Facility costs are the third-largest expense for most hospitals. Only staffing costs and drug and medical supply expenses
rank higher. Of course, your facility also plays a major role in revenue generation. "The building acts as a working asset,"
says Veterinary Economics Editorial Advisory Board member Gary Glassman, CPA.
When you look at industry averages, two full-time, small animal practitioners should generate approximately $940,000 of gross
revenue out of an average of 2,500 square feet, says Glassman. When you look at these numbers by profit center, about 35 percent
of your building space will be allocated to overhead and is not direct income-production space. "You need these areas—including
offices, bathrooms, an employee lounge, and most of your reception area—to manage the business functions of the practice,"
says Glassman, a partner with Burzenski & Co. PC in East Haven, Conn.
Below you can see a breakdown of the revenue-generating areas of a practice supporting two full-time doctors that gives annual
revenue per square foot. As you can see, the most profitable profit centers based on use of space are the pharmacy, clinical
services, and dental services, while the least profitable are boarding, hospitalization/treatments and radiology/ultrasound
services.
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Interestingly, as a hospital grows in volume, there are some services that can become more efficient in terms of revenue when
you look at the space they use, Glassman says. For example, radiology/ultrasound, surgery, and hospitalization/treatments,
may be underutilized in a smaller practice. As the client volume grows, you may not need any more space for these services,
and yet the revenue could grow dramatically. In contrast, Glassman says, it's harder to make an area like clinical services
more profitable per square foot, because an increase in client volume will demand more exam rooms and thus more space.
So use your space wisely. What you're not using—or not using wisely—is more than wasted space. It's wasted potential.
Make the best use of your space Practitioners often lament not having enough storage space in their facilities. But when we asked 100 practitioners how they
would use an extra 200 square feet, the No. 1 answer was for an exam room, according to the 2005 Well-Managed Practice Study
by Wutchiett Tumblin and Associates and Veterinary Economics. This emphatic response doesn't surprise architect Dan Chapel, AIA, a Veterinary Economics Editorial Advisory Board member, in the least.
"Veterinarians want to add space that will enhance client services and therefore make more money, and for most of them, that's
an exam room," says Chapel, principal of Chapel Associates Architects in Little Rock, Ark. "As much as they want and need
more storage, or even increased treatment space, most doctors will invest in the room that generates the most revenue and
is essential to clients' perceptions of the practice."
Chapel points out that adding another exam room also helps alleviate crowding and congestion in the waiting area, which increases
client satisfaction. "A great rule of thumb is to have two exam rooms for every doctor who works the exam rooms," says Chapel.
"AAHA recommends exam rooms that are 80 square feet; I prefer more like 100 square feet to give you ample room."
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