Hanging with Hafen: Now's the time to assess opportunities for practice growth

Consider these economic indicators when thinking about remodeling, expanding, or building a new veterinary practice.
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Nov 06, 2012
News flash: Bloomberg Businessweek says deliveries of RVs are up 10.5 percent through August. You might say who cares? But you should. RV sales fell 10 percent in 2007, just before the 2008 recession. History has shown that for some reason, the sale of RVs is an accurate indicator of economic growth in the U.S. According to this data, with RV deliveries up, you should expect your practice to grow in the next year. And in turn you should think about building, remodeling, or expanding to be ready to respond to this growth. There are a host of other oddball economic indicators that, for the most part, accurately predict economic trends, from the cost of a McDonalds Big Mac in China to the sale of lipstick. And while I’m not sure I would necessarily bank on all of these indicators, they can make you think. Here are some other indicators that I think are both more accurate and closer to home for veterinarians.

Money is cheap. With interest rates at an all-time low, now is the time to borrow money. Granted, rates are low because the economy is stalled, but it can’t stay that way forever. The sooner people start borrowing the sooner the economy will rebound.

Contractors are returning calls. Remember when you used to call a contractor, a plumber, or an electrician, and he would call you back in a couple of days or not at all? Try calling a contractor now. I’d bet that if you call before lunch, you’ll hear back from him before closing time. There is a reason they are returning calls; they’re hungry. And they will give you a good price on any work you’re considering. As the economy comes back, costs will increase again. Already, housing starts are picking up dramatically.

Housing starts equates to pets in suburbia. Recent data shows housing starts are up for the first time in four years. That means people are buying houses again, have more money to spend, and might very well get a dog or cat.

Your willing to go beyond the little fixes. During the past four years you may have limited yourself to small improvements like painting walls and hanging new artwork. Perhaps now is the time to step it up. You don’t need to build a Taj Mahal, but consider a renovation or expansion.

You take a number to get an exam room. Are you unable to get into an exam room when you need it? Maybe you’ve tightened up your appointment scheduling or extended your hours to include evenings and weekends, but still you can’t fit everybody in. Your future economic growth is directly linked to the number of client appointments you can schedule and the number of exam rooms in your hospital limits client appointments. Take the next step.

You don’t do dental work. Dental procedures are one of the strongest and most lucrative aspects of most veterinary practices. If you’re not doing dental work because you don’t have the room, you’re missing out on a cash cow with gold fillings. Again, take the next step.

Clients are voting with their feet. If you see your clients going someplace else because they can’t get in or your competition has a nicer looking hospital, you’re missing out. Studies show that it takes significantly more money to find and win new clients than it takes to keep your existing ones. Do something about it now while money and services are cheap.

The sooner you start buying toys, the sooner we’re out of this mess. It has been shown that the gross national product is more directly impacted by the purchasing power of private individuals, households, and small business than anything else. The sooner you buy a new X-ray unit, otoscope, or any other piece of equipment, the sooner the economy picks up. Save our economy—buy something!

You're ready for change. Are you thinking about bringing on new associates, retiring, or selling your practice? If so, there’s often a direct link between the value of a veterinary practice and the perceived quality of the facility. A practice that looks like it’s successful sells for more. It’s like washing and polishing your old Chevy before you put it on Craigslist.

Your spread has increased. As your practice grows, the spread between what you make and what you can save or take home grows. Likewise as your practice grows, you’re probably paying down your debt. The money you have available to build, remodel, or expand is equal to your gross income minus your debt. With banks starting to lend again, you should be able to walk into a bank and borrow that amount of money. Conversely, if you are not capitalizing on your spread, then you are not making your money work for you. Think of it this way: The money you have in the bank is, at best, earning you one or two percent. You can probably make more than that by investing in your practice.

The model on the Sports Illustrated swimsuit edition is an American. According to the Bespoke Investment Group, this is an indicator that the S&P 500 is going to be positive, and in turn, the U.S. economy is going to grow. Before you discount this, you should know that this indicator has an accuracy rating of 80 percent over time.

You’ve done your homework, and you still feel good. No matter what you do in terms of remodeling, rehabilitating, expanding, or building new, you need to do your homework and carefully consider your options. Look at the indicators, but also talk to people who know, including your accountant and your practice manager. Get on the phone and talk to a veterinary design consultant. Most consultants will play it straight with you because they want you to know the odds and want you to succeed. If you do your homework and it still looks like a good idea to expand, do it. Studies have shown that the first people in on a stock rally, or as I see it, the first ones to build in anticipation of future growth, make the most money.