Building Practice Value Workshop in Queenstown, NZ

2. Today’s Program
Introduction
Financials 101
How Practices are Valued
Changes in Veterinary Practice Ownership
Increasing Practice Value and Monitoring
Success
Developing Your Brand & Culture

3. www.slideshare.net/OculusInsights

4. www.OculusInsights.net

5. Who is Oculus?
• Global Business Education Company
• Business Consulting & Management Services
• Industry-Focused Programming
• Relationship/Networking
• Strategic Partnerships

6. The Oculus Learning Opportunities
• 4 Day Immersion programs at different locations in
the worldBusiness Summits
• One-Day, Topic Driven programs not species specificBusiness Workshops
• 3 Year Educational Certificate program not species
specific at MBA level
Veterinary Business
School
Business Consulting • Customized solutions and speaking engagements

7. Joop Loomans DVM, PhD
Utrecht, The Netherlands & China
Robert Magnus DVM, MBA
Wisconsin, United States
Michael Pownall DVM, MBA
Toronto, Canada
Executive Leadership Team
Including: Consortium of business
professionals, industry specialists,
instructors, and coaches

9. Equine Practice Financials

10. Financials 101
• But first some basic understanding is necessary....
• You don’t need to become an accountant
24/07/2017 10

11. What is Financial Accounting
• The preparation and use of accounting
information
• Provided in the form of a company’s financial
statements
• Enables users to make informed decisions
24/07/2017 11

12. Let’s start with the Accounting Equation
24/07/2017 12
Assets Liabilities Equity= +

13. The Financial Statements
24/07/2017 13

14. Stocks and Flows
24/07/2017 14
Opening Balance
Sheet
Assets
Fixed
Current
Cash
Liabilities
Shareholders equity
Equity shares
Retained earnings
Closing Balance Sheet
Assets
Fixed
Current
Cash
Liabilities
Shareholders equity
Equity shares
Retained earnings
Statement of Cash Flow
Operating activities
Investment activities
Financing activities
Change in Cash
Income Statement
Revenues
Expenses
Net Income
Beginning of
accounting period
End of
accounting period

15. Balance Sheet: Assets
Tangible and Intangible Economic Value
• Is owned by the company
• Used to generate future benefits
• Assists in providing the products and services of the
business
• Available to meet debts or commitments
• Can be sold or reversed into cash
24/07/2017 15

16. List as many Assets as possible for a ABC
Equine Clinic
•
•
•
•
•
•
•
•
•
24/07/2017 16

17. Balance Sheet: Liabilities
A Liability is an obligation to make a
future payment
•Can be short term or long term
•Can be interest bearing
24/07/2017 17

18. List as many Liabilities as possible for ABC
Equine Clinic
•
•
•
•
•
•
•
•
•
24/07/2017 18

19. Is it OK to have Debt?
• In Personal Life it has often a negative side:
• Can we pay the bills?
• Do we owe enough when we retire?
• In Business Finance:
• An important part of the capital structure
• External financing needed under several curcumstances:
• New buisness
• Heavy investments
• M&A
• Balance out uneven cash flow streams during the year
24/07/2017 19

20. Is it OK to have Debt?
In Business Finance:
• External Financing is in general cheaper than Equity:
• Cost of lending < Return on investment
• Cash rich companies can miss business opportunities:
• Active in M&A
• Share Buy Back
• Cash Dividends
• Some companies, especially Private Equity:
• Highly leveraged (over 90% Liabilities) => During crisis is this
KILLING
24/07/2017 20

21. Is it OK to have Debts?
The trick is to find the right balance between Debt and
Equity
• Every business is different
• Over the Life Cycle financing changes
• Don’t sell your soul to the bank.
24/07/2017 21

22. Balance Sheet:
The difference between a
company’s assets and liabilities
represents the shareholders’
financial stake in a company.
or
• Contribution by owners +
• Retained earnings (net profit)
24/07/2017 22

23. Equity: The Claim on the Assets
• Share Capital / Common stocks
• Share Premium
• Contribution by Owners -/- Drawings by owners
• Retained earnings (profit on the income statement)
24/07/2017 23

24. Income Statement
24/07/2017 24

25. Income statement
A financial statement that reports a company's
financial performance over a specific accounting
period. Financial performance is assessed by giving a
summary of how the business incurs its revenues and
expenses. This results in showing the net profit or loss
incurred over a specific accounting period.
24/07/2017 25

26. Income Statement
• Looks pretty straightforward BUT:
• Some fundamental choices to be made
24/07/2017 26
Revenue Costs Profit- =

