Veterinary Practice Profitability
A busy practice that is not profitable is a common complaint and a solvable one. In almost every case the cause is in one of four places: pricing, staffing shape, drug margin, or work being done and not charged.
What This Guide Covers
- The Cost Structure
- The Four Leaks
- How to Find Which One It Is
The Cost Structure
A first opinion small animal practice broadly divides into staffing, direct clinical costs, premises and other overheads, with what is left being operating profit. Staffing is by far the largest, and drugs and consumables the second.
Because staffing dominates, small changes in team shape or productivity move profit far more than savings elsewhere. A practice chasing overhead savings while carrying a staffing structure that does not match demand is optimising the wrong number.
The Four Leaks
- Pricing that has fallen behind cost
- A blanket percentage rise applied each year, while wages, medicines and laboratory fees moved at different rates. After a few years some services are delivered below cost. Pricing needs rebuilding from cost periodically, not indexing.
- Missed charges
- Consumables used and not billed, procedures done and not charged, and time given away. In a busy practice this is continuous and invisible, and it shows as a gap between clinical activity and income.
- Drug margin erosion
- Buying terms unreviewed, price lists not updated when costs rise, short-dated stock written off, and dispensing priced against online competition without knowing the true cost of dispensing.
- Staffing shape
- Not headcount but shape. Too many vets and not enough nurses, or cover built around availability rather than demand, with locums filling the gaps at a premium.
How to Find Which One It Is
Compare revenue per full-time equivalent vet, gross margin on medicines, staffing cost as a share of turnover and average transaction value against comparable practices and against your own history. The measure that is furthest out of line is where to start.
Then act on one at a time. Changing four things at once means you will never know which one worked.
Frequently Asked Questions
What profit margin should a veterinary practice make?
Our turnover is up but profit is flat. Why?
Find Out Where Your Profit Is Going
Try the profit margin calculator for a first view, then send us your accounts for the proper answer.