|Surviving the Slow Economy
The plea for advice, anonymously made, is candid and heart-rending.
“My dream for a long time has been to own a veterinary practice and I happened to have purchased one right before the economy tanked,” it reads. “...I love what I do ... It's hard for me to consider going out of business after so much work, but I'm starting to look at that possibility.”
One response was equally anguished. “Right there with you, anonymous. It is hard to come in (to work) some days.... I am at my wit’s end and don’t know what else to do.”
Told on the online message boards of the Veterinary Information Network (VIN) and heard by practice-management consultants and lenders, stories of pain and strain are coming across the country from veterinary practice owners faltering under the pressure of an economic slump in its fourth year.
“Our nation’s economy has been struggling, and the veterinary industry, usually resilient during tough financial times, has felt this slowdown,” observed Tom McFerson, a CPA in California whose firm tracks monthly revenue figures for 160 practices in that state.
McFerson’s view matches that of Jon Dittrich, a practice management consultant in Tennessee with 100 clients around the country. “I haven’t seen wholesale practices going under but I am sure owners are taking a real beating right now,” Dittrich said.
But amid the dour news and lamentations are stories of survival as inventive business owners tap creativity, drive and a willingness to experiment to keep their practices alive — and even thrive.
In British Columbia, Canada, Dr. Josephine Banyard decided to meet the prices of low-cost clinics and shelters on spays and neuters as one response to changing times. “We have been charging more than the public can or will pay — it is in our power to change this situation,” Banyard wrote on VIN. “I am meeting my cheap competition because to do so means I get that business and do not lose my clients.”
Banyard believes the slowed economy reflects a long-term global shift in fortunes. “In North America, we’re shuffling down to the rest of the world, and if we don’t see that and we don’t accept and realize that and bear up to the challenge, (ours is) not going to be a very strong profession,” she said in an interview.
In the profession for 30 years and owner of a practice in Chilliwack for 15, Banyard said, “The economy in Canada is not as bad as it is in the States but I have experienced an economic shift in my practice. I’ve seen my income go down.”
The downward trend spurred Banyard to try new approaches. She began working harder to attract public attention, although conventional advertising, a fancy website and social media are not her style.
In her city of 80,000, a wood and Plexiglas sign with a short message is enough to catch the eyes of drivers passing the clinic. The sign might read “Wellness is enjoying life.” Or “Dental Month.”
“We don’t put any value judgments on it. And anything more than five words, people can’t read fast enough,” Banyard said. She knows the sign is noticed because people comment on it.
In the reception area, clients see other messages as well, as part of Banyard’s long-term campaign to bond with pet owners and educate them about good medicine and the value of preventive care. Using inexpensive frames, graphics and a few well-chosen words, she and her staff are making displays on topics such as senior wellness, physical exams, dental cleanings and spays.
An essential part of Banyard’s strategy for sustaining her practice is a frugal lifestyle. “Whenever we’ve bought something, we’ve used cash,” said Banyard, whose husband is a large-animal veterinarian. “Saved up, then bought. The less you’re in debt, the better it is for you. If you’re in debt, your bank is going to do great.”
Today, Banyard said, her practice income has rebounded to the level it was before the slide began six years ago.
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Dr. Michelle Wilbanks, owner of Sterling Paws Veterinary Hospital in The Woodlands, Texas, was in what she calls “the crucial three-to-five-years-when-you-will-finally-break-even-and-start-to-make-a-profit” period when the economy crashed.
“I am barely holding my head above water,” she posted on VIN, “but I have managed to do some things that I think are crucial to keeping my doors open.”
She’s cut staff and hours and halted raises. At the same time, she said, “I have kept my staff updated with regards to the financial situation of the clinic. They know we are struggling and it has really helped with them understanding when I have to send someone home and why it is so important to schedule rechecks before they walk out the door, reminders, etc.”
She’s decreased inventory of goods such as heartworm and flea and tick preventive treatments and medications, and splits with a colleague supplies that come in large quantities or are too expensive for either to afford singly. She uses the online pharmacy service Vetstreet to reduce inventory further.
“It has been hugely convenient for my clients (who can order online) and even though I do not make as much profit as I do (selling it) in the clinic, I have adjusted the prices to compete with other ... online pharmacies,” Wilbanks wrote. “Better to have some than none. For those clients that hate the Internet, I still carry the most common products that I recommend (usually have no more than two to four boxes in the clinic at a time).”
Wilbanks also recommends communicating regularly with vendors about payments “so they don’t attack you at the end of the month — better to be proactive than hide.”