27. Income Statement – arranged in several
different ways for reporting
Incomes Statement (1):
Sales (Revenue)
-/- Costs of Goods Sold
= Gross Profit
-/- All Expenses
= Net Income
Income Statement (3)
Sales / Revenue
-/- Direct Costs
= Gross Profit
-/- Indirect Costs
= EBITDA
-/- Depreciations
= EBIT
-/+ Interest
= Gross Income
-/- Tax
= Net Income
24/07/2017 27
Incomes Statement (2):
Sales (Revenue)
-/- Direct Costs
= Gross Margin (GM)
-/- indirect Costs
= Net Income
Also called the Profit & Loss Statement or P&L

28. How do you List?
Revenue
•
•
•
•
•
•
•
•
24/07/2017 28
Expenses
•
•
•
•
•
•
•
•

29. Costs:Terminology
• Cost of Goods Sold:
• Costs directly related to the production or delivery of services
• Variable Costs:
• Costs that can easily and accurately be traced to the item
producing the revenue
• Fixed Costs:
• Costs that are related to producing the revenue but that
cannot be easily and accurately traced to the item producing
the revenue
• Operating costs:
• Costs that are necessary to run the business but not directly
related to the revenue,services or production
24/07/2017 29

30. Costs: An Overview
Cost of Goods Sold Admin / Operational Costs
Pharmaceuticals Salaries
Medical supplies Social charges and tax
Lab fees T&E
X-ray expenses Education
Animal Food Rent
Materials lease costs Repairs & Maintenance
Waste Utilities
Surgery equipment Office suppplies
Kennel equipment Advertising
Miscellaneous
Depreciation
24/07/2017 30

31. Stocks and Flows
24/07/2017 31
Opening Balance
Sheet
Assets
Fixed
Current
Cash
Liabilities
Shareholders equity
Equity shares
Retained earnings
Closing Balance Sheet
Assets
Fixed
Current
Cash
Liabilities
Shareholders equity
Equity shares
Retained earnings
Statement of Cash Flow
Operating activities
Investment activities
Financing activities
Change in Cash
Income Statement
Revenues
Expenses
Net Income
Beginning of
accounting period
End of
accounting period

32. Questions?

33. How Practices are Valued
Buyer & Seller Options
Ways to Increase Value

34. Valuation Methods
1. % of Turnover (Sales)
2. Discounted Cash Flow (DCF)
3. Multiple of EBITDA (Operating Income)

35. % of Turnover (Sales)
Older Method
• higher profitability (margins)
• simple
• no analysis
Historically = 100% of Turnover

36. Discounted Cash Flow (DCF)
The value of an
anticipated revenue
stream (cash) from an
investment made

37. Discounted Cash Flow
The analysis uses future free cash flow projections
and discounts them to arrive at a present value
estimate

38. Sample Practice Income Statement
Benchmark Data
Is the average of 30
equine practices in the
USA in 2016.
Industry
Benchmarks PRACTICE 2016
100.00% Practice Income (Turnover) $ 2,500,000
Expenses
26.39% Total Cost of Professional Services $659,750
19.36% Drugs & Supplies
7.03% Hosptitalation, Lab costs, etc
73.91% Gross Profit $1,840,250
5.67% Administrative Expense $ 141,750
10.22% Facility and Equipment Costs $255,500
45.04% Payroll Costs $ 1,127,250
12.63% Operating Income (EBITDA) $ 315,750
2.79% Depreciation Costs $ 69,750
0.45% Other Income/Expenses ($ 12,500)
9.39% Net Income € 233,500

39. Initial Cash Flow*: 150,000
Year Range: 1-5 6-10
Growth Rate: 3% 3%
Terminal Growth Rate: 1% Discount Rate: 10.32%
Debt Level: 35,000
Year Flows Growth Value
1 154,500 3% 140,047
2 159,135 3% 130,755
3 163,909 3% 122,079
4 168,826 3% 113,979
5 173,891 3% 106,416
6 179,108 3% 99,355
7 184,481 3% 92,762
8 190,016 3% 86,607
9 195,716 3% 80,861
10 201,587 3% 75,495
Terminal Year 203,603
PV of Year 1-10 Cash Flows: 1,048,356
Terminal Value: 818,138
Total PV of Cash Flows - Total Value 1,866,494
Total Value - Outstanding Debt: 1,831,494
Total Value X Marketability Discount 40% 1,098,896
Discounted Cash Flow Valuation (DCF)
*cells in yellow can be changed to fit your assumptions
Risk Free Rate 2.00%
Beta 1.04
Market Rate of Return 10.00%
Discount Rate 10.32%
Effective Tax Rate 30%
Buyout Percentage 25%
Term 10
Interest Rate 4%
Loan Amount 274,724
Payment € -33,870.99
Available Cash Flow 150,000
New Partner Cash Flow 37,500
Discount Rate Assumptions
Note Terms
Practice Value
Net Cash Flow
37,500 – 33,870
= $ 3,630
Practice Turnover = 2,500,000

