of those things. And then there's a long term benefit of profitability as well in that profits are the biggest driver of practise value. And so ultimately, if you're the owner of a practise, you care about that from a from a sales standpoint.

So why do practises care about calculating profitability? Most practises want or need a good sales price and that's almost entirely driven by profitability. Many practises, more than we would probably suspect, have a low profit margin.

Many owners again. More than we would, we would suspect, don't know what their profitability is and don't recognise that it's low. And of course, this is a very correctable condition.

There's no reason you can't, you can't have a profitable practise, but it takes some work, it can take some changes in how, how things are currently being done. You may have heard the term no low practise. A no low practise is a practise of no or low value, and it can either be no or low value or no or low profitability.

And that's a term that popped up about 10 years ago. It was coined by the Veterinary evaluation council of a management group, a veterinary management group in the US called VET Partners, and, but you, you hear that term used pretty regularly these days. So when we talk about calculating profitability, and I'm not gonna go through it in extensive detail.

But I wanna at least give you a sense of that and give you some resources too. So when we talk about the need to adjust the profit and loss statement to get to profitability, some of the common things that would be adjusted would be owner compensation, and I mentioned that one earlier, if the owner, if the money that the owner takes out of the practise doesn't represent a fair market value salary, and of course, payroll taxes and how You do payroll taxes is gonna be different than how we do but any related taxes to compensation would be, would be adjusted as well. Sometimes you will have family members that work in a practise and they are either overpaid compared to the fair market value of what the services they're doing are worth or they're underpaid.

We would commonly see spouses that work in a practise that don't get paid at all. But obviously, people aren't gonna do that unless they're a family member. So if you were to sell the practise, that family member won't be willing to work free when, when their spouse doesn't own the practise.

And when I say over and underpaid employees here, I don't mean employees that are paid on a, a fair market value or I guess I should say who have voluntarily accepted a certain salary. If you've got, if you've got, employees that you're not paying enough, but they've been willing to work there, that's kind of a different issue. It's not something we would adjust in a profitability calculation.

Facility rent, oftentimes a practise owner will also own the real estate and the practise pays rent from the practise to the, to the owner of the real estate. Sometimes that number is a fair market value number, sometimes it's not. And so to get to a true profitability number, that's something else that has to be estimated.

Perks, so by perks, I mean, largely personal expenses that are paid by the practise. And that's usually done for a tax benefit. So it was funny because I was talking to a an accountant and we have the same conversation in the US as in any other country but I was talking to a UK accountant and they said, but that's illegal to do that in the UK and I get it, it's illegal to do it in the US as well but it's very common to see small businesses that.

Run their personal expenses through the practise to get a tax advantage. But if we're calculating the profit margin, we need to take those expenses out because they make the practise look less profitable than it really is. So you, you certainly have a legal and a taxing authority issue, but you've also got a practical issue when you're trying to look at your profitability.

Non-recurring income and expense. This would be some kind of an expense. It's very unusual.

Might happen once in the lifetime of a practise. I often think about these as being related to natural disasters. So if a practise is located in an area where tornadoes or hurricanes or Fires are occasionally occur and there's damage to the practise and it has to be repaired.

Those are not ongoing typical expenses of the practise. So in a profitability calculation, we would take those out. We would make an estimate of, on average, how much does the practise spend per year in equipment reinvestment, and that's not the same typically as depreciation.

Amortisation, if you see that as a line item on your P&L, that's a non-cash expense, we would remove that in a profitability calculation. Interest income, interest expense are not considered operating items and so they're removed as well in a profitability calculation. So a couple of resources, certainly working with one of the veterinary financial advisors or accountants in the UK, somebody who's familiar with the veterinary practises and familiar with your, how your P&Ls and how your tax returns are prepared can be very helpful.

There's a couple of documents too that are available on the vet partners website. These are obviously going to be aimed at the US market, but the Concepts are the same, even if some of the exact details about what our tax returns look like are not gonna be the same as in the UK. And you all may very well have some similar documents.

