The GeniusVets Show with Terry O'Neil

 

Hello, Everyone. Welcome to another episode of The GeniusVets Show. I'm your host, David Hall, Co-Founder of GeniusVets, and today we've just got a fantastic show for you. I have been looking forward to this because I always have such a great time talking to our guests today. Not only is he, I think, the most brilliant financial mind in the veterinary industry, he's just a great guy and always just leaves every conversation illuminated, feeling smarter for the conversation, and I know you're going to get that out of today. I am bringing on our guest today, Mr. Terry O'Neil. Terry was previously a CFO for a group of eight veterinary medical practices, as well as a Stakeholder in that business, and has been working with veterinary practices for over 30 years.

For the past 20 years, he's been with Katz, Sapper & Miller, now known as KSM, and is the Partner in charge of their Veterinary Services Group. Terry was instrumental in shaping the veterinary chart of accounts that has been adopted by VSG, as well as the American Animal Hospital Association, and he aids his clients with tax and strategic planning, forecasting, budgeting, employment incentive contracts, financing, debt structuring, valuations, mergers, acquisitions, and the sale of veterinary businesses. Terry, thanks so much for taking some time out of your busy schedule and meeting with us today on The GeniusVets Show.

 

You're so welcome. Great to be back. Good to see you, David. Thanks for having me.

Hey, Terry, I'm just going to jump right in because you are just a spring of knowledge, a wealth of knowledge, and as I always tell anybody when I talk about your presentations, you hear, "Oh, a CPA's going to give a presentation. This should be really exciting." And within five, 10 minutes, everybody in the audience is grabbing their book and paper and pen and taking notes. So I want to tell you guys who are listening today, honestly, grab a pen and paper because you're going to want to write some of this down.

From your perspective as a CPA that deeply understands veterinary practices, what would you say are the most common mistakes veterinary practices make, and how do those mistakes affect their businesses?

That's a big question, David. But I think the most common mistakes that we see, there's a handful of them. I think number one would be the information systems that they use to manage their businesses, whether it's their practice management system, their accounting system, their payroll systems, or all their systems that capture the financial data. And a lot of times they have the right tools in place. They're just not utilizing them and/or they don't have them set up the right way so they can get the information they need to run their businesses. I think another very common mistake is they don't always surround themselves with the right people that compliment their strengths and their weaknesses. A lot of business owners have a lot of confidence, which you have to have as a business owner as you know as the Co-Founder of GeniusVets, but you also have to be humble and understand that maybe there's some people that can come in and compliment some of your perceived weaknesses to do a better job at certain things.

I think those are probably the two biggest issues that we talk about a lot. Then the other very common mistake that we see, we've been studying more socioeconomic data and how that impacts financial performance of hospitals. And a lot of times the business owners provide products and services that they believe the consumer wants, and this is going into your world of marketing right now, David, I'm not trying to step on your toes, but they provide, and they set their business up to provide what they think the consumer wants within the three to five mile radius around their hospital, not really knowing what they want. And oftentimes we see a disconnect where somebody might be in a location that's trying to cater to a certain clientele that doesn't live in that area. So those are probably the biggest mistakes. What happens is they have lost opportunities, whether or not they're managing, if their PIM system isn't managing the reminder system the correct way, then they're not getting people to come back in.

If their PIM systems or the practice management system is not being utilized correctly to track their inventory, then they quite possibly might not be marking their prices up the correct way, which is going to cost them financially. If they're not utilizing their accounting systems, I often talk to business owners, how often do you look at your numbers? I know we'll talk about that a little bit later. But if they wait till the end of the month to look at their financial statement that maybe comes out two or three weeks after the end of the month, they literally could go seven weeks with not knowing that they've got a financial opportunity or real way to say that they've got a problem, they just don't know about it for six or seven weeks. So those are usually the biggest issues, not having the right systems and not having the right people, and then not doing their homework as to what type of services and offerings should their hospital be providing in the demographic of where their hospital is located.

There is a lot there. A lot there that you added and a lot to unpack. I come from a family of small business owners and all different industries and everything like that, and I just saw the differences growing up of the ones that were always hair on fire and struggling, and the ones that were just really doing amazingly well. It wasn't always because of the market opportunity, it was so much about how organized they were and what they looked at, how they were running their business. And I learned those things early on. I mean, you touched on some things. One, having access to numbers readily available and understanding metrics and just making that easy. I definitely want to dig more into that. Also mentioning marketing. I mean, that being that that's my passion and area, I couldn't agree more. You always have to understand. I mean, of course you have to understand your business in and out and what you deliver and how and why, but understanding the people you're serving, and understanding what they're looking for and what speaks to them, and just how to connect with them and actually service the needs that they have.

