Karen E. Felsted
CPA, MS, DVM, CVPM, CVA
Take Charge columnist Dr. Karen E. Felsted is the founder of PantheraT Veterinary Management Consulting. She spent three years as CEO of the National Commission on Veterinary Economic Issues.Read Articles Written by Karen E. Felsted
Dr. Peter Weinstein owns PAW Consulting and is the former executive director of the Southern California Veterinary Medical Association and the former chair of the American Veterinary Medical Association’s Veterinary Economics Strategy Committee. He teaches a business and finance course at the Western University of Health Sciences College of Veterinary Medicine.Read Articles Written by Peter Weinstein
The nebulous term “business model” is without one clear definition, but you know a business model when you see it. Essentially, it is a company’s core plan for success and profitability. Important aspects include:
- The products and services offered.
- The target market.
- The customers. What do they want?
- The sales structure. Is it direct and in-person, a franchise, a subscription model, an online venture or some combination?
- How will the business make money?
You might look at the description above and say, “That’s just a business strategy,” “That’s a business plan” or “That’s a value proposition.” The concepts definitely overlap. Attempting to pin down precise and unique definitions is a waste of time. It is essential that veterinary practice owners engage in the thought process and clearly define why their hospitals are unique and why pet owners would want to pick their practices instead of a competitor’s.
It’s just enough to define a business model for your practice, but you’ll want it to be better than your rivals’.
“Why Do I Care?”
One of the first questions that practice owners or soon-to-be owners ask is, “Why do I need to go through this process? I’m a veterinarian; I know what I do. Pet owners need veterinarians.”
All true, but as the authors of “Funky Business” wrote, “The ‘surplus society’ has a surplus of similar companies, employing similar people, with similar educational backgrounds, coming up with similar ideas, producing similar things, with similar prices and similar quality.” The veterinary profession has different practice models, but it also has an awful lot of very similar practices. When too many indistinguishable choices are present, consumers are either paralyzed with indecision and don’t choose a business, or they select one based solely on price.
Therefore, as Tom Peters wrote in “Re-Imagine,” “It is the foremost task — and responsibility — of our generation to re-imagine our enterprises, public and private.” Re-imagine is the key word here. Determining your business model isn’t something done just once. Pet owner desires change over time, and we have to keep up.
The most successful businesses focus on fulfilling customer wants, a concept much more important than fulfilling customer needs. What’s been clear for many years is that many pets “need” more care than they get, but it doesn’t work as a strategy. People have to “want” the care, and they have to find value in it. Wants change over time, and consumers might not know they want something until the company demonstrates it. (Who would have known we’d spend $1,000 on an iPhone?)
Therefore, the primary focus in determining your practice’s business model is knowing what pet owners want and value. One sign that consumers aren’t getting what they want from a provider is the availability of alternatives in the market. If pet owners thought they were getting products at fair prices, the market for products sold elsewhere never would have opened. Look at the changes you see today when you define your business model.
Define Your Model
As we look toward the post-COVID era of veterinary business, what can we learn from the consumer demands and expectations of the past year and previous years? What business model changes can deliver a better client experience? Can we move from a doctor-centric model to one that is client- and patient-centric? And what changes can we make to work smarter, not harder, so that we generate sufficient profit in a time of rising costs?
Veterinary medicine isn’t devoid of different business models. We have practices solely devoted to cats, exotic pets, house calls or end-of-life care. We have low-cost practices and pop-up vaccine clinics. Within more traditional models, we provide niche services such as behavior, hospice and telemedicine.
However, the great majority of veterinary hospitals, whether large animal or small animal, mixed or equine, are jack-of-all-trades businesses. Think of a doctor, dentist, pediatrician, gerontologist, hotel, spa and nutrition center under one roof. That type can work and has worked as long as something differentiates the practice besides the specific products and services. Maybe the difference maker is the hours of operation, the exceptional client service or the amazing use of technology, but in the end, it has to be something.
Different types of clients have different needs, even within the same community. You don’t have to attract every pet owner. Choose your clients and let them choose you based on a match between your vision and their wants.
Also, build a business that meets your life standards. Remember, though, that always doing something “my way” might deliver professional satisfaction and be the fast route to bankruptcy if your vision doesn’t correlate with what pet owners want and value.
Not all the ideas we outline below are guaranteed to work. Some failed on the first attempt. Some were hugely profitable. Thinking different can help you stand out in the community, keep your business energized and strengthen your profitability against the corporate practices engulfing the profession. Don’t say something won’t work until you think it through.