I know there were some practise consultants in the UK that were focusing on this issue and putting the other documents that were, were more helpful for the UK market. So, certainly, anything like that will also help you. So as I said earlier, other data is still important.

So revenue, average transaction charge, operational metrics, a number of clients, but you can't replace profitability with these numbers if you don't know how profitable the practise is. You're missing out on a big, a big data point and, and you may be misinterpreting other data. So all of this other data helps support, explain, plan for profitability, but it doesn't replace it as a measure of financial success.

So then when we talk about a practise and whether or not it's profitable or not, and we think about the kinds of metrics that a practise wants to look at on a regular basis, you can really break it up into revenue drivers and expense drivers. And when I think about revenue drivers, I tend to think, the first level down from total revenue, and it's helpful to look at total revenue and look at the percentage growth, but But you can't do a lot with that metric if you're thinking about making changes. You've gotta, you've gotta dive a little deeper.

So the next level down is just the equation, the number of transactions or invoices times the average transaction charge or the average amount spent per invoice. Obviously, if you multiply those two numbers together, you're gonna get total revenue. So that's a good.

Starting point. And you can look at transactions and you can say, OK, how do our number of transactions per full-time equivalent veterinarian match up to publish data about other practises? You can say, are our transactions increasing or decreasing and would we have expected that, you know, if you've been missing a doctor and you're trying to replace a doctor, you could see a drop.

In transactions, but at least you know what it is and you have reason to think that if you can replace that doctor, the number will go back up. One other thing that gets factored into revenue, although it usually gets factored into the ATC is discounts. So if you're a practise that has a lot of discounts or a lot of mischarges, then that's also going to impact revenue and that's certainly an area that's worth focusing on.

When we think about average transaction charge and what drives ATC obviously discounts, but certainly the fee level and the practise and one of the things that practises have to look at is, is how much they charge for each service or each product that they sell. And then it's also the acceptance of recommendations of services by clients. And so if we're concerned that clients, we're not having clients accept as many of our services as we would like, then we have to think about, OK, are we actually recommending them?

And, and so a client isn't magically gonna know that the pet needs a dental or the pet needs senior, senior blood work unless we are regularly recommending that. And then when we think about transactions, there's a lot of submetrics that we can look at there. Obviously the number of active clients, the frequency with which clients visit the practise, the number of new clients, the number of lost clients, and then most importantly, why are clients leaving the practise.

Are they leaving because they moved. Which is something we can't do a whole lot about in most cases, or are they leaving because they're unhappy with the service or feel that they're not getting value for the price it's charged. And then certainly efficiency drives number of transactions as well, so the number of, or the doctor and staff time per transaction that we talked about earlier.

And then common expense issues too, poor inventory control or doctor compensation doesn't correlate with production. Or staff costs are too high. When I talk about staff costs being high, it's not usually cause people are overpaid.

I don't see that very often, although it occasionally happens. It usually means that we have too many staff hours. In, in the practise, and it's a productivity and efficiency issue.

And so we need to think about how can we utilise people better. Some practises are in very expensive facilities and while they're highly attractive, they cost a lot of money and that may not be worth it for the practise as a whole. We may have equipment that's not fully used, so you'll see practises to buy ultrasounds and, and never get the training that they need and never really use it as much so it sits in a corner and gathers dust, poor return on investment on marketing and so we may be spending money on a bunch of marketing programmes, but we're not actually getting clients from it.

And then I think the practises that I see that are the most profitable are they're prudent in all of their spending. And so the practises that aren't as Profitable or losing profitability, it tends to be because they have this upward creep in expenses and so they're just spending more without really thinking about why they're doing that and, and it's just like with their own personal household budgets, we have to look at where we spend money and is it, is it worth the, the amount spent. In-depth analysis is critical.