This is a huge thing in veterinary medicine, doctors are so into delivering the services because they're doctors, they love the medicine, but they forget that it's really information first and services second, because the pet owner needs the info. They don't really know much about their cat dog other than they're fuzzy and cute and they love them, and they need all this information. So there's so much that goes into running a busy veterinary practice. Obviously it's easy for practice owners to spend all their time working in the business instead of on their business.

What advice do you have for practice owners who want to gain greater insight into the health of their business, but they just don't have a lot of time to spend pouring over every number and metric because there is a lot and it can be super overwhelming. How do they simplify that?

That's a great question. That comes up quite often also, and we like to suggest the exception based rule, that the practice owner needs to align themselves with somebody to gain a real understanding of what the financial metrics of the hospital are. That might be as simple as just taking the 2022 year-end practice management, year-end report, and the 2022 year-end financial statements and doing, we like to call them hospital opportunity blueprints. Or go through and look at all of the different metrics and what opportunities that are there, and then based on that review, identify the three or four things that are the most important things that they should be measuring and monitoring. I know that's one of the things that you wanted to talk about. Is it okay if I kind of dive into those?

I know that you talked a lot about four key numbers. What are the four key numbers that determine the health of a practice?

They can be different based on what the hospital goals are. But I think it's really important. Our firm generates just a ton of data, and it's too much to understand oftentimes what the business owners have gone through the last 35 months now with Covid, it was all hands on deck. Every ounce of energy was given back to providing patient care where they simply didn't have the time. And that's where we really started to focus on how do we provide exception-based reporting? How do we teach the administrative personnel to provide the owner the information and the data they need to actively manage their business? And the four numbers that we really focus on, and I'll circle back and talk about each one a little bit more, but number one is revenue. Veterinary medicine is a revenue driven business, so we need to understand the dynamics of revenue.

I'll circle back in a second on that. What are they spending for their drugs and medical supplies? For all of the medical care that they're providing, what is the hospital paying for that? Once again, I'll circle back on that and go into a little more detail. The third number in no particular order is your labor and benefits. The labor is the most expensive line item on a business owner's profit and loss. How are they managing their labor? But then within that, what opportunities do they have from that perspective? And the last number, the fourth number would be just what is the profit? What is the end of the day profitability of the hospital? In the accounting world, we like to call it EBITDA, Earnings Before Interest, Taxes, Depreciation and Amortization. So it's a common financial metric. That bottom line income or that EBITDA number will drive what the enterprise value of the hospital is.>/p>

Everything that we do on the revenue side, the drugs, drugs and medical supplies and labor will impact EBITDA. I can almost add a fifth line here this year. I'll just touch on it very briefly as we're going through and closing out trailing 12 month information, September and 2022, what kind of caught me off guard a little bit is that all of the general administrative expenses that a veterinary hospital has, whether it's 12% to 14% of total revenue, the inflationary increase in the general administrative expenses was almost three times the inflation rate. We always focus on revenue, labor and drugs. We don't really spend a lot of time thinking about the general administrative expenses, but that kind of crept into this last year with inflation.

Circling back on revenue, it's really understanding the dynamics. And the first thing that I like to do with our team is really understand the invoice counts. How many patients are coming into the hospital, and what are we charging for every patient visit? So really understanding the invoice counts. It's interesting because we saw such a demand in the later part of 2022, we're starting to see a drop in invoice counts. January was a good month, they bounced back, but year over year in December, we saw a 6% decline in invoice counts. So really understanding invoice counts, but then also understanding the components of revenue.

Almost 70 cents of every dollar that comes in the door every day at a veterinary hospital, professional services, pharmacy and lab. So understanding the dynamics of how those three components of revenue are performing is so important. The other 30% are extremely important. Don't misunderstand what I'm saying, but you want to make sure that you understand from a revenue perspective what's happening to your vaccine revenue? What's happening with your examination revenue? Those are two huge components. How is our pharmacy doing? Are we seeing increases or decreases with respect to our FDA drugs, or our long-term therapy, or our heartworm and flea? I'm mentioning a lot of different things because every single component of revenue and professional services of pharmacy, we've got different strategies for. But you can't strategize something if you don't track it. So you have to have your system set up to track it the right way.

