Welcome to the Future of Veterinary Practices - Episode 7, Featuring Dr. Joy Fuhrman
Originally from South Africa, Dr. Fuhrman has extensive experience in financial consulting and corporate accounting. As a CPA and a graduate of Colorado State University's combined MBA, DVM program, she offers a combination of veterinary practice ownership, financial, and management skills. Dr. Fuhrman is a veterinary consultant and a nationwide industry speaker. She is also a practice owner and practitioner, as well as an adjunct faculty member at Midwestern University College of Veterinary Medicine.
You've seen this industry from so many perspectives, and sharing some of those perspectives is going to be incredibly valuable for our audience today. Thank you for taking some of your very valuable time to spend with us.
One of the things that we're talking about at the beginning of every interview this season is, this has been such a crazy year. We have to recognize we're coming out of the weirdest year during our lifetimes. We've been locked down for so long, there are so many things that we haven't had access to that we're used to that we're craving and yearning for. What are you most looking forward to once COVID is... really, once we're past this and we're getting back to some semblance of normalcy. What is it that you're missing and most looking forward to?
Well undoubtedly, travel. I had planned a trip to South Africa to visit my family back in June of last year and we had to cancel and we postponed it until December of 2020 and ended up having to cancel that trip too. At this point, I haven't made any plans. I'm waiting for things to be completely died down before I dare to try to book another trip. So, but hopefully, we'll get to do that, if not in the summer then hopefully by the end of this year.
So Dr. Fuhrman, with this for the past year, I mean with COVID, we've been confined to quarantines. We've had so many things that we're used to, taken away from us, but so many other stresses as well. The political climate has been just wild, turning friends and family against each other. There have been so many stresses. So, what have you been doing to protect your mental health?
You're exactly right, David. I think COVID has been particularly stressful for people in the veterinary industry, and specifically in veterinary practice because we're dealing with a business that has been an essential service. So while everyone else has been in lockdown, we've continued to operate and in the face of having to deal with the outside pressures of COVID. We've had to take on curbside service, which has in many cases not been well received by clients. Adding that the political climate with some people not wanting to wear masks despite the business requiring people to wear masks. Then adding that the staff going out sick and on quarantine for COVIVD, and the extraordinary pressure that that has placed on the remaining staff within the practice.
So for me personally, I think really honoring myself and protecting my time away from the practice has been crucial to maintaining my mental health. Really, just taking extremely good physical care of myself to make sure that I didn't get sick, that no one in my family got sick. Those were the key things that really have kept me going through this year.
Most practice owners, even though they have the physical separation, go to a practice, go home, as an entrepreneur it's so hard to not just be working around the clock. Do you have any particular tricks or organizational things that you do that really help you honor that time off, separate yourself and give you that ability to really put it away?
Well honestly, I'm in an extremely fortunate situation. I have two other partners that I practice with and we are very supportive of each other. So we really honor one another when we need time off for just a mental break or time to be with family, and we really pick up the burden when one of us is weaker. It works extremely well and it allows each of us a little bit of downtime to be able to step away from the business even if just for a short period of time.
But on the other hand, you are exactly right, that the stresses of the business never go away and there are always things to deal with. It's just a case of learning how to handle that and roll with the punches.
What I'd love to do is transition now and talk a little bit more about some of these things that are really affecting independent practice owners and really the future of veterinary medicine in America. One of these biggest, frankly, existential threats is consolidating veterinary practices, corporatization of veterinary care across the country. From our perspective, because we are all completely in this 100% for the independent veterinary practice owner and some of the small groups because there is some differences in some of the way that these go. What we see time and time again from the really large corporate groups is that doctors end up not really truly being able to practice medicine and they lose some of their passion for it because they get into this, this is the way that we do it under this corporate structure and what is okay and not. You get to nobody within the practice really has that ownership and that entrepreneurial drive to make sure and bring their absolute best and lift everybody up and really push this forward. The culture ends up suffering, the quality of care ends up suffering. Overall, it drives down the quality of care for veterinary medicine. What do you think are the things that are driving practice owners to sell to large corporate consolidators?
Well honestly, that's an easy answer and it's the money is money. Corporate consolidators are offering significant multiples of EBITDA and certainly a lot more than any associate or independent veterinarian could typically afford to pay for a business. Certainly oftentimes, way in excess of the true value of the practice.