There's no point in just comparing your numbers to the trends in your practise or to publish benchmarks, if you don't actually dive a little bit deeper into the areas that look problematic. So you want to spend the most time on the biggest areas, labour cost, revenue, drugs and medical supplies, but look at the smaller items at least once a year. I think it's helpful to Look at expenses by category, so I'll look at all of the expenses related to employees.

So that would be compensation, it would be related taxes, it would be the benefits that, that employees are getting as well. Or I'll look at all of the expenses related to facility costs. So that would be the rent on the facility.

It'd be repairs and maintenance, it'd be utilities, things like that. But most importantly, you wanna understand what drives those expenses and then what can you control of those, of those drivers. You may not be able to do anything about rent, it's outside of your control, but there may be other areas that you, you can.

So types of analysis, and I've mentioned this a couple of times, but just to reiterate, what is in-house trends, and that's very, very helpful to compare how your practise is doing this month versus last month or, or say February of this year to February of last year. But I, I'm a, I'm certainly a fan of comparing to published benchmarks as well. We tend to compare when we're looking at published benchmarks, we tend to use ratio analysis, so we won't look at the dollar or excuse me, the pound amount of an expense.

We'll look at an expense as a percentage of total turnover. Because that way you can compare practises of different sizes. We'll also use the full-time equivalent comparisons that I talked about earlier.

So let's talk a little bit about comparison to industry studies. I think the most important thing to say is that no study will be. Perfectly comparable.

One, it's almost for sure gonna be different years, and I use data, when I spoke a few months to your group, we were talking about pricing and I used some data that was a couple of years old and somebody in the comments expressed concern about whether that was helpful and, and, you know, in a perfect world, we would have instantaneous comparative data available. That we could use when we're analysing our own practises. Most good quality studies are not that instantly available.

It takes time for whoever's providing the study to gather the data, to scrub it, and then to produce the study. So it's pretty infrequent that you're gonna have, let's say it's 2022. And you want to compare how your practise is doing, it's pretty infrequent that you would have data instantly available for 2022.

You're gonna end up looking at 2021 or 2020, and while that's not perfect, I still think you can get valuable information out of the comparison, but you take it with, with a grain of salt. A couple of other problems we sometimes see with studies are how you calculate something, may be different from a study. Most of our studies in the US calculate active clients as those that come in once a year, once every 12 months.

But if you're calculating it as once every 15 months or once every 18 months, you don't have a comparison there. And then I've also seen some studies that will have very small number of respondents for some questions. So they may say the average amount paid to a technician in, let's say Texas, the state that I'm, I'm in, you know, is a certain number, but they've only got 8 people responding and of course Texas is a huge state.

8 Responses to any question is not gonna be enough to, to really tell you, you know, what's the industry as a whole doing. So you've gotta be careful about the study and the methodology, and the timing to know how to use it when you're, when you're, when you're comparing that data to your practise. So, data reliability, you can read through the methodology section, you can look at the number of respondents.

Any decent quality study will tell you how many people responded. If they don't tell you, I end up having a little bit of concern about the quality of the data. You've got to understand that, that calculation.

We talked about active clients. I've also sometimes seen medical revenue per doctor calculated in different ways. In some studies, it represents all services that a doctor gets credit for when they're in the calculation, but I've also seen studies where it's just the, it's just the service revenue.

So if a doctor gets credit for selling a product, at least in this one study, that, that's not included. And so if you're trying to Compare total medical revenue in your practise, but you're comparing it to a study that only includes service revenue, it's not gonna be comparative and you may end up thinking, wow, my practise is doing way better than this comparative study, but it's because it's not an apples to apples comparison. I think you've also got to look at the data and say is this meant to represent an average practise or best practises?

Probably the two major studies that we have in the US. One is the well managed practise study, and that's a 100 handpicked practises that are quote unquote best practises. Then we also have some, some very good quality studies that come from the American Animal Hospital Association, but that's.

That's there, it's a bigger sample size which is helpful, but that's more representative of an average or a typical practise. And so I think it's helpful to look at studies of both kinds and, and, and then compare your practise and see where you fall there. But again, you've gotta know what you're, what you're comparing to.

