Does your veterinary staff truly know what they cost the business?
This is an important question for practice owners and managers. It becomes key when staff members don’t support your pricing plans, discount too much or too often, or don’t invoice for a service because they forget or feel it’s too costly.
Many staff members assume that their only cost to the clinic is their net pay.
Educating them on their true expense, and showing how profitability affects them can help change this behavior. Also teaching employees how the costs of veterinary staff impact fees, and how discounting or missing charges affects their compensation, can help get them on board with your fee schedule.
Getting Started With Expenses
Because many staff members don’t know what they really cost the practice, it’s a great place to start. Educating each team member on expenses – particularly their actual expense – gives them insight into the clinic’s true costs.
However, it’s important to account for all veterinary staff costs. This will give you the knowledge to educate each employee on their true expense and value to the clinic.
In turn, show staff members how a small raise to them is a larger expense to the clinic and therefore can affect service prices. As a result, they will start to see the links between wages, fees and revenue.
Finding Each Employee’s True Cost
Basic Expenses. As we look to each staff member, first account for the easy, basic expenses: payroll, 401k, bonuses, health insurance, and so on.
Ancillary Benefits. Second, add the often overlooked ancillary benefits like:
- Employer taxes
- Insurance such as workers compensation, life and liability
Don’t forget these more frequently overlooked benefits – which are rarely even tracked:
- Staff lunches
- Holiday parties
- Staff picnics
- Movie tickets
- Gift cards
Pet Discounts. Next, include another large benefit rarely addressed with individual staff – pet discounts. I mean the actual cash value of the discounts.
Why does that matter?
Because the pet discount benefit helps you help your employees see the cost of care. Especially those that take true advantage of a discount policy.
Remember, you usually treat staff’s pets at a discount – you are not generating revenue for the clinic. So staff members need to recognize the cost involved in this benefit. For the record, I have nothing against pet discounts.
Total Employee Cost. Finally, add all of these expenses together to get your total employee cost. Showing each staff member the practice’s true expense helps them understand and be part of the business side of patient care.
So now that you’ve found each employee’s total cost, how do we share this knowledge with our staff?
Educating Your Staff Members
Here are six tips for educating employees on their true cost and how practice profitability affects them:
- Schedule a 10-minute meeting with each employee.
- Be prepared.
- Use a professional visual aid. I use Excel. It’s a powerful tool which can organize the data on each person’s Total Employee Cost in a neat, professional presentation.
- Demonstrate how profitability affects them.
- Benefits and perks: Discuss how you want to provide additional benefits and perks, and that only happens if the business is profitable. Don’t be afraid to talk profit with your staff. Teaching them that jobs only exist if a business is profitable is important. You deserve a return for your risk and investment, otherwise you own a job. People don’t go into business to own a job, they do it to make a profit. No Profit, no benefits, no job.
- Relationship between wages and pricing: Show them that what you pay them directly affects the service prices required to make a profit. A fair wage equals a fair service price. Tell them you want veterinary staff costs to be under 40% of revenue.
- Impact of discounting and missed charges: Explain that discounting or missing charges affects revenue, and therefore their compensation. Just like you want clients to perceive value, your staff needs to see value also.
- Do unto Others. One thing to keep in mind – be honest. Treat and pay your staff appropriately. This helps them understand business and rewards. You cannot overwork and underpay your staff and hope to converse openly about employee expenses. Happy staff, loyal staff, profitable staff.
- Communicate honestly and openly. Finally, show them you truly value their help; it’s why you invest in them and their future.
Relating Veterinary Staff Costs to Fees and Compensation
In summary, many staff members don’t think about all the benefits and perks that make up the total veterinary staff costs of your practice. Therefore, they believe their only cost to your clinic is their net pay. Due to this incorrect viewpoint, staff may fail to support your fee schedule, overuse discounts, or neglect to invoice for services.
In order to change this behavior, first you’ll need to find each staff member’s Total Employee Cost.
Secondly, meet with employees to share this cost and show them how profitability affects their benefits and perks.
Next, explain how their wages affect the service prices you charge.
Finally, share how missed fees and discounts affect revenue, and hence their compensation – which will help get them on board with your pricing.