1. Access to Care Models
Access to care is arguably one of the most critical issues in veterinary medicine because of the unfortunately large percentage of pet owners who provide no health care or only limited care for their cats and dogs. Access can be limited by multiple factors, from a practice’s location and hours to a client’s lack of transportation to the cost of care. The last one is generally considered the most significant issue in access discussions.
Understanding the demographics of the community where you practice or want to establish a clinic is essential when addressing access to care. For example, double-income families might leave for work early and get home late. Traditional 9-to-5 business hours are a challenge for these pet owners. Can your practice open early for drop-offs and remain open late for pickups? Can you use virtual technology to connect with those clients during the day?
When it comes to hours, opening at 7 a.m. and closing at 6 p.m. might not be enough. Maybe the practice has to open at 6 a.m., close at 8 p.m. and provide weekend appointments.
Have you thought about opening a practice on the ground floor of an animal-friendly apartment complex? It worked wonders in Tokyo. Or what about regular office hours at an over-55 community and then offering complimentary transportation to the practice for pets needing X-rays or surgery?
How about special hours for senior citizens and longer appointments at non-rush-hour times?
Pop-up clinics like those seen at pet stores are popular across all income ranges, not just because of the lower cost but also because some pet owners eschew the traditional model of set appointment times and the veterinary team’s sometimes guilt-inducing focus on the highest quality of care.
Language can be a barrier to access, too. If you practice near a large non-English-speaking population, consider hiring a team member who speaks the language or set specific days of the week when translators are available. In one California city, government announcements are recorded in English, Spanish, Cantonese and Mandarin to match the community demographics.
In lower-income areas, practices can be very profitable and professionally fulfilling as long as the services and prices appeal to the community. A typical middle-class business model might not work there. One blue-collar community once had a very profitable, well-thought-of practice that offered limited services. The clinic was sold to another veterinarian, who expanded the care and increased prices. The old practice’s loyal clients didn’t want the new level of care. The new owner filed for bankruptcy within a couple of years.
The takeaway: A practice has to have minimum standards of care, but not all pet owners want or can afford the gold standard. When it comes to lower prices, an added focus on efficiency and controlling expenses is particularly important. Can you build a veterinary practice with the following?
- A small footprint. The rent is lower.
- A wellness focus involving vaccinations, microchips, deworming, flea, tick and heartworm preventives, and simple in-house laboratory testing.
- No radiology, in-house laboratory or surgery suite.
- A team of leveraged staff members who handle client education and provide all services not legally required to be done by a doctor.
- Referrals to clinics offering reasonably priced sick care.
All those things help a veterinarian see more pets at a lower average cost and with a higher margin per visit, thus netting a greater profit level.
Note that many of those ideas can be implemented part of the time. Perhaps your practice can’t find a full-time Spanish- or Chinese-speaking employee, but you know someone who could work 20 hours a week. Or you’re able to pay a language student as a translator every Tuesday. If you want two clinics, perhaps one is a traditional operation and the other a two-day-a-week wellness clinic located in a lower-income area.
2. Client Experience Models
The differences in veterinary practice business models aren’t just about access to care. They also can be about service, technology and price. The client experience is what Uber, Airbnb, Starbucks and even Amazon deliver.
Can you provide a customized experience when the demographics and psychographics of your clients run the entire bell-shaped curve — from a pet being a family member to a utilitarian approach? Or from “Do everything, please” to “I am on a fixed income” to “What can you do for $100?”
Are millennials your largest client segment? They want convenience and technology, so consider focusing on their desire to make appointments online, refill prescriptions through an internet pharmacy, have pet food delivered via a portal, and communicate with you by text, video and other means.
The veterinary profession’s first cat-only practice was a trendsetter because it addressed a niche market for a customized client and patient experience, one that made cats feel more at home. As with any customized business, the customer expectations and, subsequently, the costs of access to services were higher.
With this in mind, growth is occurring in practices that focus on birds, exotics or avian-exotics. Their success relies on their genuinely offering a better experience to clients and pets.
Can the next permutation be breed-specific patient care? A Southern California practice thrives by focusing on the plethora of brachycephalic breeds and their common abnormalities. People see medical specialists all the time, so why wouldn’t a hunting-dog-only practice work in the right demographic? What about a practice catering to dogs under 20 pounds?
The growth in advanced specialty veterinary practices tells us that room exists for niche clinics where the veterinarian is the local expert.
