This Sessionwill invite you to consider and respond to a number of investment/management questions and record your findings in the Performance Review Sheet,
Who should be involved? - You and your practice manager
How long will it take to complete? - suggest allocate two weeks
So now you need to consider whether or not the Establishment and Overhead Costs may be contributing to your disappointing level of profit
First - Are the costs of your Practice Premises and Business Overheads at or below the Median?
YES ? - Your answer suggests that the costs of your Practice Premises and Business Overheads are realistic and probably not a significant cause for your disappointing level of profit.
NO ? - OK - Now you now have to decide whether this is a 'cost' problem or a 'revenue' problem.
The first job is to review the your property and overhead costs over the last two or three years – has the trend been rising, falling or static?
Now examine the establishment and overheads separately
The Establishment (property) costs include rent (actual or notional), business rates, insurance, repairs, heat, light and power. If they represent 5% to 7.5% or practice income or lower – they probably don't represent a significant problem.
If they represent 7.5% or more, ask yourself:
Which is the key cost heading?
Are the premises too large?
Are we over-capitalised?
Are there any opportunities to reduce the offending cost?
Or is it a revenue problem?
Now consider all the remaining overhead costs
If they represent 12.5% of turnover or less and the total Establishment and Overhead costs represent 17.5% of turnover or less - and if trends over the recent two or three years are static or declining, you can conclude that this cost heading is probably not a major issue
If the remaining overhead costs are significantly higher than 12.5% and total Establishment and Overhead costs exceed 17.5%, ask yourself:
What have been the trends over the last 2/3 years – rising, falling or static?
What are the top five overhead costs – and trends over recent years?
Are you under-capitalised? Costs of finance too high?
Are there any other obvious culprits which need to be addressed?
Or is this a revenue problem?
Now summarise your findings, identify any operational or other policies which may be necessary and record them in your Practice Performance Review Sheet
Ready for the next step?
You have investigated to what extent the Transaction Volume Index and the separate costs of Drugs & Supplies, your Practice People and the Establishment and Overhead costs have each contributed to the disappointing profitability of your veterinary business and you have recorded your findings in the Practice Performance Review Sheet
So click the button in this box when you are ready to to review your findings, make some firm leadership decisions and plan the way ahead with confidence
If you have any questions relating to this Session, please submit your name, e.mail address and your question in the box below and I will respond as quickly as I am able