40. Projections & Assumptions
Discounted Cash Flow Valuation (DCF)
*cells in yellow can be changed to fit your assumptions
Initial Cash Flow*: 150,000
Year Range: 1-5 6-10
Growth Rate: 3% 3%
Terminal Growth Rate: 1% Discount Rate: 10.32%
Debt Level: 35,000
6% Sales
Low Debt
Interest Rate
On Investment

41. Projections & Assumptions
Discount Rate Assumptions
Risk Free Rate 2.00%
Beta 1.04
Market Rate of Return 10.00%
Discount Rate 10.32%
Effective Tax Rate 30%
Buyout Percentage 25%
Note Terms
Term 10
Interest Rate 4%
Loan Amount 274,724
Payment € -33,870.99

42. Total Value - Outstanding Debt: 1,831,494
Total Value X Marketability Discount 40% 1,098,896

43. Will this Cash Flow for Doctor?
1 37,500 10,989 26,511 7,953 22,882 (4,324)
2 38,625 10,074 28,551 8,565 23,797 (3,811)
3 39,784 9,122 30,662 9,199 24,749 (3,286)
4 40,977 8,132 32,845 9,854 25,739 (2,747)
5 42,207 7,102 35,104 10,531 26,769 (2,196)
6 43,473 6,032 37,441 11,232 27,839 (1,631)
7 44,777 4,918 39,859 11,958 28,953 (1,052)
8 46,120 3,760 42,360 12,708 30,111 (459)
9 47,504 2,555 44,949 13,485 31,316 148
10 48,929 1,303 47,626 14,288 31,266 2,073
11 50,397 - 50,397 15,119 - 35,278
12 51,909 - 51,909 15,573 - 36,336
13 53,466 - 53,466 16,040 - 37,426
14 55,070 - 55,070 16,521 - 38,549
15 56,722 - 56,722 17,017 - 39,705
Year
New Partner
Cash Flow
Net Cash
Flow
Principal
Payment
Tax
Expense
Interest
Expense
Net Taxable
Income
Net Cash Flow Schedule
New Doctor Company Profits @ 25%
Cash In Cash Out

44. Initial Cash Flow*: 150,000
Year Range: 1-5 6-10
Growth Rate: 3% 3%
Terminal Growth Rate: 1% Discount Rate: 10.32%
Debt Level: 35,000
Year Flows Growth Value
1 154,500 3% 140,047
2 159,135 3% 130,755
3 163,909 3% 122,079
4 168,826 3% 113,979
5 173,891 3% 106,416
6 179,108 3% 99,355
7 184,481 3% 92,762
8 190,016 3% 86,607
9 195,716 3% 80,861
10 201,587 3% 75,495
Terminal Year 203,603
PV of Year 1-10 Cash Flows: 1,048,356
Terminal Value: 818,138
Total PV of Cash Flows - Total Value 1,866,494
Total Value - Outstanding Debt: 1,831,494
Total Value X Marketability Discount 40% 1,098,896
Discounted Cash Flow Valuation (DCF)
*cells in yellow can be changed to fit your assumptions
Risk Free Rate 2.00%
Beta 1.04
Market Rate of Return 10.00%
Discount Rate 10.32%
Effective Tax Rate 30%
Buyout Percentage 25%
Term 10
Interest Rate 4%
Loan Amount 274,724
Payment € -33,870.99
Available Cash Flow 150,000
New Partner Cash Flow 37,500
Note Terms
Discount Rate Assumptions
Practice Value
Net Cash Flow
37,500 – 33,870
= $ 3.630

45. Operating Income Method
Money left over after
paying for all of the
operating costs of
doing business

46. EBITDA
Earning Before Interest Taxes Depreciation Amortization
Revenue
Expenses
- Variable costs
- Fixed costs
= Operating Income (EBITDA)
+/- other expenses, interest
+/- other income
- taxes, depreciation, amortization
Net Income
EBITDA is an estimate of company cash flow

47. EBITDA & Multiple Benchmarks
North America
Equine Practice
Companion Animal Practice
3 – 6X EBITDA (Normalized)
Average = 12%
Range = 3% - 21%
3 – 8X EBITDA (Normalized)
Average = 15%
Range = 3% – 25%

48. Multiples for Small Animal Veterinary Hospitals
20x
18x
16x
14x
12x
10x
8x
6x
4x
2x
0x
0 1 2 3 4 5 6............200………..2,500
Single Site Clinic
1 DVM
3-5x EBITDA
Single Site
multi-DVM
4-10x
Specialty
Hospital
10-15x
20+ site
Corporation
10-15x
Revenue ($millions)
EBITDAMultiple
Valuations have
trended higher in
recent years due to
increased competition
for acquisitions
Sources: Company disclosures and guidance from private equity investors