So I think a lot of veterinarians who are getting stressed out, getting burned out with veterinary practice are really turning to the corporates because it's easy money for them and high-value dollars to sell their practice.
What do you think would cause more independent practice owners to want to maintain ownership?
Well, David, I am extremely passionate about independent veterinary practices and practice ownership. I love to support any veterinarians, including new graduates, young veterinarians who are looking to make their way as entrepreneurs and own their own business. So for me, I think the real challenge for the veterinarian who is mid to late-stage who is usually a solo practice owners, who is struggling with managing the business, and continuing to grow the business and is quite frankly, burned out, especially after a year like the one we've just had. Turning to corporates is a quick, easy exit for them with money in their pocket.
Honestly, I think investigating many alternative strategies sometimes doesn't come up, but I would strongly recommend looking for taking on a partner. A lot of people are reluctant to do that for a myriad of reasons but honestly, taking on a partnership, be it an existing associate within the business, really does allow you a lot more flexibility, a lot more time to take care of yourself, and to renew your passion for the profession as opposed to just walking away from practice completely.
I always recommend to my clients as a consultant that they should start planning for an exit probably three to five years before they actually want to get out, because that allows them the time to increase their revenues, really tighten that big costs so that they can grow their EBITDA and ultimately their practice value. That's where you really need someone to step in and analyze the financials regularly, taking a close look at the numbers. Let's be quite frank, as a practice owner when you see clients, managing staff, you don't always have the time commitment to be able to delve into the numbers on a regular basis. So, it certainly can be a huge burden, and then it gets left behind, and ultimately by the time the owner wants to sell the practice, it's too late to build the true value of the practice.
Some of the line items that practice owners should really be paying attention to if they want to maximize the value of their practice. Two of the biggest ones would be the cost of goods sold and payroll. Far too many practice owners don't dive in and figure out how they can manipulate those and dial those in to increase their EBITDA. Do you think you can talk a little bit about some of those? What is it that you would do to really dial in your cost of goods solve if you're consulting with a practice owner?
Right, so the cost of goods sold as you know is the second highest line item or expense in any veterinary practice with payroll being number one. So keeping really close track of the cost of goods sold is key to managing the bottom line in every single practice.
I have to bring up the inventory count word, even though many practices hate to do that. I highly recommend doing inventory counts at least every quarter, if you do cycling counts, you can do one section of the inventory every week. That spreads out the burden so you don't have to spend much of one day doing counting. Then really, really closely tracking your costs. So if your practice management system isn't doing it for you, really making sure that every single purchase, if the cost of your input has gone up, you need to adjust your price going forward.
Then the last tool that I use every week is budgeting for the cost of goods sold. So what I mean by that is taking a look at the prior week's income and then estimating what your budget and cost of goods sold should be, and then placing your orders according to that, and managing how you spend your money. That's what, it's the surest way to get your cost of goods sold into a manageable range as opposed to just buying things randomly as you need it.
It's a two-tiered approach. You have to manage the physical inventory and control the cost of goods sold, and then you also have to be very careful about the pricing.
Different medications that are essentially competing and instead of choosing the one to represent and go with and just move it through the inventory, a lot of times you have tremendous wasted costs just sitting on the shelf in that way. How do you deal with practices that are doing that?
Well, the reality is in today's environment with online purchasing options, are a lot about veterinary products and even now veterinary prescriptions, who cannot realistically compete with the pricing offered by Amazon.com, Chewy.com, and on and on and on. So veterinary practices really need to move from being in the place that pet owners go to purchase goods. Dog foods, cat foods, even prescriptions to some extent, and certainly over-the-counter items.
But in addition to that, they need to focus on their services and be the place where the people come for advice about their pets. We typically say that only about a third of your revenue should be generated from the sale of products. So ideally, I actually like to see there is more or less, probably around 25% to 30% and no more than that. So that is one of the key ways that practices can move away from keeping high volumes of inventory on their shelves. Using online pharmacies in another way that they can maximize keeping their inventory costs down.