Another business model is member-only concierge care, which has grown in human medicine as doctors become exhausted by the insurance reimbursement system and a lack of control over wages. Veterinary medicine is the perfect platform for memberships in communities where pet owners desire a relationship-based doctoring experience and are willing to pay a monthly or annual fee for it. Talk about the $1 million practice. What about 1,000 pets being on your patient rolls for a fee of $1,000 a year? Some pet owners will make full use of the $1,000 over 12 months and others won’t. The concierge practice can be a lifestyle practice for the right veterinarian in the right community at the right time.
Be Open to New Ideas
No matter the profession or industry, not every consumer wants the same level of excellence or the same type of experience. Think of cars and hotels. Consumers can select from a huge inventory of each at a wide range of prices. Not every pet owner wants the same level of care or experience. Trying to force them into a gold-standard experience will continue to fail. It would be like saying all automobile owners must buy a Lexus and all travelers must stay at a Four Seasons. It sounds laughable in that context, but why do we think it should work in veterinary medicine?
Now is the time to think differently. The pandemic forced veterinary practices to adjust their business protocols. So, we know that practices can change.
When the pandemic is over, you must ask yourself this: Will I return to February 2020, or will I use the opportunity to create a business model that meets the needs of my clients and provides for my team and me?
What would it take to eliminate the cost of care as a barrier to access for any pet and owner? Could we do that and simultaneously grow the economic footprint of the veterinary profession so that the financial status of veterinarians and their teams also improves?
RE-IMAGINE YOUR PRACTICE
Not every possible business model is going to work in your situation. Before you launch into something new and different, do your homework. Here’s how.
- Investigate pet owner demographics in your current or proposed practice area.
- Research nearby veterinary practices, and not just how many and where.
- Identify competitors’ medical services and any unusual client services. What are the hours of operation? What do online reviewers say? Where do the practices fit into the community from a price and value standpoint? If they all take online appointments, pet owners probably expect it.
- Review industry research on what clients want.
- Determine the potential market size if you are going to specialize in a type of care or the patients you see. How much will you charge and how will you reach pet owners? Is your plan feasible?
- How will your practice differentiate itself? Will it be the hours? Customized care? House call services? If your practice isn’t distinctive, why should a pet owner choose you?
- Work with a professional adviser to prepare cash-flow projections based on the model under consideration.
IF YOU CAN’T BEAT ’EM, JOIN ’EM
The 1996 book “Co-opetition” suggested that some businesses should think not about competing against similar companies but about cooperating with them to strengthen both sides. The idea is that cooperation leads to the expansion of the business pie while competition slices it up.
A co-opetition mindset seeks to change and grow a business and identify new and better ways to compete. A strictly competitive attitude ignores the potential for change and restricts the possibility of increasing market share through the synergies that cooperation can bring.
Think of co-opetition this way:
- Could a wellness-only veterinary hospital cooperatively work with a practice that provides surgery and hospitalization? Does the acute care hospital need to serve as a vaccination and wellness site?
- Do specialty practices benefit from operating independently of general practices, or would the hybridization and commingling of specialists within private practice support both business models?
- Could greater co-opetition occur between house call practices and brick-and-mortar practices? For instance, should the independent mobile veterinarian have a referral relationship with a traditional practice, which in turn sends clients to the house call practitioner? Is that a win-win relationship?
- What other co-opetition opportunities can you think of that would enhance access to care?
VETERINARY CARE FOR ALL
The Merck Animal Health Veterinary Wellbeing Study found rising levels of stress and declining career satisfaction among veterinarians. We would argue that the chief reason is money, starting with the cost of a veterinary education and advancing to difficult discussions with clients over the cost of medical care. Also, take into account cases of economic euthanasia, when money trumps the human-animal bond, as well as salaries that often are not in sync with those of other health care professionals.
How can we take money out of the equation? And what happens when you do?
One way to make money less of an issue is pet health insurance. Another is third-party financing, which gives clients time to pay their bills through affordable monthly payments.
The Southern California Veterinary Medical Association has operated free clinics in lower-income areas with the help of The Amanda Foundation. Spay-neuters and major surgeries are performed in vehicles or off-site. Volunteers work four- to five-hour shifts under the requirement that they provide patients with the best care possible.
At day’s end, they mention another thing they love about the experience: They don’t have to talk about money.
MEMBERSHIP HAS ITS PRIVILEGES
The Los Angeles veterinary practice Modern Animal started a $100-a-year concierge program. Members get unlimited appointments for one pet in person or around the clock virtually. They also get streamlined appointment booking, records management and prescription ordering.