University of Tennessee College of Veterinary Medicine December 3, 2007 Fritz Wood, CPA, CFP ® fwood@kc.rr fritzwood

1. University of TennesseeCollege of Veterinary MedicineDecember 3, 2007Fritz Wood, CPA, CFP®fwood@kc.rr.comwww.fritzwood.com

2. North Grafton – 1,400

3. Professional Background • Worked 9 years for Andersen in the Business Consulting Group, including 4 years in the veterinary industry • Small business owner working exclusively with veterinarians and veterinary industry for the last 12 years

4. The State of the Industry

5. Three Key Takeaways: • Fast growing

6. You are part of one of the fastest growing industry’s in America. Pet spending has doubled in the past 10 years.It’s now larger than the toy industry, the candy industry, the jewelry industry, the movie industry, the video game industry, and the music industry.

7. Three Key Takeaways: • Fast growing • Economically resilient

8. Three Key Takeaways: • Fast growing • Economically resilient • Positive public image

9. CNN/Gallup Annual Survey onHonesty, Ethics, and Integrity • Nurses • Veterinarians (tied) • Medical Doctors (tied) • Pharmacists • Dentists • College Teachers (tied) • Engineers (tied) • Police Officers (tied) • Clergy • Psychiatrists • Bankers

10. CNN/Gallup Annual Survey onHonesty, Ethics, and Integrity • Chiropractors • State Governors • Journalists • Senators • Business Executives • Congressmen • Lawyers • Stockbrokers • Advertising Executives (tied) • Insurance Salesmen (tied) • HMO Managers • Car Salesmen

11. Keys to Success • Competence • Confidence • Conviction • Communication skills • Don’t prejudge clients • Plan to succeed

12. The Service Profit Chain

13. Avg. Annual Client Contribution Year 1 $248 Year 2 $360 ~45% Year 3 $443 ~79% Source: VetConnect National Averages

14. In most practices, existing clients account for 90% of gross income…client loyalty is KEY!

15. Gross Income - Expense Profit

16. It’s a Fact “Profitability is a necessary condition for existence and a means to more important ends, but it is not the end itself ……. Profit is like oxygen, food, water, and blood for the body; they are not the point of life, but without them, there is no life.” - Jim Collins - Built To Last

17. Gross Income = $ Avg. Charge per Transaction (ACT) X Number of Transactions

18. Gross Income = ACT X Number of Transactions Charge for services rendered Charge more for services rendered Perform more services/spend > time Improve compliance

19. Gross Income = ACT X Number of Transactions Leverage/delegation # of new clients Hospital hours Bonding rate (year-to-year return) Improve compliance

20. Staff/Doctor Ratio • Veterinarian 2.7 • Dentist 3.7 • Dermatology 4.3 • Family practice 4.1 • Oncology 5.3 • OB/GYN 4.1 • Ophthalmology 4.9 • Orthopedics 4.0

21. Veterinarians 39/45 Allergists 80/40 Cardiologists 100/60 Dermatologists 130/40 FPs 120/50 GPs 108/45 Oncologists 102/60 Internists 109/55 Nephrologists 120/60 Source: Medical Economics November 18, 2005 Neurosurgeons 52/60 OB/gyns 100/60 Ophthalmologists 120/50 Ortho Surgeons 102/50 Pediatricians 121/45 Plastic Surgeons 62/50 Urologists 102/60 Thoracic Surgeons 42/40 All primary care physicians 110/50 Compare & ContrastPatient visits/hours worked per week

22. Mega-Study Report “…practices that utilize technicians and assistants more are financially better off than those who are less reliant on staff…”

23. Mega-Study Report “…practices that use technicians and assistants more have a higher probability of being financially healthy…”

24. Mega-Study Report “…healthier practices are utilizing more nonveterinarians…”

25. Increased Staff Leverage Independent Optometrists

26. Increased Staff Leverage Independent Optometrists

27. Dental Business Model Staff/Doctor Ratio

28. Dental Business Model Research clearly and consistently shows (1) that highly successful veterinary practices employ similar leverage as the dentist. That is, there are 3.5 or more full-time equivalent staff per veterinarian. (1) Dynamics of a Successful Practice Study (1994) (1) KPMG Mega-Study Report (1999) (1) Well-Managed Practice Study (2004)

29. Dental Business Model Impact of Staff Leverage

30. Dental Business Model Impact of Staff Leverage Additional Patient Visits per Week 23 Number of Work Weeks per Year 50 Additional Patient Visits per Year 1,150 Average Charge per Transaction $ 122 $ Total Increase in Gross Income $ 140,300

31. Veterinarian Job Description • Diagnose • Prescribe • Perform surgery • Outline treatment programs • Examine pets • Certain client consultation and education activities

32. What to look for in an employer… • Location • Salary • Medical ethics/philosophy • Culture • Orientation

33. As an associate doctor, your income will be a function of your production. You’ll earn 20% to 25% of what you produce.

34. Attributes of High-Performing Clinics • Current medically/technically • Adequate staff/health care team (both in number and in skills/abilities) • Continuously improve (unsatisfied w/ status quo) • Charge fair/reasonable fees • Client-service mentality

35. Benefits may represent 40% of your total compensation package! Health insurance alone may be worth $10,000/yr.

36. Most Important Employee Benefits(Value of Benefits Survey, EBRI & Mathew Greenwald & Assoc., Inc.)

37. % of Private Practice Assoc. Receiving…(AVMA Economic Report – 2005 Edition)

38. Perception of Value Client Experience Client Expectations

39. Improve the Client Experience • Simplify treatment/make clients’ life easier (remember that pets eat every day) • Increase the likelihood of successful first-treatment outcome • Save client time/hassle/frustration • Minimize anxiety

40. Most Powerful Moments of Truth • Very first interaction (likely via telephone) • Very first live interaction • Very last interaction The front office/reception staff is key!

41. You’re never better than your worst receptionist!

42. Adding Value as an Associate • Learn to operate the computer - especially reminders, recalls or rechecks • Help establish written medical standards of care or protocols

43. Adding Value as an Associate • Charge for what you do • Capture everyday opportunities • “Show & tell” consequences of non-compliance

44. Convince the Owner • To establish fair & reasonable fees • To staff appropriately…leverage & delegation are critical

45. Adding Value as an Associate • Delegate • Continuously improve your communication skills • Respect & recognize health care team members

46. InfluenceScience and PracticeFourth EditionRobert B. CialdiniArizona State University