Good Business and Great Medicine: More in Common Than Meets the Eye

Good Business and Great Medicine: More in Common Than Meets the Eye

I often have conversations with veterinarians who own their own businesses but claim to “not be good at business”. These are extraordinarily intelligent individuals who have mastered the challenging art of veterinary medicine yet feel intimidated by the prospect of operating their businesses to the same level of sophistication with which they practice medicine.

The “business side” of your practice isn’t nearly as different as the clinical!

Just like the body, a business is a system consisting of “ins” and “outs” that, when healthy, exist in homeostasis with each other. Like medicine, diagnosing and treating dysfunction of this system is a matter of identifying the cause of and then correcting imbalances.

If you can learn medicine, you can understand business!

For example, we are (at least most of the time!) comfortable with our approach to the azotemic patient. “Azotemia” tells us what the imbalance is that exists, but not the reason why it exists. To identify the etiology behind our patient’s imbalance, we first break the problem down into broader categories which can then be further investigated to find the specific cause: Pre-renal vs renal vs post-renal. Understanding the specific driver of the azotemia is then critical for treatment as while there may be overlap in treatment plans, pyelonephritis demands a different approach than urinary obstruction.

“My business is struggling with declining profitability” might not sound like a similar situation to a cat with azotemia, but these situations are more similar than you’d think. Like your patient, you need to perform a “workup” to collect the necessary information to arrive at a diagnosis, develop a treatment plan, and then continue monitoring to ensure full resolution.

First, it is always important to normalize with an appropriate relative denominator, and then understand what “normal range” looks like to draw conclusions.

We’re very familiar with this concept in medicine. Rarely are we expressing numbers in absolute amounts. Instead, relative measures are used: milligrams per kilograms, micrograms per deciliter, and so on. The same is true for looking at the Profit & Loss statement of your veterinary practice. “We spent $50,000 on pharmacy and lab goods last month” is not a helpful piece of information on its own without context. However, applying the correct denominator, in this case revenue, and then comparing it to a proper benchmark allows you to arrive at a useful conclusion: “We spent 30% of revenue on Cost of Goods Sold last month and we know that 20-25% COGS is considered the goal for most general practices of similar demographics to ours, so we know that this is an area of improvement.”

Whether it is with ill patients or declining balance sheets, analyzing trends gives you very impactful and actionable information.

In the example above, we are aware that the clinic is spending more on COGS than is ideal, but a single data point rarely ever tells the full story. For example, that 30% figure means a very different thing if the preceding months were 36% and 33% respectively, suggesting a trajectory of improvement (hopefully in response to decisions by the practice’s leadership), whereas if the prior months were 24% and 27% it paints a picture of the practice losing discipline in that expense.

The concept of triage also applies to any problem with your business’ finances.

When the numbers don’t look like you hoped or expected, you need to triage the issue based on which system is having a problem and how bad the problem is.

Categories of expenses are like body systems in this regard. Just as your level of urgency is at its highest for your clinical patients when they have issues with their CNS, cardiovascular, or respiratory systems, there is a similar “big 3” for veterinary practices: Revenue, COGS%, and labor%.

Abnormalities in these metrics, especially significant adverse changes, should be treated as an emergency. As in medicine, meaningful dysfunction in one of these major systems can secondarily lead to dysfunction in the others, so it is important to avoid tunnel vision and ensure that you’re keeping an eye on the “whole patient” while addressing an issue with one of these categories.

For example, if you were experiencing declining EBITDA (profitability) at your practice, how would you go about understanding the “etiology” of the problem? The “body system”-based approach below might not look dissimilar to what you’d find in an internal medicine textbook:

Finally, practice leadership is identical to clinical practice in a very important way:
No buy-in, no success.

Very often, diagnosis and developing a treatment plan ends up being the “easy” part of a case, and the 2-legged mammal in your exam room ends up being the lynchpin of success in the case rather than the 4-legged one. I have often joked that the best general practitioners are therapists who also happen to perform medicine on animals. Securing the buy-in of the client is a necessary part of success. Communicating the “what”, “why”, and “how much” to clients is required to ensure that they agree to treatment for their pet in the first place, and then follow through with any parts of treatment that extend beyond the patient’s time in your direct care. The same is true for operating a financially successful veterinary hospital. Being able to effectively communicate tactics to your team and build alignment of incentives (ensure that the practice’s success also becomes their success) is necessary for success. No matter how good your business strategies are, they will be ineffective if you are not able to communicate, train, hold accountable, and reward your team accordingly.

I hope that the takeaway from this article is simple: You CAN do it! However, you don’t have to go alone if you don’t want to. If you are looking for the right partner to counsel, support, and collaborate with you to take your veterinary practice to the next level, please don’t hesitate to reach out to me at to learn more about partnership with AVP.

Be well,
Dr. Bill