Then also, I'm a big believer in lab compliance and what's happening with lab compliance. I'm particularly interested in responses from practitioners on healthy pet panels. The pets that are two to six years old or seven years old, what percentage of them are having annual lab work done? Things along those lines. So really understanding the components of revenue. If you've got more than one doctor within your practice, really understanding are the standards of care consistent amongst your doctors? And that's a really important question that every owner I think needs to ask because if David and I are doctors, God forbid that if we were the doctors in the hospital and he's working everything up the right way and recommending labs and images and really doing A+ care, and I'm the old guy in the room saying, "Well, 98, just go ahead and do this and if it doesn't get better, come back and see me.

Well, I'm going to be the most popular doctor, because they're going to realize there's a difference between the way we practice and it's a matter of standards of care. So really understanding those components of revenue, then your direct costs correlate directly to that. Because of your direct cost, there can be up to 1500 to 2000 SKUs within a practice management system. That's the lifeblood that drives revenue on every invoice, and making sure that your pricing is correct. The last time I looked, there's probably four or five major manufacturers from distributors the veterinary hospitals use. So all the veterinarians are buying the stuff from the same people, but we see wild variances in how much they're spending for the drugs they're dispensing, or how much they're spending in lab costs as a percentage of lab revenue. It's a really important function to understand what those markups multiples should be within your practice management system, and having your practice management system set up so that as your vendors increase prices, you automatically can pass that increase along to the consumer, or at least you're notified to say, "Hey David, do you want to increase the price on this?" "Your vaccine cost just went up 3%. Do you want to bump your vaccines up?" You might come back and say, "No, that's a loss-leader for me." Or, "No, that's part of my wellness program. I'm not going to do that." But at least you're aware of it. If you've ever sat down with a practice manager and said, "You need to look at 2000 SKUs and make sure we've got the right markup multiples," their eyes roll in the back of their head. We used to just say, "Hey." They're just like, "Yeah, okay, I'll get back to you next week." Take your top 20 professional services, take your top 20 pharmacy items you've dispensed, take your top 10 labs or 15 labs, that's going to consume a big portion of your revenue, and at least make sure those are right and kind of work your way down the list.

Understanding those direct costs, making sure you've got inventory controls in place, making sure that it's just working very smoothly. I'm telling you, these practice management systems can electronically communicate directly with distributors and manufacturers where you're taking the human error element out of it, and they work. It's just a matter of making sure they're set up correctly to do this. So we spend a lot of our time taking a look at, we call the margin by product, and making sure, David, that if you've got a veterinary hospital that your FDAs are marked up the right way, your long-term therapies are marked up the right way, to help you find those hidden gems that's deep, deep, deep down in the data, but it's going to drive your profitability. The third item, as I mentioned, was just the management of labor. There's three different buckets that we look at from a labor perspective: doctor, labor, non-doctor labor and administrative labor. Starting with administrative labor.

The admin people you pay should be profit centers is the way I always look at it. You hire those people to help the hospital be more profitable, to free the doctor to see more patients, or whatever it might be. I never look at administrative folks as overhead. I look at them as profit centers. They're doing their job, they're helping increase the profitability. Then we look at doctor compensation, that's mostly market driven. It's been a very interesting couple of years with respect to the demand for veterinarians, the veterinarians' commitment to how much they're willing to work, and then the mass consolidation and the competition that's out there. So you're going to have to be market driven. You're going to have to know what the competition is paying for doctors. But really managing them from a standpoint of how many patients per day would you expect an associate doctor to see in it?

If they're seeing an appointment every 45 minutes, we probably have an opportunity there. But really understanding that doctor, how the doctor's working up cases, what their average invoice amount is? Because the pace at which they're willing to see patients, you have to marry that then with the support staff you're going to provide to me as a doctor. So if I'm a turtle and I'm only seeing one patient an hour, I probably don't need three or four people helping me, right? But if I'm a doctor that's getting after it and I'm willing to see two and a half or three patients an hour on a wellness basis, the sick appointments will take 30 minutes. But if I'm moving at a pace that's three times yours, I probably would need some more support staff. So it's really a matter of aligning the non-doctor staff with the staff.

