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Compendium January 2011 (Vol 33, No 1)

In Practice—When Not to Do It Yourself: Outsourcing in the Veterinary Practice

by Jessica Goodman Lee

    Out•source: to procure under contract (as some goods or services needed by a business or organization) with an outside supplier.1

    Outsourcing in veterinary medicine—or, rather, the lack of outsourcing—is an interesting phenomenon. From a purely historical perspective, outsourcing has been an extremely successful method of conducting business in corporate America for more than a century. Most businesses have discovered that it is far more cost-effective to purchase certain goods and services from others than to attempt to do everything in-house; as a result, they are able to focus on their strengths and their products are far more accessible to consumers. Yet for most veterinary practices, this business model remains in its infancy, and as a result, opportunities for increased revenue and efficiency are being overlooked.

    Perhaps one of the biggest reasons for the lack of outsourcing by veterinary hospitals is that the industry in general has struggled with a changing business model. No longer are veterinary practices small, individual entities. Rather, the task of owning and managing a successful practice has become far more complex over the last decade, and, like it or not, it requires far more management and business knowledge than ever before (traditionally not skills in which veterinarians excel). Veterinary business owners who are reluctant to change put themselves at a great disadvantage compared with their counterparts who are already taking advantage of outside expertise to run and promote their hospitals. As practices increase in size and competition between practices becomes stronger, owners must shift their “do it myself” mentality in order to flourish.

    Clients still expect the personalized care and service that comes with smaller veterinary clinics, but at the same time, they demand increased efficiency, online access to your business, and a facility that looks like it’s been updated since the 1970s. These expectations are difficult to meet, and almost impossible for owners who believe that paying for help is money out of their pocket with no valuable return on investment. Would large corporations outsource if it meant losing money? Of course not! These companies understand that there is a cost-to-benefit equation that must be considered. When the equation proves that parting with money now leads to greater success and increased future revenues, outsourcing is clearly the intelligent approach.

    The cost-to-benefit equation also takes time and quality into consideration. With regard to quality, there is simply no one in the world who is good at everything! Peter F. Drucker, a highly respected author on business management, puts it best: “One cannot build performance on weaknesses, let alone on something one cannot do at all.”2 Take this one step further and consider that if a project means undertaking tasks that you are neither very good at nor happy doing, it will likely get pushed even further to the bottom of your “to do” list. We do what we like to do and are good at—it’s human nature!

    As for the time factor, even if you are a veterinarian who also happens to be an accountant, businessperson, computer genius, graphic designer, interior designer, and all around fix-it person, one very important fact remains: there are not enough hours in the day for you to do everything yourself. Take a minute and think about the projects on your “to-do” list for your practice. How long have they been there? For example, how long have you been planning to update your website or paint the examination rooms? A year? Longer? If you had outsourced them to get them completed—or at least under way—what benefits might you already be seeing with regard to client retention, referrals, and an increase in new client numbers? 

    Some of the most common areas in which a veterinary practice can benefit from outsourcing are financial planning and analysis, bookkeeping, payroll processing, benefits administration, marketing, Web site creation and maintenance, social media presence, client communication, and hiring new veterinarians and managers. Let’s take a closer look at just a few of these areas.

    Taxes and Financial Analysis

    Consider a scenario in which the person who has been preparing your personal taxes for years has also been preparing the taxes for your practice and is one of your closest friends. While this is technically outsourcing, it is based solely on friendship, convenience, and (probably) price, none of which are good reasons to pick a service provider. You have a part-time bookkeeper who pays the bills and enters them in your accounting software, and at the end of the year, you send your friend the necessary reports to prepare your tax returns. It’s cheap and easy, and so far you haven’t been audited, so it’s working just fine, right? Wrong.