And so if numbers are significantly different, then this is where you get into the deeper dive analysis that we talked about. I'm not gonna worry too much about a 0.1% difference in your, you know, some number, so your practise versus a published study, but if we're looking, say at team compensation, staff compensation, so non-doctor compensation, and let's say most practises.

The team compensation is 20% of your total turnover, then. And, and your practise is 25%. So that means you're either paying people more or you're using them more.

You've got more hours that they, that they work or more team members. It could be any of those three or some combination of those three. So that's not necessarily a bad thing.

It will definitely chip away from your profitability. What you've got to do is understand why do we have those differences and do we think it's a good thing? Is it helping the practise or is that something that we need to focus on, on improving?

So I'm, I'm a big fan of using industry studies. Even though they have some flaws, but you use them with care. This is, this is one tool in better running your practise and you don't place as much reliance on small variations as on large ones.

Obviously, you're gonna continue to look at internal trend comparisons and you've got to do a profitability calculation because ultimately, Everything could look good and you still have a low profit margin. And bottom line, the profit margin is really what you care about the most. So just an example here, let's talk about doctor productivity.

If we're talking about and this is a, I think a, a, a revenue submetric, if you will. We would look at total practise revenue divided by the number of full-time equivalent DVMs. Then we would look at medical revenue divided by the number of full-time equivalent DVMs, and then we would look at each individual doctor and, and that's going to, to vary in.

Most practises. So talking about the full-time equivalent doctor calculation, and this will vary by country. In the US we assume that a full-time equivalent doctor is one that works 40 hours a week for an entire year, 52 weeks, and that's 2080 hours.

In Canada, I've spoken up there and in their report, they use 1750 hours. A year as an FTE calculation and I don't know what it is in the UK, but whatever the, the number is, whatever you consider to be a full-time equivalent is how you wanna calculate your FTE doctors. The calculation is essentially the same, it's just the, the divisor is gonna be different.

So you're essentially taking the total number of hours worked. By either veterinarians or team members and then you divide it by that annual number of hours. So in the US we would divide it by 2080 hours in Canada it's 1750 and then it's whatever the appropriate number is for the, for the UK.

So, when we think about whether or not doctors are producing enough, and even if you're a practise that pays on some kind of a production pay, when you've got a variation in, in productivity, it tends to harm the practise. It just tends to even if it doesn't cost more in compensation, it tends to cost more in benefits or in the number of team members that have to be available to support that doctor. And so, Once you've determined whether or not your doctors are as productive compared to what's going on in other practises in, in your country, then you have to think about what drives doctor production.

And so that's gonna be the number of hours worked each week by each doctor and so there'll be some legitimate differences in production per doctor if one's a full-time doctor and one's a part-time doctor. Some of it can be time management skills of each doctor. Some can be the number of medical transactions per doctor, and some doctors are very good at seeing patients quickly and they see a lot of patients, others are less good.

Certainly, it's gonna be the average transaction charge and there's a lot of drivers of ATC. Some doctors are better at communicating. The need for recommendations and others are.

ATC tends to be higher for doctors that are good communicators. In some hospitals, the amount of support staff utilised by each doctor can vary a lot, and that can certainly have an impact on how productive that doctor is. Some doctors are, are worse or, or, some doctors discount more services than others do.

And also discounts and mischarges are a team issue as well, so it depends on who's responsible for inputting the services into the, the client's invoice and whether all of the services and products actually get invoiced. The number of key procedures done is another, metric that's worth looking at to understand. Doctor production.

So CBCs, chemistry panels, X-rays, and I'm not ever suggesting that we tell doctors how to practise medicine because that doesn't go over well and that's a, it's a legal issue as well. It's up to the doctor to decide how the patient should be cared for. But what you want out of this is you wanna make sure that all of the doctors are practising good medicine.