The doctor compensation is over here, market driven, and then we've got our non-doctor staff. And what type of leverage is the doctor using? One of the questions I always like to ask practice owners is, "How many people are on the floor helping you, David, when you're seeing patients?" "Oh, about three." I'm like, "That's interesting. I've got nine helping me when I'm seeing clients. I've got nine people on my team." David, you probably have more than nine on your team right now.

I tell them, "If I only have three people helping me see patients, my practice would be a third its size." Then that usually doesn't set in right away. I'm just challenging the owner that if you have more leverage and you utilize your staff and you utilize the technology that's available in the marketplace, whether it's through automated dictation or scribes or the use of templates or automated billing systems, I could talk the rest of the day about the different technology solutions that'll make a practice more efficient.

The doctor and the staff, what leverage and what production is the doctor getting based on the leverage that she or he has is crucially important. The two metrics, probably my favorite metric that I look at, and everybody can do this so easily is, how many support staff minutes are spent on every invoice that goes out the door? Super easy to calculate. Go to your payroll system, your payroll clock, look how many hours the non-doctor staff will work. Multiply that times 60. Okay, we've got our minutes. How many minutes we've had. We've got our invoices. Do the quick math and you've got it. We see variances anywhere from 89 minutes up to 150 minutes. I mean, that big a difference per every invoice. Just to put the magnitude on there, average doctors see 4,500 patients a year. We have a three doctor practice and we've got a 30-minute difference in invoices.

There's a huge opportunity there to look at the efficiency. So labor management is just so critically important. Then as I said, the EBITDA, that's just the culmination of the revenue minus all the expenses and how your hospital's performing. I always like to tell people that if your hospital is growing, your profitability should be growing at a higher rate. If you grow your practice 10%, and 10% of your costs are fixed, then your profits should be higher at the end of the day. I'll tell you what happened over the last year, is that most hospitals grew but their profits didn't grow at the same rate. They actually regressed a little bit, where the hospitals weren't proactive enough in keeping in touch with the inflationary demand on their wages to their staff, and they weren't keeping up with the price increases for their drugs and medical supplies and for all of their other general administrative expenses.

Their costs went up higher than what they were raising their prices. And anybody that didn't raise the prices 7% in 2022 actually is losing money, because inflation was at 7% in 2022. So it's fascinating, and I'll be quiet here in a second so you can ask me another question. But you asked me a really long-winded question. I always look at the financial performance of a veterinary hospital. I like to use the analogy of a bicycle tire and all the spokes on the tire. Every one of those spokes holds that tire together to make it keep going smoothly. So if you're off in a certain area, it's going to affect your EBITDA. If your labor's off, it's going to affect EBITDA. If your margins are off, it's going to affect EBITDA. You got a slow doctor, it's going to affect EBITDA.

Trying to work on all those different categories is daunting at times. What I always ask practice owners to do and what we try to educate them on, what are their two biggest opportunities they have? What are the two biggest opportunities they have to improve their financial performance? Let's just focus on those two. Let's get those mastered and then let's move to the next two. Let's just do two at a time. And it might take 3, 6, 9 months to get something mastered. But you know what? Once that's mastered, that was the biggest opportunity we had, and it seems to be a little bit more manageable. You don't even know this, but in full disclosure, I use a consultant to come in and help me departmentalize my opportunities, help keep me grounded, help me manage my business better too. I'm telling you it works, and it's not inexpensive, but it's a really good sounding board where I'm in the same position where a lot of the practitioners are at, but for lack of a better way, I'm on the floor all day long.

I'm on the floor nine hours a day. I don't have time to see if Molly's staying busy. For me, it's a matter of surrounding myself with people I trust, and that we do have accountability meetings once a month to make sure that, if you're doing the marketing course, I wish you could, but if you do veterinarians not CPAs, from that perspective, you're touching base once a month and you're letting me know that, "Hey, this is how things are performing, here's what you need to do, Terry." So four numbers, it's a lot to absorb there. I get it. But if the one takeaway is focus on the two, I think that will hopefully resonate with some of the listeners today.

