What Business Metrics Can You Use to Evaluate Your Practice's Success?
Veterinary practices are as diverse as the fascinating people who make them up, each with their own drives and passions. To truly measure success, you must understand your practice's unique mission and the environment that you operate in. But, there are some key goals that most practices share:
- Financial stability to support your team, keep your practice up to date, and generate a return for the owner.
- Medicine that meets your patients' needs.
- A positive work environment.
If you regularly review business metrics related to these goals and adjust your protocols accordingly, you'll see your practice grow and succeed.
Key Metrics to Track
Don't know where to start? Here are the most important metrics to track in your practice information management software (PIMS):
- New clients: New clients are the lifeblood of the practice. While average practices pull in around 20 new clients per month for each full-time DVM, those with high turnover need more.
- Client retention rates: Existing clients sustain your practice. If you're losing clients, reach out to schedule a new appointment or at least understand why they're leaving.
- Practice revenue: Without income you can't keep the doors open, buy new equipment, or support your team. Compare revenue periods to the previous year's to minimize seasonal distortions.
- Number of transactions and average fee: Are you seeing more or fewer clients? What about patients? Are you seeing all of the clients' pets, or are they skipping services? Are those appointments valuable to your practice? If revenue is changing, it's important to know the "how" so you can address the "why."
- Production totals by doctor: There's nothing like healthy competition among peers to drive growth. There are lots of ways to encourage your doctors, and transparency around production totals can spark discussion.
- Doctor revenue, broken down by category: Not all revenue is created equal — X-rays generate more profit per dollar than pharmacy items. Use revenue breakdowns to understand how your doctors practice medicine and how that fits with your practice philosophy.
In addition to information from your PIMS, there's information in your accounting software that you should track as well:
- Accounts receivable: Managing debts owed to you prevents you from including revenue you'll never receive in your reports.
- Cost of goods sold (COGS) as a percentage of gross revenue: Adjust the COGS so you're not worrying about accounts payable each month.
- Payroll costs as a percentage of gross revenue: Payroll is relatively inflexible and requires long-term planning. Check it every month to keep on top of trends.
Finally, collect data on client opinions:
- Client surveys: Get feedback on what you're doing right and wrong, and present totals in your PIMS dashboard.
- Online reviews: Online reviews may be your only chance to reach a new client. Make sure to track and manage them.
When to Conduct Reviews
Your PIMS contains a lot of data, but it's only useful if it conveys a message that can be digested by your audience. Monthly dashboards are a great way of presenting data in bite-sized chunks and comparing results to look for trends. Pulling key business metrics out of your PIMS reports and presenting them visually helps decision-makers to move quickly. Your PIMS may have preconfigured dashboard reports that cover what you need. If not, creating tables or graphs in a spreadsheet package will allow you to highlight what's important. Presenting too much information all at once dilutes your message, so make sure that your presentation is focused and to the point. Remember that not all information is targeted at everyone in the practice — you can customize your dashboard for the audience.
While some data can be collected and reviewed monthly, quarterly and annual reviews allow for more detailed analysis that dig deep into each issue. Here's what to review on a quarterly and annual basis:
- Overall revenue vs. cost: Use these reviews to eliminate unusual trends, like a damaging snowstorm, that distort monthly data.
- COGS vs. revenue by category: Set up your PIMS to match revenue and cost centers, so you can understand the relative profitability of each area of your practice. It also helps you focus your inventory management time.
- Team surveys: Get feedback from your team at least every six months. Anonymous surveys of managers and peers can identify new leaders and struggling team members.
Implementing What You Learn
The trends you identify in your data represent opportunities for your practice to improve. Take the time to set targets, plan a way to get there, and then use your reports to track progress against your goals. Reporting isn't just a monthly chore; it directs how best to use your time and how to get the most out of the changes you make.