49. Risk
If Practice A has an operating margin of 4% on
$3 million in net sales and Practice B has an
operating margin of 12% on $3 million in net
sales, Practice A may have a difficult time
covering its fixed costs if business declines in a
given year.
Practice B, on the other hand, has a comfortable
buffer to account for hard financial times.
Effect on Valuation Price
Practice A Multiple = 3
Practice B Multiple = >5

50. What is a practice selling?

51. Tangible Assets
Intangible Assets

52. Building Practice Value
1. Increase Turnover (Sales Growth)
2. Increase Operating Margin (EBITDA)
3. Lower Risk
4. Decrease Practice Debt
2016 2015 2014
Annual Sales $1,704,935 $1,461,225 $1,348,197
EBITDA X 5 $914,060 $714,720 $294,080
Less Long Term Debt $130,331 $176,007 $99,400
Value of Practice $783,729 $538,713 $194,680
Prior Year Value Rate Change 45.5% 176.7% X

53. Questions?

54. Changes in Veterinary Practice Ownership
Joop Loomans

55. Joop Loomans DVM, MS, PhD, PTV FEI,
Certified Equine Practitioner
Heilan International Equestrian Club, China
Loomans International Veterinary Expertise
Oculus Insights BV LLC

57. Veterinary Profession
vs
Veterinary Hobby

58. Profession
The principal activity in your life that you do to earn
money.

59. Hobby
May cost money!

60. The target group for this survey exists of the Veterinary students of all
stages of study from all over the globe. We have been collecting answers
from 31 of October 2014 till 31 of January 2015. In total, 3111 students
from 89 countries participated in the survey. Survey was done online and
it was anonymous.

62. Federation of Veterinarians of Europe
www.fve.org
4 FVE Sections
 UEVP (Practitioners)
 UEVH (Hygienists – Public Health Officers)
 EASVO (Veterinary State Officers)
 EVERI (Education, Research, Industry)
Federation of veterinarians
of Europe
46 national organisations
38 European countries

63. Content report:
5 chapters + country reports
1. Demography
2. Demand veterinary services
3. Veterinary practices
4. Working as a vet
5. Future of veterinary profession
See: www.fve.org

64. www.fve.org
FVE Survey of the Veterinary Profession in Europe
24 FVE Member Organisations
participated fully
2 partially (provided results of own
surveys)
> 13 000 vets replied to the
survey (statistical confidence +/-0,85 % at
95% conf. level)
Results reflect personal
understanding, perspective and
knowledge of the individual vets.
This can divert from national
statistics.

65. www.fve.org
Key findings demography
DEMOGRAPHY
• Estimated number of veterinarians in European Union (EU 28) 182 900
in Europe (FVE 38): 243 000
• 44 % aged under 40 years
• 53 % female / 47% male
• 78 % work full-time
• Reported unemployment is 3 % (reality probably higher)
• Private practice dominates, employing 60 % of veterinarians
• 19 % work in public service
• 48 % work with/on issues related to companion animals

66. www.fve.org
Age versus Gender
DEMOGRAPHY

67. www.fve.org
Fields of employment
60%
19%
6%
10%
1%
4%
DEMOGRAPHY

68. www.fve.org
Employment status – Europe
DEMOGRAPHY
68

69. www.fve.org
DEMOGRAPHY
Vets/1000
population
% < 40 yrs % unemploy-
ment
Regarded
by
general public
(rank 1 – 24)
Regarded
by
customers
(rank 1-24)
Belgium 0,57 30 0,6 13 12
Italy 0,50 31 5,4 24 23
Spain 0,48 52 8,2 20 20
Portugal 0,48 76 5,3 17 18
Norway 0,44 40 0,9 4 5
Germany 0,33 43 1,8 6 9
France 0,26 39 0,9 7 6
Netherlands 0,23 32 0,6 9 8

70. www.fve.org
Area of focus - Europe
DEMOGRAPHY
As percentage of veterinarians

71. www.fve.org
Key findings demand veterinary services
DEMAND
 Long term downward trend pigs, poultry, cattle and sheep
 Dogs: stable, cats: slight increase
 Nothing about trends on horses 
 104 million cattle
 150 million pigs
 90 million sheep
 13 million goats
 417 million poultry
 157 million companion animals
 6 million horses
 59 million exotics
71