Brilliant stuff and a lot to unpack. I know that asking such a high level question that really speaks to your broader presentations you give with slides and data and everything. I knew that this was going to be a spring that was going to flow for a while when I asked you that question. But there is so much there. To find your two biggest opportunities, it's kind of like you may not really know what they are until you wade through a lot of that stuff. One of the things that we are working with 100s of veterinary practices like we do, something we hear so consistently is we always ask clients, "Hey, bring your numbers." Because we want to monitor how practices are progressing as we progress in their systems and are helping them along. Sometimes they may not bring numbers to a meeting because whatever, they go, "Hey, let's talk about it."

I'll kind of tell you how. But they're not necessarily bringing their numbers and sharing them. But the biggest reason why they don't is because they really don't know how to access them. It's unfortunate. It seems to me, and I hear all the time that the PIM System, the Practice Management System, that someone's using doesn't give them good reporting, doesn't really provide this stuff. It's got the data in there, but they don't know how to extract it or that's why they have an accountant. They're not watching their numbers closely enough.

If they don't already have these numbers in some kind of report, where should they be getting the types of numbers, and where should they be putting this focus to find this information and learn about what these opportunities are in each area?

That's a good question. I'll follow back up with the practice management system and their accounting systems. But what I used to do in my previous life before I started my practice when I was a minority partner in the eight hospitals here in the greater Indianapolis area, we used to have one 8.5 by 11 sheet of paper for every hospital that we generated once a week. Guess what? It had five numbers on it instead of four. What was our revenue? How many invoices? If you can't get your revenue, a number of invoices out of your practice management system, we need to sign you up for a different seminar. That's pretty readily available information. We've got revenue, we've got invoices, we can then calculate what our average invoice was. You can benchmark those three numbers literally in 10 seconds.

The other thing that we would do, I'm once again going back to my previous life, and it still works, I'm telling you, go into your payroll system. Everybody's using automated payroll clocks now. When you pull the revenue, the invoices pull up how many non-doctor hours were worked last week? So we've got the hours worked. Simply multiply that times your average hourly rate of pay. We've got our payroll system. You just said, "I want to know how many hours you worked last week, David?" "A hundred?" Okay. A hundred hours worked. Multiply that times your average hourly rate of pay. How do I get my average hourly rate of pay? Pull your payroll report from two weeks ago and look at it. It's right there on the bottom. So it's very simple to do. Then we can take that non-doctor labor and divide it into our revenue, and all of a sudden we know how much we spent on non-doctor labor.

I don't worry about doctor labor on a weekly basis because we're simply not going to change it. That's only going to change when you renew contracts and things along those lines. So the doctor's compensation wasn't something that I personally looked at every week, because I knew I was paying them a percentage of the production anyways. We've got revenue invoices, average invoice, our number of hours worked, what we spend in non-doctor labor, and then I would have one other line item on there, and it was simply David, I wanted to know how much you ordered last week of drugs and medical supplies off the purchase orders? We had our practice management system set up. So once again, we looked it right up, this is how much we ordered, and I would simply divide that into the revenue. But what I would also do to you is that you've only got X percentage of gross revenue every week to spend on drugs and medical supplies.

You've got a budget, now you're my inventory guy. Most of the inventory guys don't have budgets, but now you've got a budget. If you spent more than what your budget was, we might have a conversation, and you could say, "Oh, there's a special on Bravecto so I went ahead and ordered an extra case." But it creates an accountability and "Oh, the labor number that we're looking at for non-doctor labor, well, somebody in the hospital's scheduling them, I would presume somebody's doing a schedule." Now all of a sudden we've got a financial benchmark that we can look at weekly and then we can go sit down with the person that's doing the scheduling like, "Hey, our non-doctor labor was 25% of gross revenue and we really want it to be 20%, what happened?" Now all of a sudden I've got the inventory person and I've got the scheduling person.

Now we've got a little bit of a management team looking at one little simple piece of paper weekly. I'm telling you, if you can manage your labor, your direct costs and your non-doctor labor on a simplified basis, you are light years ahead in trying to increase the profitability of your business. Those are the KPIs that I still believe in and I still work off of. I've got a weekly KPI that my partner Beth gives to me every week and it fits on one piece of paper. Then at the end of the month we've got a dashboard that kind of looks at some more things, but there's never a surprise because we're looking at it weekly. If we do see something that's going outside of the parameters of where we like it to be, we can address it right away versus waiting two or three weeks after the end of the month to fix it.

Love it. Well, that was my next question was how often we'd be looking? So this is a weekly report, looking at this report every week. I know you talked about how monthly reports sometimes are not generated, so you could be seven weeks out before you see it, but you're getting a weekly report, you're not going more than a week and getting this and making your adjustments.