Finally, to whittle the accounts receivable — which Wilbanks acknowledges she should not have allowed to grow as it did — the clinic is cutting deals with clients. “Usually we offer to write off the interest charged to their account for (a certain period) if they pay their remaining balance off,” she said. “Better than not having the money and way better than having to turn the account over to a collections agency where we won’t see anything.”
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At Bellflower Veterinary Hospital in Southern California, Dr. Ena Valikov was paralyzed with shock when she recognized the effects of the economic crash on her life.
“I literally had two months that I was afraid I wasn’t going to be able to pay my mortgage,” said Valikov, who runs a solo practice.
In 2009 and 2010, she went months at a time without taking a salary, withdrawing money from savings to get by.
Beyond the general economic slump, Valikov was affected by the opening of a fancy 24-hour facility a half-mile away. And during good times, she had become complacent.
“I took my eye off the ball...” she said. “I figured, I can coast now and not pay attention, not look at the numbers, not look at what the practice is doing. Frankly, I got distracted with VIN and the politics of what’s happening in AVMA (the American Veterinary Medical Association) and the research of this and the research of that.
“It’s much easier to go off on interesting tangents than to keep your nose to the ground, (attending to) tedious stuff like accounting and bookkeeping,” she said.
Once jolted to attention, Valikov took action. She trimmed staff and began offering financial incentives to staff who bring clients in the door. She tended to her online reputation. “I paid absolutely no attention to Internet reviews (before),” Valikov said. “What I realized is that they matter.”
The realization came through an anonymous letter containing a printout of the clinic’s online reviews that showed low ratings posted years ago by disgruntled clients. “That’s all that was there,” Valikov said. “Meantime, I’m getting two or three thank-you cards a week, but (those) people don’t bother to go online.”
Now she asks clients to post their views online, or give permission for the clinic to post the contents of their thank-you notes.
Also in the works is an update of her boarding facilities. The idea came to Valikov one day when she took a long drive around town to calm her worries. She visited nearby kennels and hospitals. She learned that her 1,000-square-foot indoor kennel is outdated.
“What people want these days is to have their pet in a suite,” she said. “They want to go online and see their pet. Mine right now looks like runs with wire. It makes it look like they’re in prison.” She plans to redesign the facility look cage-free and add a little courtyard. Once done, she’ll post pictures on her website in hopes of attracting more business.
Although Bellflower’s financial situation has not improved appreciably, Valikov feels relief in taking steps. “Part of it is, the shock and the paralysis is over,” she said. “I think once you realize you’re not a victim in this thing and there are things you can do, you feel better.”
* * *
Dr. Laurie Hess turned the slow economy to her advantage.
The avian specialist and exotics practitioner had spent a decade at The Animal Medical Center in New York City followed by six years as a traveling doctor, keeping hours at various clinics in Westchester County. Business was good, but she didn’t have a place to call her own.
Then, late last year, a 2,000-square-foot property that once housed an exercise equipment store became available for lease next door to one of the clinics where Hess worked. She grabbed it, negotiating a 20-year lease at a rate she figures is close to half what it would have been during flush times.
She opened on Feb. 15 and hasn’t had a bad month yet. “We’ve been in the positive every single month and our outcome is significantly better than projected,” Hess said.
Much of the success likely can be credited to Hess’s infinite energy. The clinic is open Monday through Thursday 8 a.m. to 7 p.m., Friday 8 a.m. to 5 p.m., Saturday 9 a.m. to 1 p.m. and Hess — who is married to a lawyer and has two tween-age children — is on call round-the-clock. “I’m working harder than I’ve ever worked but the benefit is that there’s room to grow,” she said.
Hess has embraced social networking and the Internet to pump up her clinic’s intrigue.
There’s a Facebook page with 770 fans (at last count) linked to a Twitter account so that when anything new is added to the Facebook page, a “tweet” goes out to followers. There are YouTube videos showing unusual events, such as a hummingbird examination. “When we have cool animals, we talk about them,” Hess said.
Videos are posted on her website as well, along with a collection of endearing photographs of patients, including parrots, rabbits, guinea pigs, tortoises, a chicken and a hedgehog. Clients are invited to submit short videos of themselves and their pets for posting and an opportunity to win “species-specific food prizes” each month.
The interaction between Hess and staff with clients and the public “is fun,” Hess said. “It brings the practice together.”
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Like Hess, Dr. Sam Meisler found opportunity in the recession. As times worsened and consumers began looking for ways to save money, Meisler sought to be noticed by offering coupons and discounts.
Meisler, who owns a clinic in Knoxville, Tenn., and another across the river in Alcoa, said the idea is not to reduce prices across-the-board but to employ “price segmentation” — offering different prices to different segments of the market.