72. www.fve.org
DEMAND
72
Market Value
• Total value of market for Veterinary Services in private practice in the 24
surveyed countries is estimated at 11.1 billion €
• On average 111 000 € per veterinarian
• This varies from 300 000 € (NO) to <20 000 € (BG, RO, SK)
- Belgium: 107 000 €
- Germany: 181 000 €
- Netherlands: 152 000 €

73. Revenue by type of Service – Europe
 Share of revenue: treatment 52%, surgery 20%, medicine sales 13%,
official tasks 4%, food sales 6% and other 5%
 In countries with decoupling medicine prescription and distribution,
less on medicines
DEMAND
73
As percentage of total amount

74. Average revenue per practice
The average practice revenue figures are as reported and have not been
adjusted to take account of purchasing power
Vets
and nurses
24
countries
BE DE NL
1 person 85.318 € 103.280 € 92.215 € 98.551 €
2 persons 163.097 € 153.250 € 249.424 € 181.455 €
3 – 5 persons 312.313 € 360.455 € 298.516 € 308.075 €
6 -10 persons 794.386 € 986.000 € 506.634 € 496.256 €
11 – 30 persons 1.414.384 € 1.000.000 € 1.128.205 € 1.179.648 €
31 – 50 persons 3.394.478 € 2.573.333 € 4.122.000 €
> 50 persons 6.488.876 €
74

75. www.fve.org
Key findings working as a veterinarian
WORKING AS A VETERINARIAN
 Average earnings: €38 500 (adjusted for Purchasing Power Parity PPP)
 Large difference in average earnings between countries: from 9 506€
to 63 579€
 Outside practice, highest salaries in industry and research
 Male veterinarians earn on average 28% more than female
veterinarians
 28% of vets do not have a pension plan, and many who have a plan
do not think it is adequate for their needs
 Vets are a mobile profession; 6% worked in another country in last 3
years 75

76. Average earnings (in €, adjusted for ppp)
76

77. 77

78. Veterinary Compensation
(Salary)
Management Compensation
(% of Gross)
Real Estate Compensation
(Rent)
Practice Owner Compensation
(ROI)

79. Number:
Entrepreneurs
Employed
Not in practice
Percentage:
Entrepreneurs
Employed
Not in practice

80. www.fve.org
Key findings in respect to the future
THE FUTURE
• 68% believe that “Too many newly qualified veterinarians are emerging
from Veterinary schools”
• Areas where more veterinarians will be needed:
 animal welfare
 Companion animals & exotic animals
 disease control
 Environment
• In order to meet the challenges of the next five years:
 83 % think more specialization is needed
 80 % think more business training is needed
 49 % think more legislation for the profession is needed
80

81. Current Market Analysis
Current Practice Ownership
• Retiring Owners
• No Exit Strategy
• Private Equity solution?

82. Current Market Analysis
Next Generation of Owners?
• Work/Life Balance
• Large Student Debt in USA
• Job Dissatisfaction
• Transition Challenges

83. Current Market Analysis
• Price Sensitivity
• High Investments
• Competition
• Lack of Management
Skills
• Lack of Data Analysis

84. Current Market Analysis
• Disconnect with Customers
• Expectations
• Delivery Models
• Fragmented Health Care
Sources
• Poor Customer Service

85. Buyers - Corporate

86. Associate (employee) Veterinarians
Key Staff
Other Practices
Buying Groups
Family
Buyers – Others

90. Current Consolidations
• Mainly USA, UK, Northern Europe
• Mainly Companion Animals
• Exit Strategy for Older Practice Owners
• Is it a “Game Changer”?
• Remains a Traditional Model?
• What does it mean for you and our
profession?

91. Questions?

92. Increasing Practice Value and
Monitoring Success

93. Building Practice Value
1. Increase Turnover (Sales Growth)
2. Increase Operating Margin (EBITDA)
3. Lower Risk
4. Decrease Practice Debt

94. Increase Sales (Revenue or Turnover)

95. PRACTICE 2016
Practice Income (Turnover) $ 2,500,000
Expenses
Total Cost of Professional Services 659,750
Drugs & Supplies
Hosptitalation, Lab costs, etc
Gross Profit 1,840,250
Administrative Expense 141,750
Facility and Equipment Costs 255,500
Payroll Costs 1,127,250
Operating Income (EBITDA) 315,750
Depreciation Costs 69,750
Other Income/Expenses -12,500
Net Income $ 233,500
6% Increase in Sales (Turnover)
Increase Turnover
6% $150,000
Change
$699,335
Change Change % Variance
$ 343,915 8.92% $ 28,165
Value
Change
$ 140,825
@ 5x
EBITDA

96. Increasing EBITDA
1. Increase Revenue
2. Lower Expenses
• Inventory/Cost of Goods
• HR
• Cash Payments
• Owners Expenses
The greater the cash flow, the greater the value