I'd love to hear more about, you look at this so much, and by the way, I mean you also talked about a little earlier having the right experts, having a coach for your business in your own life. I have a coach. I find it's so important, and not just one, I have coaches in different areas, because people have different areas of expertise. Years ago I didn't, I kind of did a lot of self-study and doing things alone and whatnot, and somebody had told me, "Hey, look at the best." The real difference between an amateur athlete and a professional athlete is that amateur athletes may start a new thing and they go, "Oh, give me a lesson." Then they're like, "Ah, I'm good. I'm going to get out there on the golf course or whatever it might be on my own and hack away at it, watch a video once in a while and try to improve myself."

Professionals have their coach with them right there on the field with them every time all the time. It's basically the more coaching you get, the better you're going to be. That’s what that boils down to. So just hearing you speak, it's not just do you have somebody who's helping you in a certain area, but are they really the right expert? Hearing you talk about this, I'm sure, I know there's so many veterinary practice owners and managers out there that are like, "Hey, we're working with the CPA in our town. They're a great CPA. I have friends that are business owners that have been working with this CPA, they're awesome."

I'm sure that that CPA, they come in and they go, "Okay, well let's look at your business and let's figure this out." But I mean, ask you a question relevant to a veterinary practice and it's just reams of data that are so specific to how veterinary practices work. You know what the industry benchmarks are because you do this so much. I hope that this is something that's just ringing through to people to see. It makes a really big difference when you get somebody who really dials us in and understands your specific area and what you should be doing.

A couple of comments there. My professional coach in golf has never helped me, and it's been years that I've been horrible. But anyway, no, in all seriousness, it does help to be privy to a lot of the data sources and feeds that we get. I had a human doctor call me up and ask me what his nursing costs should be as a percentage of revenue, and I said, "I don't know. I can do a little bit of digging." So I think it does help to work with some people that have more experience than live and breathe it, just by the genius that they live and breathe helping veterinary hospitals grow from a marketing perspective. So we've got a lot of really wonderful relationships with CPA firms across the country that do a really good job on tax compliance. They know there's a difference between a dog and a cat, and that's about the extent of their knowledge of what a veterinary hospital's finances should look like.

My coach, the biggest asset that he brings is somebody that really holds me accountable. That's his biggest check mark for me is that he keeps my feet to the fire, that I say I'm going to do certain things and that he comes back four weeks later and I better have done them. I don't know if your coach does that to you, otherwise he says he's wasting his time, and that keeps my fire going to always strive to get those things done.

Oh yeah. I believe in accountability partners. A good friend I've known for a long time, very successful guy, introduced me to the concept of accountability partners. I said, "How do you get so much stuff done?" He said, "I have accountability partners for everything that I do." And it really is important to have somebody that's, "Hey, are you doing what you said you were going to do?" And things like that. I'd love to get you to back up some of these. You threw out so many numbers and so many areas and you related these four numbers, how this boils down.

I'd love you to kind of go a little specific about helping people understand now that they heard the depth and breadth where this could go. How do these numbers impact the ongoing practice management strategies as well as the valuation and exit strategies?

All of the numbers will factor into what the net income of the business is. The net income of the business will drive what the value of the business is. I like to give the example, if you have a $1 million practice, and we're able to help you save 1%, we're able to put 1% more to the bottom line. That's $10,000 in your pocket as a business owner. Okay, that sounds pretty good. I think most business owners would like that. And then if we say your hospital is worth, just for discussion purposes, don't hold me to this because valuation multiples are all over the board, but just to keep the math easy right now, if we say your hospital is worth five times your earnings, that one $10,000 increase in profitability just increased the value of your business by 50 grand. So it is so important that I always tell people we live in the world of a quarter and a half percent, and that's what we're looking for in many different categories, whether we can bump the margins here or there.

It's vitally important to know what those benchmarks should be and where your opportunities are. I can give you just one example of probably the lowest hanging fruit we see literally every day is, what is your philosophy on how you charge for fluids? "Well, I mean, I don't know. I just mark it up 50%." And I say, "Well mark it up 10 times." Then I asked, "I've yet to have a veterinarian price shopped on fluids." Just one simple example, but it's literally $50,000 of top line revenue with costs that are only $5,000 versus charging $10,000, they just all went ahead and gone from $10,000 in revenue up to $50,000. Most of that $40,000 will fall at the bottom line five times. Just in one strategy alone in fluid pricing, they could literally increase the value of their hospital by over $100,000.