Then reducing the range of products you carry. So if you have multiple doctors in the practice, have them sit down and figure out one nonsteroidal antiinflammatory that they could all use as opposed to carrying every single brand that's out on the market.
So there are certainly a lot of tips and tricks that independent practices can utilize to be able to keep those costs down and of course using buying groups. Independent veterinary practice buying groups are another great tool to minimize your input costs when you're talking about the product that you're going to be selling.
How do you address price increases to clients, especially in this landscape where they do have other options, online options, where they can go get a lot of the stuff? How do you address that?
Well depending on items, if they really are true over the counter items that can be purchased easily online, my philosophy is that we need to match those prices. Even though we're going to be carrying them at a lower margin, I think it's important that we remain competitive. But for prescription items, anything that involves doctor input, we have to add in the costs associated with the doctor or the staff taking the time to write the prescription, fill the meds, so on and so forth. So those are some of the things that I think about when pricing those items.
Groups like AAHA, groups like the AVMA, and other groups that are supposed to be representing the interest of independent veterinarians, need to step up and start applying some pressure not just on behalf of their members but on behalf of veterinarians overall. Get these costs down so that vets can make the margin and still be more than competitive.
I love that idea, David. I think you are exactly right. Without the veterinarian, the pharmaceuticals wouldn't be selling any of the medications. So would certainly, but who then to motivate and incentivize the doctors to sell a product. On the flip side, that could open up a whole different can of worms. Does that look like kickbacks? How are they incentivizing those veterinarians? Is it always in the best interest of the patient? So it could potentially be a slippery slope if not handled and addressed really well.
Now, the number one line item as you said is payroll. So could you give some advice, how do you go about dialing in your payroll? What sort of ways do you find that you can reduce those costs and really keep that tight? Where are the biggest pain points and how do you resolve them?
So, great question, David. I think this is probably top of mind for every veterinary practice, corporate or independent, especially in today's climate. Unlike many practice owners or even corporate managers, my philosophy is to pay staff really well, probably more so than they would be earning out in the marketplace. It not only bonds people to you but it really shows them their value.
Now, some may argue, well that's just going to drive up my payroll. My philosophy is the other side of that input is the hours. So really making sure that we are using technicians to their fullest ability, delegating tasks to lower-level staff or lower-paid staff as much as possible. Better managing the hours that people are working so that overall payroll is still at a reasonable level, even though the employees are paid well on an hourly basis.
In our conversations leading up to this, you mentioned that some of these things sound great in theory and they are, but they're difficult in practice.
That's true. I mean in reality, we want to have doctors doing just the things that doctors do. There is the only things that technicians cannot do is diagnose, prescribe, and do surgery. Essentially, they should be doing everything else. In reality, however, this is an extremely difficult job market for technicians or for practice owners to hire technicians rather. It's as you said, many of them are leaving the industry and it's becoming increasingly difficult to recruit and retain strong, technical help and even other support staff within the practice.
So what's happening is just out of necessity, doctors and other staff are doing lower-level tasks because somebody has to do it. Of course, efficiency drops, profits drop, and stacked to another is probably the most expensive thing that any practice can have.
You mentioned a couple of things, paying staff very well, but all of the recent studies show that I mean, payment is, how much their wages are is not what binds today's workforce to the place that they're working. That's not the number one thing. So, what are some of the other things that you do and implement in your practice to really create that bond?
Well, I think it comes down to culture. That's where the independent practice definitely has an edge on corporate. I've worked in both independent practices and corporates, I worked in the industry, and I really see how the squeezing of expenses has a significant impact on culture when you're working within a corporate practice. Independence really gives you the flexibility to motivate your employees in any way you want, setting up a bonus program that rewards employees for alternative goals such as self-care, such as mentoring another support staff, such as client education. So you really have that flexibility and you can build and protect your employees by creating a really warm, friendly, safe environment where your support staff doesn't feel like they are being pushed to the limit every single day they work.
Another thing that I see a lot in corporate practice is this inclination to significantly shorten appointment times, which not only looks negative to the client, they don't see the value of what they're paying for that appointment, but in addition, it adds significant pressure to the staff because they're seeing more appointments in any one day. So as a result, they get burned out really quickly and this is why we're starting to see so many support staff leave the profession.