97. Lower Expenses

99. Inventory Days
How many days it takes to sell inventory
or
The number of days money is tied up in inventory
Inventory = (Cost of Sales/365)

100. Inventory Turnover
How many times inventory
is sold in a year
Cost of Sales/Inventory

101. Goal
Ave Inventory Days = < 30 days
Inventory Turnover = 12 +

102. Goal
Reduce quantity on hand
Reduce order time
Reduce expired medications
Reduce interest payments

103. Holding Costs
20 - 40% of cost

104. Holding Costs
Item cost = $10
Holding cost = $2-4
Actual Cost = then is $12-14
Selling Price = $20
Profit = $6 to $8 not $10

105. Reducing Holding Costs
•Minimum & Maximums
•Inventory Counts
•Weekly orders
•Measure & compare

107. Inventory Counts
AA – top 5% of items sold
A – next 20%
B – next 20%
C – All the rest

108. Inventory Cycle Counts
AA - Weekly
A - Quarterly
B – Semi-annual
C - Annual

109. Measure
Ave Inventory Days = < 30 days
Inventory Turnover = 10 or more

110. What Does Improvement in
Inventory Look Like?
Example – Ave Days Inventory
Ending Inventory/(COG/365)
125,000/(659,750/365) = 125,000/1808 = 69

111. What Does Improvement in
Inventory Look Like?
What does each in improvement look like?
125,000/(659,750/365) = 125,000/1808 = 69
Each day improvement equals
125,000/69 = $1,812

112. PRACTICE 2016
Practice Income (Turnover) $ 2,500,000
Expenses
Total Cost of Professional Services 659,750
Drugs & Supplies
Hosptitalation, Lab costs, etc
Gross Profit 1,840,250
Administrative Expense 141,750
Facility and Equipment Costs 255,500
Payroll Costs 1,127,250
Operating Income (EBITDA) 315,750
Depreciation Costs € 69,750
Other Income/Expenses -$ 12,500
Net Income $ 233,500
Decrease Drug Costs
Change
-2.00% $ 50,000
Change Change % Variance
$ 365,750 15.84% $ 50,000
Value
Change
$ 250,000
@ 5x EBITDA
2% Improvement/Reduction of Inventory Costs

113. Examples – Increasing Value
 Decrease Drug Costs by 2%
• EBITDA increases by 15.8%
• Practice Value Increases by
 Increase Revenue by 6%
• EBITDA increases by 8.9%
• Practice Value Increases by
$ 250,000
$ 140,825

114. Our
Staff

115. Unhappy Staff = Expensive Staff

116. Employee Turnover
# employees left during year
__________________________ x 100
Average # employees

117. Employee Turnover
3
__________________________ x 100
9
33%

118. Cost of Employee Turnover
• 50-75% of salary
• $30,000 salary
• $15,000-22,500 annual cost each
3 = $45,000-67,500
http://www.zanebenefits.com/blog/bid/312123/Employee-Retention-The-Real-Cost-of-Losing-an-Employee

119. Employee Engagement
“Customers will never love
your company, until the
employees love it first”
Simon Sinek
http://sloanreview.mit.edu/article/measuring-the-benefits-of-employee-
engagement/

120. Profit Benefits
Disengaged Employees = 0-1%
Highly Engaged = 10-15%

121. PRACTICE 2016
Practice Income (Turnover) € 2,500,000
Expenses
Total Cost of Professional Services € 659,750
Drugs & Supplies
Hosptitalation, Lab costs, etc
Gross Profit € 1,840,250
Administrative Expense € 141,750
Facility and Equipment Costs € 255,500
Payroll Costs € 1,127,250
Operating Income (EBITDA) € 315,750
Depreciation Costs € 69,750
Other Income/Expenses -€ 12,500
Net Income € 233,500
Employee Engagement
2% $ 50,000
Engaged Staff Improvement
Employee Decrease
Turnover
$ 1,059,750 5.99% $67,500
Value
Change
$ 587,500
@ 5x
EBITDA
Employee Management Impact

122. 122
The Problem with Cash

123. 7/24/2017 123
The Problem with OwnersThe Problem with Owners

124. PRACTICE 2016
Practice Income (Turnover) $2,500,000
Expenses
Total Cost of Professional Services 659,750
Drugs & Supplies
Hosptitalation, Lab costs, etc
Gross Profit 1,840,250
Administrative Expense 141,750
Facility and Equipment Costs 255,500
Payroll Costs 1,127,250
Operating Income (EBITDA) 315,750
Depreciation Costs 69,750
Other Income/Expenses -$ 12,500
Net Income $ 233,500
Creative Financing
Cash $ 25,000
Kids $ 3,500
Home $ 41,000
College $ 20,000
Value
Change
-$ 447,500
@ 5x
EBITDA
Getting Ready to Sell

125. Risk

126. Reducing Risk
•Consistent Growth
•Consistent EBITDA
•Consistent Staff
•Excellent Brand
•Loyal Clients

127. Questions?

128. Developing Your Brand & Culture

129. Adding Value to Your Practice
• Increase sales?
• Decrease expenses?
• Increase cash flow?
• Lower risk?
• Increase multiple of EBITDA?

