Maybe you offer services such as nail clips and baths for free and undercharge for some clinical services such as surgery. But does this really aid in client retention, or just negatively affect revenue with no real benefit? Deepa Gopinath reports
Veterinary clinics in Australia operate with an average profit margin of 16 per cent, according to the Australian Bureau of Statistics. When placed alongside the 19.8 per cent, 26.9 per cent and 26.4 per cent profit margins of physiotherapy practices, dental clinics and general medical practices respectively, veterinary practice profitability sits at the bottom of comparable medical services. High overheads, low profit margins, absence of government funded health insurance for pets and low uptake of private pet health insurance in Australia likely all contribute to relatively low profitability.
General public perception that vet bills are unreasonably high contributes to downward pressure on the costs of veterinary services. This perception may give rise to another factor which negatively affects vet clinic profitability—undercharging for services by veterinary professionals. Among veterinarians and support staff, there is a tendency to provide minor services free of charge, with some veterinarians also undercharging for more substantial services such as surgery and medical treatment.
Practices vary in their approach to charging for minor services. The attitude of management and the attitude of individual staff members can be major factors that determine this approach. Some veterinarians and practice managers feel that all services should be charged for, while others see it beneficial to the practice image to provide some complimentary services.
The demographic of the clientele influences cost pressures that staff are subjected to, and this, in turn, can influence how veterinarians charge for services.
Complimentary services are often provided when performed at the same time as professional services which incur a fee such as consultations and surgery. In some practices, certain minor procedures such as nail clips are performed as standard complimentary add-ons to any procedure requiring sedation or anaesthesia.
A primary reason given by veterinarians for providing minor procedures as complimentary services, or ‘freebies’, is that it reflects well on the business. “People appreciate caring, professional service where the perception is it’s not all about the money,” says Dr Barry Young, Sydney-based veterinarian and former owner of a large and busy small animal practice. “In our practice vets are essentially at liberty to decide when to charge for (minor procedures such as) nail clips, anal sac expression, ear cleans and cytology in a consultation, although the norm is to include nail clips and anal gland expressions in the consultation fee. All of these procedures would be charged if they were the primary reason the appointment was made.”
Dr Sonya Bains, owner of and veterinarian at Hills Animal Hospital in Sydney, takes a similar approach. “I find myself providing complimentary services frequently. I think clients appreciate it and feel they are getting value for money,” says Dr Bains, who admits that she does feel some pressure to curb veterinary bills by providing free services. “I am not sure why it is, but I often feel obliged to give free services. If I was to charge for every minor service, some clients may react quite negatively to the change.”
Provision of freebies in the vet profession is in contrast to many other comparable professions like dentistry and general medicine, where insurance provides cover for many treatments. “People don’t value something if it’s free,” concedes Dr Young, who in the past has attempted to partially address this issue by asking the vets he’s managed to add a charge for zero dollars for each complimentary procedure provided. Dr Young felt that this encouraged appreciation by the clients for professional services that were provided at no cost to them. “The trick is to charge appropriately for primary services in the first place so these ‘add on services’ can be provided without charge and without significant detriment to the business when thought appropriate.”
The detriment to the business that Dr Young refers to includes not only undervaluing professional time and skill, but also loss of profit to a business which already operates on relatively low profit margins. Consider two common minor procedures provided by vets during consultations: anal sac expressions and nail clips. These procedures usually incur a fee of around $20 each on average. In a busy practice that employs two full-time veterinarians who each provide such freebies five times a week (a conservative estimate), loss of profit for these services is $10,400 per year. This amount is substantial, especially considering that these procedures carry very little cost and hence a high profit margin.
Adding any freebies to the vet bill with a zero charge as standard practice would enable practice owners to generate appropriate reports and quantify the cost of providing these freebies. If costs are deemed to outweigh benefits to practice image, efforts could be made to alter practice protocol around provision of such services free of charge.
The veterinary profession is one built almost completely on the desire of veterinary professionals to care for animals. Veterinary salaries are low when compared to that of similar human health professionals, while the cost of obtaining qualifications is comparable. Yet there are pressures from the public on veterinarians to keep costs low due to their undervaluing of the professional time of vets and their support staff. These factors combine to make the provision of freebies inevitable in veterinary practice.
However, as Dr Bains explains, a balanced approach is needed. “Ultimately, most clients realise it is a business and bills need to be paid. There are even some clients that demand that I charge fully for my time. It’s a good reminder that not all clients think practice owners are money-hungry vets that have no passion or empathy. It’s all about trying to find a balance to keep everyone happy and most importantly, keep pets healthy.”