Veterinary Pricing

Question 1

What is considered a good net profit

Answer 1

> 18% Excellent
15-18% - Good
12-15% Average
8-12% Below Average
<8% - Poor

Question 2

What is a bundled procedure

Answer 2

A combination of professional services and veterinary items.
All components not necessarily made visible to the client on the invoice.

Question 3

Importance of a margin

Answer 3

The margin is the component of the professional service fee that can drive improved animal health outcomes

Question 4

What are the two components of drug fees

Answer 4

Injection/dispensing fee
Drug price

Question 5

What is the most common fee setting method

Answer 5

Cost Plus pricing
This method involves estimating all the costs that can be allocated to every unit of product or service and marking it up with an appropriate but arbitrarily chosen factor to arrive at the price. In such calculations, variable costs are often treated as static, even though they may change with the level of volume (e.g., quantity discount for buying a certain amount of a particular medication or pet food for resale). Cost-plus pricing tends to be particularly popular for selling products in veterinary practices but is commonly used for services as well.

Question 6

5 Steps to Deriving a Per Minute Rate

Answer 6

1. Determine annual overhead
2. Calculate the required margin
3. Calculate target professional services income
4. Determine the realistic billable time
5. Create a professional fee rate per minute

Question 7

How to calculate target professional services income for the year

Answer 7

To support professional service provision annual income needs to be the sum of the annual overheads and the margin required

Question 8

What is the largest single expense in most business

Answer 8

Salaries

Question 9

How To calculate annual billable minutes for direct veterinary work

Answer 9

1. Calculate the total number of hours worked by all veterinarians in the year
2. Apply a billable efficiency rate (e.g. 50% for the average veterinary business, 70% for highly leveraged practices with a high ratio support staff to vets)

Question 10

How To calculate a per minute rate for professional fees

Answer 10

Target services income required (the sum of the overhead and the required margin) is spread over the direct (billable) time in minutes for the same period.