Small changes make a big difference in lifetime earnings (Proceedings)
The recession has made it clear to owners and managers of veterinary practices that an increased focus on good business practices is critical for increased financial success. Data from the National Commission on Veterinary Economic Issues indicated total revenue growth of about 4% in companion animal practices from 2007 to 2008. (This is an average figure—about 1/3 of the practices did not do as well as this and another 1/3 did better—there was a wide range of performance.) To put this in perspective, the average growth rate had ranged from 11-13% for several years prior to 2007. Transactions were down, on average, by 1% from 2007 to 2008 but an increase in the average transaction charge of about 5% bolstered revenue growth. While the average practice still saw revenue growth, it was clear that practices were going to have to work much harder than before to maintian revenue growth and improve profitability.
Both practice owners and clients are clearly more anxious about the future than ever before as evidenced by some of the responses to the NCVEI's monthly QuickPolls. In March, 2009, the NCVEI asked: Do you think your revenue for 2009 will be? Users responded as follows:
Greater than 2008 30%
The average debt of a 2008 graduate of a US veterinary college was $119,803 with a median of $120,000. Approximate 90% of those graduating from veterinary school had student debt and 91% of the debt was incurred while in veterinary school. About 20% of the 2008 graduates had debt in excess of $160,000, 8% have debt in excess of $200,000, and some in excess of $250,000. The average private practice starting salary for 2008 graduates was $61,518 resulting in a mean debt to earnings ratio of 1.94. A traditional rule of thumb for borrowing to finance an education is that no more than the first year's salary should be borrowed (i.e. a 1:1 ratio.)
More debt of any kind reduces young veterinarians' options and increased debt means they have to look more carefully at their future plans and make more intelligent choices. The practices they choose to work in will have to give them the ability to make more money than in the past. This problem belongs to anyone who is going to need a young veterinarian in the future. While employers are not solely responsible for solving this problem, salaries must improve and employers will have to provide a practice environment in which associates can be more productive and be paid more.
It is also clear that much of the revenue growth in veterianry medicine has come from fee increases. 76% of the fees included in the AAHA Fee Reference increased above the rate of inflation from 2004 to 2006.
Some of the most significant changes included:
• Hospitalization—50% of the fees had statistically significant increases of 7-16% above the rate of inflation.