Are Your Big Accounts Costing You Money?

Those who have been following this blog know that I made a New Years Resolution to improve our AR situation. We have instituted a new system that, if followed to the letter, should show immediate results in our cash flow. Of course there are always situations that require special consideration. One of those is the trainer or manager of a barn that sends a lot of work our way but is persistently over 90 days on their own account payments. The concern is that if we cut the trainer off, do we lose all the clients associated with them? Where do we draw the line?

I have prepared a simple strategy for this type of case. Let us assume that our net profit is a generous 10%, which includes the considerable amount of time it takes the office staff to chase after overdue accounts. For every $1000 that a trainer or barn manager owes but has not paid we need to bill and collect $10,000 from their clients in order to not lose money in that barn. It would take another $10,000 billed and collected from the clients to reach an overall 5% profit. Keep in mind we would need to collect within 30 days from all clients associated with the trainer. Anything over that will start to diminish the profit margin. In effect we have to work twice as hard to earn half as much money.

To add insult to injury, if you pay your veterinarians on production you are paying them for money you are not collecting when they do work for the non-paying trainer. I’m getting depressed thinking of the handful of trainers in our practice that haven’t paid their bills and the ramifications of their delinquency.

So what is the solution?

First of all, we are lucky that our HVMS software allows us to pay our veterinarians based on collected receipts. We know they are not running up bills with bad clients to pad their commission and they trust us not to send them to clients who won’t pay their bills. Secondly, we identify the trainers and barn owners/managers who haven’t paid us. Then we pull up their clients and determine how much work they do with us each year. Using the 10% net profit rule we can then figure out how much work we need to do to break even on the trainer or barn owners account. For example, consider a trainer whose unpaid bills add up to $5000. You need to bill $50,000 to just break even on their account!! What if the client billings add up to less than that? You are losing money. Even when the economy is great nobody can afford that.  Finally, think of how much time your office staff spends chasing after those accounts. We have calculated that it costs us $10,000 annually in labour costs to chase bad accounts. Using the 10% rule, if all our clients paid at the time of service or at least within 30 days, we could eliminate $100,000 of bad accounts annually and still earn the same amount of money at the end of the year based on cost savings.

Wow. When I look at it this way I am determined to end our subsidies to trainers and barn managers/owners that can’t pay their bills. It can be very glamorous and ego-boosting to work with big name trainers but this does not necessarily translate to improvements in your bottom line. I prefer not working for free. I love the other trainers who pay their bills promptly and run their operations like the business that it is. Lets reward them by being more available and offering better service because we have created that opportunity by eliminating dead wood. The flip side is that if we can get this slow or non-payers to start making regular payments there would be a huge upside to your practice profitability. Does anyone have any ideas or proven methods on how to make that work? 

How Thick is Your Skin?

Equine vets are known for having thick skins. We couldn’t survive without deflecting the verbal barbs and the bad mouthing we have had to endure at one time or another. Thankfully, it is not always like that and usually these critiques are done in the privacy of a barn. How would you feel though if anyone who cared to look was able to read about your expensive charges, your injection skills, your bed side manner or your constant answering of the phone while talking to a client? Is your skin still thick?

But wouldn’t you want to know what people were really thinking about you and your practice? I have written about Yelp, the online customer review site but there is a new site where you invite people to anonymously talk about you. It is www.failin.gs.

Right now it is aimed at individuals but I am sure a business is going to take the plunge and expose themselves to the good, the bad and the ugly. I don’t have the nerve yet but I would love to know what clients really thought about our practice. I’ll let you know when I’m ready to take the plunge. Is anyone out there going to take a dip? Let us know!

Compounded Medications vs Pirated Knock-offs! A Correction

Thank you to a reader for pointing out that I was confusing compounded products with pirated rip-offs in my previous blog. Unfortunately the two have become synonymous in our industry. Compounded medications are legal products that are not commercially available while pirated rip-offs are exactly as described. This made me realize that whenever we purchase one of these products we are in the same league as illegal downloaders of music and purchasers of knocked off designer clothes. Ouch!! When I look at it this way it even makes more sense for pharmaceutical producers to create a campaign to consumers highlighting this. Everyone knows that pirated goods have inferior quality. This is not something most people would want their horses to receive.
In any case my apologies for the confusion and to the the producers of legitimate compounded medications.

Be Prepared to Share Your Customers

I had dinner the other night with friends from a large pharmaceutical company. As always the talk turned to compounding. The questions were the usual concerns; why do vets buy compounded products, how can we get them to stop, why should we release new products if the compounders are going to make a cheaper version? My answer was simple.

The customers of the equine pharmaceuticals are not just veterinarians but horse owners too!