I just want to say, I know that this is wildly different, but it's not so different. This is going back to look at McDonald's. They can lose money, they can break even on a cheeseburger, even lose a little bit of money. They sell millions and billions of cheeseburgers, but that's not where they make their money. They make their money on the Coke, they make their money on the drink because- it's a little bit of sugar, a little fountain water, a little bit of bubble in there, but the markup on that is through the roof. That's where they make their money.

You look at most restaurants, they don't really make a lot of money on the food. They make their money at the bar, and that's an ancillary thing. I mean the bar's not quite as good, but you think of the fast food places, you didn't drive through there just to get a drink. The drink is kind of like, "Oh, well, I'm thirsty." That's why they make their food so salty. You definitely want to get a drink to have that. You don't want to go through that salty food and not have a drink, but that's where they make their money. Brilliant what you said with the food.

That is the overall strategy in your competitive position, et cetera. There's a lot that goes into those different components of it. But the other driver that I'll talk a little bit about on Sunday with you is the biggest driver of profitability that we've seen through our research is driven by employee satisfaction. I know that wasn't a question, but it's something we've talked about before, David, I mean we have proven time and time again through our studies that hospitals that have the highest employee satisfaction, in turn have the highest client satisfaction. Higher client satisfaction is willing to pay more, 13% to 18% more for services.

Those hospitals that have the highest employee satisfaction have the happiest clients. By the way, they're the most profitable. So it's not only their pricing strategies and scheduling and all that stuff that I talked about that we can do on Excel spreadsheets, but at the end of the day, veterinary medicine is a people business, and you've got to have happy people that are engaged to create great customer service. If you've got a grumpy person answering the phone, guess what? I'm probably not going to have a good experience when I come into the hospital. But if you've got the right people doing the right things that give great customer service, I can guarantee it's going to make the doctor's job so much easier.

Yeah, it's so true. It's what we talk about. We've been talking about this for the eight years that we've been speaking at events in the veterinary industry and going around. My partner, Dr. Drake, lived this out in her practice and just shouts this from the rooftops with the loudest megaphone you can give her is that you have to start by working on yourself, working on creating a great practice culture, working on identifying the mission, the values, the culture you want to create by solidifying that and rallying around that internally, and then communicating it to the world, authentically communicating who you are and who you're striving to be to the world. By doing that, it puts out something that people can resonate with, and that resonance ends up just creating better things for everybody involved with the business, from your staff to your clients, to everything, and all of a sudden it starts raining to the bottom line.

I agree, and I consider Dr. Michelle a very good friend of mine. And trust me, she does not need a megaphone. She's loud enough.

That's one thing that GeniusVets has going for us. The three founders, man, we never need that microphone. We're like barking seals.

That's a compliment too. That's a compliment.

Yeah, absolutely. She's fantastic. Well, let me see. I know that there is something else I wanted to ask you because we talked a little bit about the systems, and you touched on some of the systems and the automation and that stuff. I mean, I'm sure that you could recommend a tech stack to veterinary practices that they could look against, and whether it's the exact systems or it's at least the functionality they need to have in place. There's absolutely a difference. There's a lot of stuff that some systems will do that others won't do and things like that, but I'm sure that you could recommend a tech stack that people should plug in and probably call you up and say, "Hey, what do you recommend?"

You don't necessarily have to go through that right now, put you on the spot with that. But there are a few data analytics systems on the market right now that help veterinary practices collect and analyze data. For instance, VMG and Datalink, which I know you have had a hand in influencing and helping manage. AAHA, Benchmark, and there's a VetSuccess out there and there's a number of tools that help extract information there.

Are there any particular systems you'd recommend, or what do you think about those in general?

I think they're all very good companies. You mentioned very good companies. I think it all boils back to what the practice owner is looking for. Oftentimes these data companies, I like to always tell them that, "I just need to fly a Cessna, I don't need a 747." And they give you a 747 and it's just too much data that nobody knows what to do with. So it's really a matter of trying to figure out what's going to work best with the practice. As you mentioned Datalink, it's fantastic. VetSuccess does a nice job. AllyDVM does a very nice job. There's another player in the market, VitusVet out of San Francisco that's doing a very nice job that goes into some pretty granular information. But if somebody wants a free website that I refer to quite a bit, our friends over at analytics built it during Covid and it's called VetWatch.

