“No one said it was going to be easy but, in reality, we haven’t got to the difficult bit yet”.
That was the reply to my enquiry about the state of practice business, in discussion with a leading practitioner at BSAVA Congress. A quick perusal of the veterinary press available at Congress featured no fewer than seven articles or reports about the declining fortunes of veterinary practice and it doesn’t make happy reading. It’s not a new message, of course, anyone who has followed the reports from the excellent Fort Dodge Indices will have seen a steady and inexorable decline in nhe parameters of busieness which contribute to its long term health. We all know that we need o measure profit and not turnover yet, when in so many discussions I’ve had with practitioners, so often the response has been that turnover is holding up so everything’s more or less OK. Unless the 120 or so FDI practices are a complete aberration within the wider world of veterinary business, this is patently not the case. Since 2002, and without exception, the number of active clients and active patients/FTE has fallen and is now 19% lower than it was eleven years ago. There are far more practices now than in 2002 and competition for pet owners’ business is far stronger within the profession than it was previously but there are other factors which contribute to the fall-off in turnover, transactional volume and client footfall across the board in small animal practice.
Naturally, as in any cross section of society, some practices remained successful and were holding on to their profitability but if the average level was falling, it’s clear than many more were developing problems than were holding their own. It would be easy to act like the eponymous cockerel and crow from the rooftops that the small animal veterinary practice model no longer works in today’s society – and to some extent that is true – but the fact that some practices are managing to grow their business in the current climate must make us look more closely to identify why some are doing well when others are approaching very turbulent waters.
If we take a look outside, it is clear that consumer confidence is near its lowest level since the last major recession in 2009. Retailers in all fields are resorting to special offers to generate trade and Peter Marks, the chief executive of the Co-op, said last week that customers’ uptake of special offers was the highest he’d seen in a forty year career. When asked how his customers felt about the security of their jobs, their houses, the future for interest rates, he replied: “ Right now, customers don’t feel confident about anything.”
James Knightley, an economist at ING Bank, said: “Household confidence is at rock bottom. People don’t have the spare cash to spend on goods and services. Personal incomes will fall further this year so the only way households will be able to boost their spending is if they borrow more or save less. Yet, UK households already have a massive debt burden, so are they likely to rack up even bigger credit card bills? Not likely. Higher interest rates would only make things worse.” Overall, none of us doubts that interest rates will rise during 2011 and the only question is how much? With inflation edging higher and with negligible earnings growth, household budgets will remain under pressure beyond the end of the year. Increased interest rates will translate into significant pressure on mortgage payments and we have yet to see the full extent of public sector job cuts so we cannot look to the immediate future with any expectation that things will get better for our clients within the next two to three years. Even those who are not threatened by redundancy or the repossession of their houses are behaving differently and are making decisions about affordability in different ways. Waitrose, the darling retailer of the chattering classes, has not moved to price matching other supermarkets with a full range of discounted “Essentials” for nothing.
Whether we like it or not, veterinary practice is a trading post. We are all, to varying degrees, retailers of products and services and we are all dependent on finding a way to engage our customers in the process of buying from us. The model is different in large animal and equine practice but the principles remain the same. True, there is huge satisfaction in saving and improving lives and that underpins the immense difference between our profession and other retailers but let’s not fool ourselves, we have to be retailers first and lifesavers second.
The headline in the Veterinary Times article on the recent Fort Dodge report states quite clearly, “Adapt or Die.” So how are we going to do it? While some practices have managed to cater for the Cartier end of the market, most of us have our feet grounded firmly in the Sainsbury’s car park and, if we are to attract and retain their consumers’ interest and their custom, we need to understand them properly. Consumers are changing and we see this everyday when we open our practice doors and yet we persist in forcing the old business model on the hapless few who are loyal enough or worried enough to come and ask for our professional opinion. Since2002, when FDI reports first began, we have stuck to the model of increasing our prices to counter slippage in volume but it must be clear to everyone that this is no longer a reasonable nor a practical approach. If we cannot substitute price increases for genuine change, we are left with only one real way to develop our business strategy and that is to adopt change instead of driving our customers away.
Does that sound harsh? I suppose it does but how else can we explain a 19% decline in footfall in those FDI practices since 2002? The FDI practices are no worse than the other 2,400 small animal practices, just brave enough to face the facts and, forewarned to the mounting problem, perhaps some of them have been in the vanguard of driving change. Elsewhere in the veterinary press, I read Fiona Sims, a Pfizer business consultant, who had written: “Practices which are faring better at this stage are more likely to be those which recognised the need for a new approach to a common problem earlier than others. They will have implemented strategies to succeed in a climate where there is a declining pet population, increased competition from outside the sector for product sales, client visit frequency continuing to fall and a reduction in spending at these visits.” Well said Fiona! Everything here is true and is increasingly relevant to the most myopic of practices.
It’s not a new message but it is becoming more strident. Veterinary inflation cannot continue to increase in today’s economic climate without casualties at both practitioner and practice level. The unavoidable truth is that we need, more than ever before, to understand our customers better and if we do not provide what they want, they will continue to go away. Our technical skills and scientific knowledge are as good as anywhere in the world. Our consumers don’t need us to gain a new certificate to become better vets, they need someone who speaks their language as well as those nice people in the pet superstore and they need to trust us not to charge them for the privilege of crossing our practice threshold.
In the end it all comes down to trust and, when the family purse is empty, trust is priceless.