Why is this? Short of jail or bodily harm the vets who use compounded products will continue to do so in spite of all the compelling reasons not to. Why beat your head against the wall? There is no reason to change. With regards to vets the goal of the pharmas is to keep the ones who buy their products from straying to compounded products.

This brings us to the horse owners themselves. Do they know what a compounded product is? They probably remember about the polo horses that were killed a while back but that was a long time ago. The memory has faded. What would happen if a pharma company prepared an advertising campaign comparing their product with that of a compounded one? What if the risks, the quality control, the potential for harm were revealed? What would happen if customers began asking theirs vet for the real stuff not a knock off product? Do you think more vets would begin buying the real products?

My friends in the pharma industry were worried about alienating veterinarians if such a campaign were created?

The answer was simple. The vets who are buying compounded aren’t buying from them anyhow? Who cares what they think? As for the vets who buy the real stuff? They will be ecstatic that the drug company will highlight to customers those vets who offer the best product to their clients. They will be bigger fans of your products and less likely to switch to compounded products.

What company wouldn’t want loyalty from so many customers?

Do You Know You’re Naked?

With all the news of the indiscretions of Wall Street, politicians and large corporations are we to think our little businesses are any less exposed? Not any more! There are numerous web sites that people are using to review and comment on every business they encounter. I have been playing with yelp.com and foursquare.com on my iPhone. Both can use GPS to identify where you are and identify businesses in your area that have been reviewed. Usually I am looking up restaurants or coffee shops but you can look up hotels, bookstores and yes even veterinarians. Next time you are running late for an appointment or an appointment is not going particularly well you might want to think that your client might be sharing their experience with you on one of these sites. Scary isn’t it?

An excellent and free way to see what discussion there is about you and your practice on the web is Google Alerts. When you sign up you can add topics and the web is scoured for references to it. I search for our practice and my name. You can be really devious and search your competitions name as well. It’s a great idea to hear both the pros and cons of your competitors.

Like it or not the transparency of the web leaves us all very exposed. At least there are ways to monitor what is being said about you.

Next time we can talk about what to do when less than complimentary things are said about you. You can turn a negative experience to a positive one. In the meantime check out yelp.com or foursquare.com to see if the world has been talking about you.

Make Your Employees Want To Work For You. Daniel Pink Has The Answer

If we dealt only with animals life would be great. Every veterinarian has said that at some point in their career. From clients to employees people tend to be our biggest challenges. In veterinary practice human resource costs are generally the biggest expense. In these economically challenging times reducing the expense of employee turnover and getting the most of the staff you have are necessary. The problem is that we always feel that we cannot afford to pay them what they want to stay in a job or produce more. But is money all that is needed to motivate staff?

I have just finished reading the new book by Daniel Pink called “Drive”. In it he explains how the typical way we pay and motivate people may be doing us more harm.

To give you an insight into the book I took the following from his web page.

“The secret to high performance and satisfaction—at work, at school, and at home—is the deeply human need to direct our own lives, to learn and create new things, and to do better by ourselves and our world.

Drawing on four decades of scientific research on human motivation, Pink exposes the mismatch between what science knows and what business does—and how that affects every aspect of life. He demonstrates that while carrots and sticks worked successfully in the twentieth century, that’s precisely the wrong way to motivate people for today’s challenges. In Drive, he examines the three elements of true motivation—autonomy, mastery, and purpose—and offers smart and surprising techniques for putting these into action. Along the way, he takes us to companies that are enlisting new approaches to motivation and introduces us to the scientists and entrepreneurs who are pointing a bold way forward.”

Like all things that are good for us the premises in this book will require some work from you. Cultures will have to change, people will have to adjust. If the end result is a happy, motivated and engaged work force it is a no-brainer to me.

Treat Your Best Customers Like They Are Your Best Customers

I found a great article in The Globe and Mail  about treating your loyal customers well. In this article the writer, Dave McGinn, took his cell phone plan to a competitor after 10 years of loyal service because he did not feel appreciated. I know I have felt this way before when dealing with companies. We all want to feel special. My first reaction after reading the article is what do we do for our excellent customers? Then I wondered can we even explain what a great customer is to our veterinary practice? Is it longevity or amount spent in a year or amount referred? The more I thought about this I became determined to find out who are best customers are? I am going to develop firm metrics of what makes someone a great customer. Then I am going to develop a reward system for these clients. Finally, we will make it known to our clientele that we have a reward system for our clients. I expect our customers will appreciate that we are being active in recognizing them. When it is transparent they will know what to expect and what they need to do to become a superior client. I’ll let you know how it works out.

Does anyone have experience doing this? Let us know what you did and how it worked out.