For a Free Workshop on How to Foster a Healthy Culture in Your Practice By DVM Michele Drake, Go Here.
You mentioned creating that warm, safe environment. What does that mean to you and how do you do this in your practice?
Wow, that's a multifaceted answer, I guess. We just, we have an incredible team, everybody supports one another, even through this year of COVID with people being out sick. We just see a lot of support, not only at work but also a true caring for one another's personal lives and personal wellbeing. We do team events, team meetings, where we will all do a yoga day, for example, or... and we offer a lot of those additional non-monetary benefits to our employees and I think that they truly value that. They feel seen and feel valued by the practice owners. I think that's what really bonds people to a business. I mean, not only a veterinary practice, but it's true of any business. That's what keeps people in their job.
We set up a bonus program for our doctors where they have five different goals. So a professional goal, a personal development goal, a team training goal, a self-care goal, and then an income goal as well. They really get to define for themselves what that goal is going to be. They work towards their goal and then there's a monetary value associated with it.
So we are incentivizing them not just on their production for the business, but on all levels, and we see them as a whole person and we see their value to the business. Maybe a big professional goal for them would be to get involved in organized veterinary medicine, that's certainly something we support and encourage because we see the ultimate long-term benefit to them being complete and whole as a human being and taking care of themselves and meeting their personal aspirations.
It's so similar to approaches that we take here at Genius Vets and what we value so much. We're so really, very proud of the culture that we've built and how much... we really do incentivize people, a lot of the same way. It works, it works, if you're listening to this right now if you are attending this webinar and you're hearing these things and you're not doing these things in your practice. I want to encourage you to really, I mean, give it a shot. One of the other things that we talked about leading up to this was the pain of needing staff right now. I mean, everybody needs staff right now, everybody's grown, everyone's practice on average over the past year, veterinary practices have grown by 17% across the country as a national average. Our clients have grown by on average over 40%. So there's a lot of growth and a lot more need. I mean, people already were crying for needing more associate vets and techs and all of that. What are you doing? Are you feeling the pain of this? How are you addressing needing more staff, going about it?
So David, honestly I would say this is probably our biggest pain point right now, is having enough staff. I was speaking to another practice owner who has a seven-doctor practice and 25 technicians. We have a six-doctor practice and we have eight technicians. It's not because we haven't tried to attract additional support staff, it's just an extremely challenging market. I've admitted, we probably pay more than the average practice in our area, but it's that difficult to get experienced staff in a practice.
So one approach that we have found to be successful is starting from the bottom up. So, hiring people who don't have experience in the industry or who have little experience in the industry, and then training them up to take on roles. We have had a lot of success with that, it certainly requires a lot of time and commitment, not only on the part of the employee but certainly on the part of the owners and the other support staff who are going to be helping train them, but it has been a successful strategy for us because we found diamonds in the rough, people who are just well suited to the industry who pick up things really quickly, and who ultimately want to go onto tech school and become trained. So that has been one successful strategy for us...
Where have you been successful, bringing people in as entry-level and moving them up to? What has that career path, how has that played out for you specifically?
So we brought people in and we firstly at the back as veterinary technician assistants. We'll run them through a program of level one, who need to learn basic skills like animal holding, working animals really lower-level tasks. Then slowly but surely we will train them on the next level of veterinary assistant tasks, so drawing blood, running lab work, other more rote type tasks but that certainly would bring them to the next level. Ultimately, we want them to be able to handle anesthesia, everything else that would be required of a fully trained veterinary technician.
Of course, the ideal path would be for them to concurrently be doing a formal veterinary technician program so that they could then become licensed at the same time.
I want to recap a little bit because there have been so many nuggets of gold that have been dropping in this, that somebody just listening along might not even notice that there are all these nuggets of gold everywhere that have been dropped for you. So you talked about attracting staff, you talked about interviewing a little bit... or sorry, training staff up and getting them to grow in their career path with you. You've talked about building a great culture, supporting them as a person, bonding them to the practice, and that's all, that's staff retention. So, lowering the turnover rate which is one of the worst hidden costs is turnover. So if you can really reduce turnover, that is first of all the biggest key to being able to build your staff and not feel this pain of always needing staff, as retaining great staff. One of the big things that also comes up, I think that's key here is being good at just things like conflict resolution, knowing when it's a good fit, knowing when to move on. At what point, and how do you go about just realizing that a mistake has been made here and making the difficult decision to move on? Despite the fact that you probably need to bring even more people on, not be letting people go, but sometimes it's addition through subtraction. How do you deal with that?