    Now consider that, over a period of time, the practice has added another doctor and several staff members and has increased its gross by more than 100%. Although your taxes are still being filed on time, no one is taking the time to review financial reports, such as profit and loss statements, on a regular basis. This means that no one is watching for discrepancies or potential problems, such as inventory costs that are excessive based on sales, declining income from certain services (e.g., dentistry), or payroll expenses that are higher than recommended percentages. Certified public accountants (CPAs) not only review financial statements on a monthly or quarterly basis to look for these and many other issues but also possess a wealth of information and resources that your friend the tax preparer probably does not have. For example, CPAs keep current on the multitude of tax laws and changes to ensure that you are benefiting from or minimizing your exposure, whichever is appropriate for you. Without the assistance of an industry-knowledgeable CPA, practice owners often do not realize financial problems until much further down the line, causing them to incur tremendous losses that could easily have been avoided. While at the outset, the fees for a CPA may seem large, the expertise provided not only quickly pays for itself but also has the potential to greatly increase your bottom line.

    Hiring

    Hiring managers, new veterinarians, and sometimes other staff members, is probably the task that veterinarians are least willing to outsource. Most of this resistance has to do with sticker shock: hiring services often charge 20% to 25% of the hired individual’s first-year salary. However, not using such services is a very short-sighted approach to doing business.

    Let’s focus on hiring veterinarians. There is a big difference between wanting another veterinarian and actively seeking another veterinarian. Actively seeking involves placing advertisements, collecting resumes, phone screening, and interviewing, all of which require a great deal of time and effort. It does not mean hoping for a miracle or expecting the “perfect” candidate to walk in the door and beg to be hired. (That’s probably not going to happen.) And if an owner has the time to aggressively recruit staff, he or she probably does not need an additional veterinarian! The key is to determine whether the lack of an additional veterinarian has had a negative effect on growth and revenue. If the answer is “yes,” then outsourcing the hiring process is the best option. The right hiring company will not only find someone faster but also do all the legwork so that the practice owner’s time is not taken away from an already overwhelming schedule. Once a successful match is made and the new veterinarian begins working, the service should pay for itself in a matter of months.

    Marketing Materials

    For most practices, the choice to create marketing materials in-house, either in print or on the Internet, is one of the worst decisions they can make. Unfortunately, in an effort to cut costs, many are still doing just that. Let’s face it: looks matter, and today’s consumers have very high expectations. It is no longer okay to create hospital brochures from a word-processed document on your copier or to use the same logo image as the practice across town. Image plays a tremendous role in a client’s decision to bond with a practice, and as such, it must be consistent, professional, and memorable. While it isn’t necessary to hire a Madison Avenue ad agency to create your logo or design your brochures, it is critical to invest in a professional company that offers these services.

    Web Site

    Competition is now a real concern for practice owners, and an online presence can be a huge force behind practice survival or failure. According to many practices that actively survey their new clients, as many as 80% list the quality of the practice Web site as the decision-making factor in their choice to seek a specific hospital’s services. Successful Web sites are dynamic, professionally made, and simple to navigate, and they offer content that is informative, current, and well written. To get the maximum possible reward from your Web site, do not hire an amateur! In fact, having an outdated or “homegrown” Web site can be more damaging than having none at all—it is much easier to make a good first impression than to redeem a poor one. And if you don’t think people remember, think again.

    Another important reason to hire a professional to create your Web site is that he or she will understand the intricacies of the Internet. For example, a professional site designer can ensure that your practice is strategically placed on search engines and appears under multiple search terms. Although these issues have nothing to do with veterinary medicine, they have everything to do with the exposure, growth, and sustainability of a practice. If paying for these services is an issue, consider that a good Web site is far cheaper than even a small ad in the Yellow Pages, and it reaches so many more people that most practices opt to cancel their Yellow Page listing once their Web site is up and running.