And, and so if you've got a doctor who very rarely does a CBC or a chemistry panel, what you wanna understand is, is that because the patient genuinely didn't need it, or is there a learning opportunity here for the doctor? And then certainly measurement of client compliance with key recommendations by, by doctors and staff. So, I'm gonna go ahead, I've got some more slides here that'll be available to you, but I'm gonna go ahead and pass a couple of these slides since we're getting toward the the, the end here.

I did want to, I did want to come back to this efficiency productivity issue that we talked about and when we talk about reducing hours for transaction, and I talked a little bit about that, that transaction or how to calculate that transaction earlier, but here's the slide that supports that. So you would take the total number of hours worked by all support staff divided by the total transactions. You would take the total number of hours worked by.

All doctors divided by the total number of transactions, and then you would add those together and look at total hours by all doctors and staff divided by total transactions. I spent some time on this metric because I think we're having to focus more on productivity and efficiency than we ever did before. The reason I think we have to focus on that now is because it's so much harder to find team members, so we just can't hire an extra person.

We've got to figure out how to utilise our people better. And I think we're also getting limited by how much we can raise fees. and I think that's an ongoing problem.

You know, right now with inflation being what it is, practises are raising fees pretty significantly. It's hard to To say that that's a bad idea, but we have an ongoing struggle with the cost of veterinary care and what that's doing to accessibility to to, to care. And so efficiency and productivity can help keep practise profits high without necessarily having to, to, to raise fees more than is absolutely necessary.

As I said before, you mostly see between 2 and 3 in a general. Practise. Your goal is 1.5.

I don't see many at 1.5, so if you're at 2.5 hours for transaction now and you get it down to 2, that's a great success.

The other thing you wanna do is you wanna shift hours from doctors to staff because we want to, in order to drive efficiency, you wanna have the lowest level person in a practise perform a task that is qualified to. Do that task. Now, obviously, I'm not talking about having veterinary assistants do surgery.

That's not a reasonable thing to talk about, but there's no reason doctors need to be cleaning cages. So, you wanna push down any tasks that a doctor doesn't absolutely, either legal legally or ethically need to do themselves to the, the lowest level team member that's appropriately trained for that. And, and so if you can reduce your total hours and shift your hours from doctors to staff, then that's gonna be, that's gonna help you see this improvement in productivity and efficiency.

And some of the things that you have to do to reduce these hours is to invest in necessary equipment. And so, I mean, I think we saw a big increase in efficiency when we moved away from traditional X-ray machines to digital. Certainly have to focus on team training.

If the team is better trained, then it doesn't take them as long to do things, that's gonna improve efficiency. And productivity. We want to think about simplifying our workflow and our and our paperwork, and I think you in the UK utilise your computer systems much better than we do in the US and without a doubt that that contributes to better productivity and efficiency.

Certainly looking at the scheduling of appointments and so if you can see more patients within a particular time frame, that will, that will improve productivity and efficiency as well. I know we struggled a lot, particularly in 2020, probably got a little better in 2021 and, and This year in 2022, but we struggled a lot with the drop in productivity when we moved to curbside services during the, during the pandemic and so, and that was to some extent a scheduling issue it just took longer to see those to see those clients. So other productivity and efficiency metrics, revenue per full-time equivalent non-veterinarian employee.

This is something that I think would be really interesting for you in the UK to, to make this calculation separately for your nurses simply because I think you, you do a tremendous job in utilising your nurses. I think better than many practises in the US do. And, and so I think you could calculate revenue for all FTE non-veterinarian employees.

And then also per FTE nurse as well. You can look at revenue per hour of operations, revenue per in a exam room and per square foot. Those last two are going to be an efficiency metric for space, essentially.

You can also look at transactions per hour of operations. You could look at transactions per exam room and per square foot as well. Either one will help you get a feel for efficiency and productivity.

So I'm gonna go ahead and end it there. I've put my email address on here again. I know we don't have the opportunity to, to use live questions, but I am more than happy to answer questions and you can either email Dawn and she'll pass them on to me or you can email me directly.

So, thank you for taking the time.