Well, they say that you should hire slow and fire fast. The reality's I think a lot of veterinarians or practice owners get caught in this paradigm of, they hire someone on, they are not making the grade or not fitting in culturally, but they are almost like a warm body doing the work. So they are afraid or reluctant to fire that person for fear of the additional work burden having to fall on the few people who are remaining. I think that is a devastating mistake to make. I think when there isn't a good fit when someone's not working out when you cannot trust them to be reliable and to get the work done, the best thing you can do is get rid of them because it speaks volumes to the remaining staff of what your expectations are for their level of commitment and work. It also actually relieves the burden because so many people have to spend time cleaning up the messes that the new individual made that ultimately results in more resentment, higher payroll costs, and just additional problems for the practice.
One of the other questions I'd really love to ask and get your perspective on, over the past year with so much turmoil in the actual procedures around running a practice. Curbside delivery and just so many changes that you've had to make and constant changes in regulations or requirements or whatnot. What's your framework for dealing with changes and keeping up with all these processes and regaining the efficiencies?
So it's been a real challenge this past year, managing all those changes. You're right, staying up on all of the changes in legislation. For me, the hardest thing has been the curbside service, I think it's placed an extra burden on the staff and moreover, I think it has changed the dynamic between the doctors and the clients who don't feel like they're getting the same level of service by being in the room with the pet and the doctor. So that has been a huge challenge to overcome.
One of our strategies has really been around training our staff, how to manage these situations. Really, just being willing to roll with the punches. Every day there's been someone else's been out sick or there's been a new requirement that we've had to meet. Just sitting down with everyone and saying, "Hey, this is a challenging time for everyone. Our schedules are going to be in flux, you may be scheduled to work next Wednesday but if Jane doesn't show up because she has COVID, then your schedule may change." Just getting buy-in from everyone and acknowledging that this is just, it's a tough time. It's been a really tough time for everyone.
What I definitely want to highlight before we leave, you do practice consulting. It's a passion of yours and you certainly take on consultants, you had mentioned to me. Can you talk a little bit about that process? How perhaps someone can reach out to you, and maybe what they can expect and what your process is a little bit like?
Yeah, so you mentioned earlier in my bio that I am a CPA and I worked for many years as a CPA and business consultant both inside and outside the veterinary industry. My time in the veterinary profession has been very multifaceted. So as a practice owner, as a practice consultant, certainly in the industry realm and also in academia. So I like to see practices and the industry as a whole from a lot of different angles.
So one of the services that I do offer is taking or offering advice to independent veterinarians and especially those newer graduate, younger veterinarians who are looking to start businesses or just getting their feet wet in starting out a practice. Helping them manage the financial aspects of their business. So you mentioned earlier about working on, not just in your business. Unfortunately, few independent veterinarians allow themselves enough time to do that. There's a lot to be said for keeping a close eye on your books and your numbers and really doing an analysis.
So I love to do that for other practices, not only because I'm a practice owner myself but just to bring all the aspects of my experience to the table. Just bookkeeping services and then financial analysis on a monthly and quarterly basis. Certainly, for those newer start-up practices, where they're operating their books in QuickBooks, aren't really sure what they're doing, it really is a significant value and allows people to grow their businesses.
To everyone out there, feel free to email me, I'll be happy to set up some time to chat with you about your needs and what's going on in your business and see where I could help you and advise you on how to manage your business. So, I look forward to hearing from all of you, thank you so much, David. I appreciate your time today.
Remember, if you are a practice owner or a practice manager, you right now have a full-page profile for your practice on geniusvets.com. It's true, go check it out. Go to geniusvets.com/start. There is a one-minute video that'll explain it to you, it's really easy for you to find your profile and claim it. It's free, it's 100% free. When not going to sell you anything, very valuable. It'll show up at the top of Google search results. That'll just help local pet owners find you, give you more visibility. It's a great thing, so check it out. Look for next week's webinar where we'll be doing it again.