Though Meisler has heard some practitioners disdain discounts, feeling that such tactics demean the profession, he doesn’t buy it. “Professors do it,” he said. “Every student pays differently if they’re on scholarship, and they don’t feel demeaned.”
Meisler offers other specials, as well, such as free vaccinations with paid exams, which enables him to emphasize what he thinks is the more important aspect — wellness.
He rewards staff for booking annual blood work-ups and dental cleanings where warranted. “We didn’t want any incentive for doing things that weren’t necessary,” he noted. “Our philosophy is that it has to be for the better care of the pet, rather than looking for revenue specifically. That makes the staff feel good, too.”
The recession presented Meisler another silver lining by knocking down the interest on his variable-rate loan from the Small Business Administration, amounting to savings of upwards of $60,000 a year.
The bottom line is that between both practices, Meisler reported, revenues were up 19 percent in 2009 over the previous year; and likely to be up 10 percent or so this year over last.
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Unfortunately for some clinic owners, no amount of hustle seems to make a difference.
Dr. Sharon Sernik, a solo practitioner in Altamonte Springs, Fla., posted on VIN in May a rundown of the things she’s done to try to drum up business:
She sets up and pays for tables at community events, puts flyers under windshield wipers and advertises in places where she thinks she has a good chance of being recognized, such as her synagogue, her child’s school and her neighborhood directory.
She sponsors clean-up stations at two dog parks, switched from Yellow Pages to online advertising and donates products or services to charity auctions and wildlife rescue. She gives heavy discounts to greyhound rescue groups, which keeps the clinic busy — although unfortunately, many of the dogs do not become lifelong patients because they are shipped out of state.
Sernik extended her Wednesday hours to 7 p.m. and instituted a service she calls Retail Payday that lets clients pay for a given service over three months for a 7 percent fee.
“With all of this, I still have days when I have only one or two clients in a morning or an afternoon. ... I am seeing a lot of people not doing blood work or recommended dental or coming in for rabies only and then maybe doing the rest of the recommended services ... over the next few months if at all. ... I am doing a home euthanasia service to fill empty time ... I ... don’t know what else to do.”
Seven months later, Sernik told the VIN News Service, “Things are still crappy.”
“I am a essentially a hobby farmer,” she said. “My husband makes twice what I do as a Ph.D. electrical engineer. I could not support a family doing this, and I am embarrassed to admit to my physician friends how little I earn.”
Sernik said she enjoys the satisfaction of helping patients and has some nice clients. Working as a veterinarian also allows her to take care of her own many animals and contribute to animal rescue. But the business side is tough. “I’m hanging on by the skin of my teeth,” she said.
Looking on the bright side, she added: “At least I’m still open.”
* * *
In David Lucht’s view, veterinary practices are weathering the economic doldrums in widely divergent ways. Lucht is president of Live Oak Bank, which counts 450 veterinary practices among its borrowers.
“We have practices in certain areas of the country that continue to experience double-digit growth,” Lucht reported. “In other markets more hard-hit by the economy, we see practices struggling to remain flat in terms of sales.”
Though most are performing well, Lucht said about 1.25 percent of veterinary practices in Live Oak’s portfolio have failed in the past two years. (The bank was established in 2007 and specializes in veterinary and dental practices and independent pharmacies.)
“In some of the instances, we can look right at the economy and say, ‘Unfortunately, they were in an area so impacted by foreclosures and job losses that there just wasn’t enough (business),” Lucht said.
But that hasn’t been the case universally. Live Oak attributes at least half of the failures to mismanagement rather than the economy.
In one case, for example, an emergency clinic that had been open nights and weekends switched to a 24-hour operations, alienating its referral sources. “So yes, the economy’s down, but they were doing fine until they made that switch,” Lucht said.
In another instance, a veterinarian who was ill left the business in the hands of a partner for three months. The partner failed to pay bills and staff the operation appropriately. “By the time she got back, there was damage done to the business,” Lucht recounted.
In a third case, a seller and buyer fought, and the seller set up shop just outside the non-compete area. “In a tough economy where business is hard anyway, that really was too much (for the buyer),” Lucht said.
Live Oak offers whatever aid it can to prevent its borrowers from going under, Lucht said. The bank has hired consultants, accountants and website designers to assist practices and bought new signs for clinics needing a boost in appearance and visibility.
“Defaults are horrible for the borrower, but they’re horrible for the bank, too,” Lucht said.
Overall, Lucht said that the veterinarians with whom he’s familiar “appear to be managing their way through the recession quite well... We see them adjusting and figuring it out.”