130. A Healthy Brand
• Increase revenue
• Increase multiple of EBITDA
• Decrease risk

131. What is a Brand
“The expectation a person has when they hear your
company name, or see your logo”

135. The Superstar??

140. A Healthy Culture
• Increased sales
• Decreased cost of payroll
• Increased multiple of EBITDA

142. Mission & Vision
Mission = Who we are
•Purpose and Values
Vision – Where we want to go

143. Mission
Purpose = “why are we here?”
“to give horse people peace of mind with
the health care of their horse by
helping them make informed decisions”

144. Core Values – Why?
•Support your mission
•Reflect the culture of the company
•Provide guidelines and expectations for
behaviour of staff AND a lens through
which decisions should be made

145. ABC Practice Core Values
•Take Ownership – “Own It”
•Evolve – “Push It”
•Deliver Excellence
•Collaborate

146. Vision
Vision = “what is your overall goal?”
“Our goal is to be a global equine
veterinary business recognized for
leadership & innovation in patient,
client and employee care”

149. Hire the Smile
Train the Skill

150. Unhappy Staff = Expensive Staff

151. Hiring – Process
•Resumes and cover letters
•Phone Screening Interview
•In-Person Interview
•Working Interview

152. Phone Screening Interview
Why?
•Time
•Assess communication skills easily
•Judge Enthusiasm
How?
•10 – 15 minutes
•Consistent questions

153. Phone Screening Process
•Go over interview process
•What attracted you to apply for this
role?
•What are you looking for in a position?
•How much do you know about the
company?
•Wage expectations/start date

154. Interview Structure
• Introductions
• Housekeeping
• What do they know about you?
• Describe the position + company
• Ask about the resume/past experience
• Behavioural/Situational questions
• Applicant questions?
• Wrap up

155. Behavioral Questions
•“Tell me about a time when you had to
deal with a client who was irate. What
was the outcome?”
•The best predictor of future behavior is
past behavior

156. Behavioral
• (Take Ownership – Emotional Intelligence and Self-
Awareness) Have you ever had to work with
someone with whom you didn't like or just couldn't
get along with? How did you cope with this
situation?
• (Take Ownership - Accountability) Tell me about a
time when you made a mistake in the workplace.
How did you deal with it? What steps did you take
to ensure that it didn't happen again?

157. Situational Questions
•“What would you do if you had to deal
with a client who was upset, but in this
instance you knew for sure they were in
the wrong?”
•See how applicant really thinks – can’t
use rehearsed answers

158. Situational
•(Take Ownership – Integrity and
Honesty) “What would you do if a client
asked you to change their horse’s
medical records before sending them to
the insurance company?”
•(Collaborate – Team Focus) “What
would you do if you saw that one of
your colleagues was struggling with
their workload?”

159. Curve Balls
• Who inspires you? Why?
• What would your friends or family say is the
biggest misperception someone might have
about you when they first meet you?
• What book are you reading? Tell me what you
like about it.
• If you could visit anywhere in the world, where
would it be?
• What has been your biggest
disappointment/regret in life?

161. Why Have Structured Training?
•Better adjustment to the workplace
•Structure increases chances for success
•Consistency
•Clear Expectations
•Increased Self-Confidence
•Increased engagement.
• Alan M. Saks, Jamie A. Gruman, (2011) "Getting newcomers engaged: the role of socialization tactics", Journal of
Managerial Psychology, Vol. 26 Iss: 5, pp.383 - 402

162. ABC Equine Clinic Training
GENERAL ORIENTATION - CSR TRAINING
1. First Day/Week General Orientation
History of ABC Equine Clinic
Vision Statement
Core Values
2. General Office Administration
Policies and Procedures Manual
Phone List, Positions and Contacts
Time Sheet/Absence Request forms
Personal Expense Report
Meetings Overview
Clinic Information (Keys, Alarm, Open/Close Procedures, Etc)
3. Computer Network Orientation
Accessing the Network (Computer Access Document)
Network Orientation (remote vs. local, P: Drive, etc)
Skype
4. Customer Service Protocol
Telephone Etiquette
MPES Customer Experience and Charter
Customer Service Training By Position