    Social Media

    Social media is the latest “product” added to the mix of small-business “must haves” for gaining exposure and promoting client loyalty and retention. Entire studies are being conducted on the effects of social media on businesses. A 2009 study found that financial performance increased by as much as 18% in 1 year for companies engaged in social media.3 Comparatively, companies that did not engage in social media opportunities saw an average revenue decline of 6% in the same time period. These figures are incredible, considering that social media barely existed 5 years ago.

    Since just having an up-to-date website can be a challenge, it is no surprise that many veterinarians and practice managers do not relish the idea of having to include social media updates in their list of things to do. Maintaining a current presence on social media sites is a perfect task to outsource.

    How to Find Resources

    Finding resources is often the most difficult part of outsourcing. However, many individuals and companies now cater directly to the veterinary industry. Often, these individuals come from within the industry itself or have chosen to create a niche within the market. As with all other service providers, it is important to do your research and ask for references to ensure that whomever you choose to work with has an excellent reputation and the experience to back it up. One resource is VetPartners, which is an association of veterinary consultants and professionals; their website, www.vetpartners.org, offers an online membership directory with the ability to search based on services provided.

    Internal outsourcing may be a viable option for some projects. Internal outsourcing refers to making use of the unique skills of someone within your practice. Many veterinary staff members have experience in other industries, and one of your existing employees may be just the right person for a project that needs completing. For example, many employees are incredibly savvy about social media. However, if you are considering internal outsourcing, research your employee’s abilities and experience as you would when hiring any other service provider. In the case of outsourcing your social media updates, you must be sure that the person you hire can be trusted to mind his or her online manners. It is also important to be clear that any projects handled in this way are completely separate from the employee’s regular duties. When internal outsourcing works, it can be a great way to keep things in-house, provide extra income to a valued employee, and probably save the practice some money as well.

    Regardless of the service to be outsourced, make sure to consider the following when choosing a service provider:

    • Can they provide several references for you to contact?
    • If applicable, are there examples of their work that you can see?
    • Are they accessible and easy to work with?
    • How long have they been in business?
    • Have they worked with other animal hospitals before, or is this uncharted territory for them?
    • Do they meet deadlines, and if not, how will you be compensated?
    • Are they reasonably priced for what they offer?
    • What is their fee structure?
    • Will you have to sign a contract?

    The following are some additional due diligence considerations specifically for outsourcing the task of hiring staff. A reputable firm should do all of the legwork, including:

    • Complete a thorough screening process
    • Provide written interview notes from at least two interviewers
    • Obtain a writing sample from the candidate
    • Perform a minimum of three reference checks
    • Perform license and background checks
    • Conduct drug screening
    • Guarantee a replacement (for a limited time period)

    The more complex the job of owning and running a business becomes, the more important it will be for veterinary practice owners to become adept at understanding and evaluating the cost-to-benefit equation with regard to outsourcing. Fortunately, the number of service providers focusing on the needs of veterinary practices continues to grow. This will keep prices competitive and options plentiful for veterinarians seeking reliable companies to whom they can outsource.

    The ability to understand and accept a business model that uses outsourcing is crucial to owning and running a successful veterinary practice in today’s competitive marketplace. It is also the best guarantee that veterinarians will have the opportunity to continue focusing on what they do best…earning income by providing high-quality medicine for animals.

    Jessica Goodman Lee has been a veterinary hospital administrator for more than 12 years and currently manages a large general practice in Flower Mound, Texas.  Jessica also has her own project management company, Pinnacle Integrated Veterinary Solutions, and is a matchmaking consultant for My Veterinary Career and chairperson of VetPartner’s membership committee.

    1. Merriam-Webster Collegiate Dictionary. Accessed December 2010 at http://www.merriam-webster.com/dictionary/outsource.

    2. Drucker PF. Managing Oneself. Cambridge, MA: Harvard Business Review Classics; 2008.

    3. The World’s Most Valuable Brands. Who’s Most Engaged? ENGAGEMENTdb. July 2009. Accessed December 2010 at http://www.engagementdb.com/Report.

    References »

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