I like it because it breaks the country down into 250 territories, so I can go into the system and if I'm consulting with somebody in Columbus, Ohio, I can go into that system and just look at what the revenue and invoice change was in Columbus, Ohio, over whatever period I want to look at. So it really gives you granular data as to how everybody else is kind of doing in your catchment area. So I'm not endorsing it, I'm just saying it's a really good source of free information. AAHA's got another good benchmarking program. The thing I'll tell you is those programs are only as good as the data sources they pull information from. So step one, make sure that you align yourself with either your practice management systems company or somebody that knows the systems to make sure that your data is being configured in a manner that's readable and comparable to other data.

It's a big problem that we see a lot of times that somebody might be calling a vaccine a pharmacy item when definitionally it's not a pharmacy item, it's a professional service. So you start to compare your numbers, you're not comparing apples to apples. A lot of good companies out there, a lot of great data, just a matter of what that business owner needs and what they're going to do with it. So if you start with the five, the four or five that I just mentioned evolved from there. Trust me, those four numbers will give you insight into your hospital on a weekly basis that will be part of your daily routine that you'll have to see every week to see how the hospital is doing.

Terry, just great information from you as always. I know we're about out of time here. I am sure anybody who hopefully took my advice in the beginning, got a lot of notes and things that they can refer back to. If not now you see why I told you to pull out a pen, right? There was a lot of stuff in there. Don't worry. You're going to be able to have access to the replay. We will put a replay up of this. We'll get it up soon because a lot of people are going to want to see it. We're also going to blast out on the podcast so you can watch the podcast, all the streaming stuff, you can reach out to us. And certainly Terry, I mean, if a veterinary practice owner is listening to this and they're realizing perhaps their CPA might not have quite as much veterinary experience and expertise as your team at KSM has working with veterinary practices, how can they get in touch with you?

They can either go to our website, KSM. My phone still works, David. That's what I like to tell people. I don't know if you're going to include my contact information or not, or if you want me to provide it right now. I try not to market during things like this, but it's 317-580-2294. So yeah, feel free to reach out. If you go to the website though, we try to practice what we preach when we work with our veterinarians. Go to our website. You can go online and book a time to talk. That website's open 24 hours a day and it'll show you what timeframes that we have available to do some meet and greets, I guess. We still do the proverbial free first exam, David, where we want to talk to the people, find out what they're looking for, maybe see if it's going to be a good match or not. Maybe I'm old school, I just like to get to know the people a little bit before we agree to dive in and start doing a bunch of work if we're not aligned with what they're looking for on the backside.

There are a lot of people out there that just want to bring on new clients. They'll take any and all. I know that you are discerning. I know that you only take on clients that you really believe that you've got a lot of ability to help. So here at GeniusVets, overall, with our platform and in our community, with our podcasts and all the stuff that we're trying to do, we are always just trying to really truly shine a light on who we think are the absolute best providers in the industry, the people that have the most important ideas that need to get shared. You're certainly that and more. So thanks so much, Terry for joining us today. Really appreciate it.

I’m very humbled by your comments. Thank you, David.

Yeah, absolutely. So, hey, thank you so much everybody for taking some time out of your busy day to join us here. I hope that you got a lot from that. Like I said, we will be sending out a link to the webinar replay. If you're a veterinary practice owner or a manager, you might not realize this, but your veterinary practice already right now has a full page profile on geniusvets.com. It's true, you should check it out. On these profiles, they show up really high on Google search results. What we're trying to do is just lift up. I mean, we're called GeniusVets because we really just believe in the genius of veterinarians out there. What you're doing, being able to diagnose and help animals that not only don't tell you what's wrong, but try and hide it and you're able to help them, it's amazing.

We lift you up. We're doing everything we can to try and help in every way that we can. By claiming your profile, you also unlock access to a lot of other really valuable resources. So go to geniusvets.com. You can look up using your state, your city, your practice name, and find your profile claim. It's totally free. Completely free. That's not our professional services. It's just a way that we can use our professional services to give back to the veterinary profession and uplift independent practice owners. So hey, tune in next week. We have this amazing string of guests that's coming up over the next few months. I mean, it's really looking very cool. I hope that you enjoyed this. Thanks so much, and we'll see you next time.