163. ”Young people need models, not critics”
John Wooden

164. Vet Training and Mentorship
•Mentoring Guidelines
•Define roles and support system
•Regular meetings and follow-up
•Training/Skill Set Outline

166. Why Do Reviews?
• Formal comprehensive discussion regarding
performance
• Basis for goal setting for entire year
• Provide expectations and guidelines for
desired behaviours
• Tie personal behaviour to Culture, Strategy,
Vision
• Provide guidance for wage increases and
bonus calculations

167. Employee Engagement
“Customers will never love
your company, until the
employees love it first”
Simon Sinek
http://sloanreview.mit.edu/article/measuring-the-benefits-of-employee-
engagement/

168. Why do we care if they care?
• Gives them a voice – find out if their
priorities as an employee are being met
• Expose areas where we are doing well and
meeting your expectations
• Identify and target areas for improvement
• Ensure that we continue to be a place
where people like to work
• Help us plan for the future

169. The Survey
•34 Questions online via
SurveyMonkey
•Anonymous other than job role
and clinic
•5 point rating scale
•Area for comments after each
question

170. The Survey
Career Development
I am satisfied with my opportunities for growth within the practice.
I am satisfied with the internal (in-house) job-related training the practice
offers.
I am satisfied with the amount of time and money the practice invests in my
CE (training courses offered by outside sources - courses, workshops, etc.)

171. The Survey
Work Engagement
I am inspired to meet my goals at work.
I feel like I have the all the support I need to meet my goals at work.
I get excited about going to work.
I am proud to tell people where I work.
I have a sense of ownership and pride in the practice.
When the company succeeds, I feel like the success is my own.
I am content to spend the rest of my career at the practice.
Employees adapt quickly to difficult situations at the practice.
Employees at the practice take the initiative to help other employees when the
need arises.
Employees at the practice are willing to take on new tasks as required.

172. The Survey
Compensation and Benefits
I feel that the number and complexity of tasks and the general workload at the
practice are manageable.
Employees at the practice willingly accept and embrace change.
I feel that I am compensated appropriately overall (including wage/salary and
bonus).
I am compensated fairly relative to similar/the same positions in similar
businesses in my area.
I am confident that the method used to determine my wage or salary increases
on a yearly basis is fair.
I am satisfied with my total benefits package (wage, bonus, medical and dental
plans, vacation days, paid personal/sick days).
I am satisfied by the workplace flexibility offered by the practice.
My role at the practice allows me to have an appropriate work-life balance.

173. The Survey
Relationship Management
Communication between management and employees is excellent at the
practice.
I am involved in the decisions that affect my work at the practice.
Management at the practice recognizes strong job performance.
My coworkers and I have an excellent working relationship.
Senior management and employees trust and respect each other at the practice.

174. The Survey
Work Environment
The work at this veterinary praxis positively impacts people's lives.
I am happy with the overall culture of the practice.
I understand how our Core Values relate to expectations around my behaviour at work, and
my work itself.
I feel like the management and staff of the practice adhere to the Core Values.
I understand how my work impacts the business goals of the practice.

175. Scoring Employee Engagement
20-39 = Poor
40-59 = Some good but needs attention
60-79 = Overall good
80-11 = High EE

176. 2016 Results
•77% Engagement
•Vet dissatisfaction
• 73% vs 80%
•Communication
•Workload
•Job Satisfaction

177. 2017 Results
•79.6% +3%
•Vets 76% vs 81.5%
•Support staff consistency
•Support staff compensation
•Communication between mgmt and
others

178. Keeping Staff
Money isn’t everything
What else
does your staff value?

179. Job Hunting
•92% were looking for another job
•“My main goals are to be satisfied with
my job and to make sure I earn the
highest possible level of compensation.
If I find a better place in terms of these
aspects, then there is no harm in
changing jobs.”

180. Retaining Staff
•Support from senior management
•Training
•Influence without authority
•Mentoring
MITSloan.com

181. What we have to acknowledge
• People add Value
• Customer and
Patient Focus
• This is a People
Business

182. • Define and communicate a strategy
• Determine what you are going to be the best in the world
at—operations, innovation, or customer intimacy
• Execution is much harder than formulation
• Avoid flavor of the month—pick something and stick with it
• Pick goals that are aligned with the strategy and shareholder
value
• Focus on creating a culture of employee engagement
Jim Woodrum – EBMS Paris 2015
Kellogg School of Management - Northwestern University -USA
What Leaders need to do!

183. Key Points
• Unhappy staff is expensive
• Develop the culture you want
• Hire for the culture
• Train
• Review
• Test

184. www.slideshare.net/OculusInsights

185. www.OculusInsights.net