Unprecedented Challenges and Opportunities in Veterinary Medicine
Change is here to stay in veterinary medicine. Will your veterinary practice clients be able to capitalize on opportunities?
The past year has presented unprecedented challenges and opportunities to the veterinary industry. Prior to 2020, the industry was already experiencing labor shortages in the form of difficulty attracting and retaining veterinarians and technicians. In several surveys, more than 70% of practices said that they would hire at least one veterinarian if they could find one. Yet, in 2020, with the arrival of the COVID-19 pandemic, practices were confronted with yet another reduction in the availability of staff. And with an increase in demand and volume of work due to a disrupted work environment caused by curbside offerings and other requirements, has made it even more difficult to retain and hire staff.
Veterinarians have experienced a wide variety of market environments over the past 15 years. Prior to the economic downturn of 2008, many people thought that there was an over-abundance of veterinarians. Practices could dictate terms of employment. Practices were highly focused on marketing and outreach to drive new client opportunities and transactions. When the financial crisis deepened, practices were faced with some flattening or decline in demand, and many found that they were overstaffed and had to learn to be better managers, making tough decisions to get payroll and inventory expenditures in line with those of a healthy practice. Since 2012, the market demand has steadily grown, and over the next six to eight years, the labor shortage became apparent. In the pandemic, practices had to learn to optimize the use of their short staffs to cover an even bigger demand for services from clients. In spite of these challenges, practices have shown resilience and creative flexibility by utilizing fewer staff to satisfy unprecedented demand.
Some practices that were not optimally managed or prepared for these extraordinary challenges have closed down or reduced hours. Those that were prepared have seen unprecedented growth. Currently, most practices that are still operating are seeing unprecedented demand for their services. Revenues are up, transactions, while decreased slightly during early COVID, were offset by significantly higher average transaction fees. Now, it appears that both transactions, revenue, and average transactions are all strong. And this was accomplished with many clinic teams still being understaffed.
So, we’re seeing unprecedented demand for veterinary services. And, as a result, there are unprecedented opportunities being presented to the veterinary industry in the form of increased availability of capital competing to own veterinary practices, to invest in animal health ventures, and for compensating and motivating employees of all of these ventures. In addition, acquisition of veterinary practices by corporate aggregators has escalated as a result of the pandemic, and valuations have continued to climb as well.
A frequent question is: What does the future of veterinary medicine look like? Here are some predictions:
- The interest among professional sources of capital in the pet space will increase. This is driven by the increasing commitment of people to have pets and their desire to treat them as members of the family. This demand will not change any time soon, barring a catastrophic and prolonged economic event.
- The professional labor shortage for veterinarians and technicians will continue. Practices will likely be forced to restructure their financial metrics and commit more resources to hiring veterinarians and technicians.
- The labor shortage will drive changes in how veterinarians and technicians are utilized. Changes to work flow, records management, communications, and other time-consuming tasks will be a priority to ensure allocation of precious resources to areas that provide the greatest return. As has been done this past year, practices will produce more with less.
- Technology solutions will be developed to help reduce the reliance on human capital, all driven by the labor shortages that currently put stress on veterinary practices.
- Fees for services will continue to rise to match the need to pay staff more and to optimize return on scarce labor deployed to achieve specific objectives.
- Practices will learn to outsource more tasks that are difficult to monetize. Industry partners will provide those services for them since they will be able to provide them more economically due to economies of scale.
- Veterinarians and technicians will have more diverse opportunities than ever before due to the investment of outside capital in the industry. For those who are motivated, opportunities will be more plentiful and potentially more fruitful than ever before.
- For those who do not like change, you will be uncomfortable and likely unhappy, as change will be rapid and constant for years to come.
About the author
Edward L. Blach, DVM, MS, MBA
Dr. Ed Blach works as a business and market specialist in veterinary medicine. He has a unique background that combines veterinary medicine, market research, business development, and management. Dr. Blach is also an inventor whose professional passion is innovation and improvement. He is co-founder of two current startups: Ask.Vet and ismypracticehealthy.com.
Photo credit: istockphoto.com/Maridav