Skip to content

How To Improve Veterinary Hospital Profitability

January 30, 2024

Veterinary Services Group

Most veterinarians joined the profession to care for animals – not necessarily to run a business. Yet profitability is critical to keeping a hospital sustainable and enabling it to grow. In the midst of changing economic conditions and the day-to-day busyness of running a veterinary hospital, it can be challenging to focus on profitability. Plus, sifting through financial data isn’t usually at the top of hospital owners’ to-do lists.

But profitability doesn’t have to be overly complex. Essentially, profitability boils down to three factors: revenue generation, cost management, and finding efficiencies. This article will take a look at each category and will provide some actionable strategies for how you can improve profitability at your veterinary hospital.

How To Improve Veterinary Hospital Profitability - Venn Diagram

Revenue Generation

Revenue GenerationGenerating revenue is key to maintaining a financially healthy business. Because revenue fills the “top line” of a profit and loss statement, keeping revenue coming into the business will ultimately affect the “bottom line” – or profitability. You may think that generating more revenue means working more, but that’s not necessarily the case. Revenue generation comes in several different forms.

Attracting New Clients

In today’s competitive market, pet owners are not only looking for great service but for a hospital that stays up to date and offers a personal touch. However, they likely won’t just happen to “find out” about your hospital – you’ll need to tell them. That’s why attracting clients to a veterinary hospital involves marketing. There are many different ways to market your hospital – your website, social media advertising, referrals from current clients, special events, and more.

Perhaps the most beneficial marketing method is an online presence. The majority of Americans search online for information, reviews, and ratings before making a purchase. The same holds true when they’re looking for veterinary hospitals. Investing in your online presence can mean the difference between a prospective client choosing you versus the hospital down the road. Your website should be professional, helpful, and user-friendly, and online reviews should be closely monitored and addressed as needed. Running active social media accounts can also be a valuable tool for engaging prospective clients and current clients alike.

Retaining Existing Clients

Engaging – or reengaging – current clients by increasing patient compliance can also help bolster revenue. By using forward scheduling and reminder systems, you can help ensure clients are coming in for their recommended annual exam every 12 months. Imagine if half of your patients waited 14 months to come back to the hospital for annual services. In a six-year span, those clients would have missed out on one annual visit per patient. Not only does it potentially compromise care, but it also leaves revenue on the table.

Client satisfaction surveys are a useful tool for understanding your clients’ loyalty to your hospital. They can provide meaningful data to start measuring, analyzing, and tracking client satisfaction instead of relying solely on a gut feeling. As simple as it might sound, start by just asking your clients if they had a good experience or not. Send short email surveys after appointments or even pose one or two questions at checkout.

Loyalty programs, whether they offer discounts or free items, can also help retain existing clients. In fact, according to Statista, 79% of Americans said loyalty programs incentivized them to keep doing business with a brand. However, it’s important to build a loyalty program that will accomplish your hospital’s goals while helping the client feel an additional benefit from bringing in their pet for services.

Offering New and Expanded Services

Most veterinary hospital revenue comes from common sources like exams, pharmacy, imaging, laboratory, anesthesia and surgery, and dentistry. But some hospitals expand revenue generation by offering new or expanded services. For example, you could consider adding laser therapy, rehabilitation services, boarding, or daycare services.

One other way to expand services is by adding another doctor. In a tight labor market, it can be a challenging and time-consuming process. However, there are steps you can take to help ensure that you are attracting the best doctors of veterinary medicine (DVMs) to join your practice and to help grow the veterinary hospital’s revenue.

Pricing Strategies

Setting prices can seem complex, but it doesn’t have to be. Even small changes can help improve veterinary hospital profitability.

It’s a good idea to review all pricing periodically throughout the year, but one place to start is by regularly updating prices in your hospital’s practice management system when receiving updated pricing from vendors. By updating the correct vendor pricing information, you can make sure that your margins are based on the correct item cost. It is also important to review the markups being utilized on the most commonly sold items as changes in these popular items will have a more significant impact on the business.

Similarly, fees should also be evaluated periodically throughout the year instead of just once per year. Reviewing fees quarterly can help ensure your hospital is adapting to the changing dynamics and capturing revenue.

Some veterinary hospitals have implemented payment plans, often referred to as wellness plans, as an option for clients. While these plans don’t discount the annual services provided, they help spread the costs throughout the entire year by dividing the total amount into manageable monthly payments. Younger generations appreciate the monthly payment option from a budgeting perspective, and these plans can also be an effective way to reduce the number of unpaid client bills.

Measuring Revenue Generation

How do you measure revenue generation at a veterinary hospital? There are a number of metrics that you can use, such as the number of invoices, the average client transaction (ACT), and DVM production, to name a few. By evaluating multiple revenue metrics, hospitals can gain a better understanding of what is truly causing an increase in revenue. For instance, a hospital can determine if revenue is increasing due to seeing a larger number of patients versus increasing fees.

Aligning hospital financials with the American Animal Hospital Association (AAHA) and Veterinary Management Groups’ (VMG) chart of accounts can also help benchmark revenue generation against other hospitals.

Cost Management

Cost ManagementEven if revenue generation is strong, high costs can whittle away at the hospital’s bottom line. There are a number of ways to reduce expenses in veterinary practices without cutting corners. Here are some key areas for expense reduction.

Labor and Benefits

Labor and benefits are the largest expense category for most veterinary hospitals – regardless of hospital performance. That makes it critical to effectively manage veterinary hospital labor.

Making sure people are doing the right jobs is the first step toward reducing excess labor costs. Scheduling labor should be done based on the needs of the hospital – the patient load – rather than employees’ preferred hours. You can regularly review the schedule to determine if total labor costs (labor, payroll tax, and benefits) are below 40% of gross revenue, which is the veterinary industry benchmark. If your labor costs are more, there is likely potential for realignment. The realignment in labor metrics can be made not only through efficient scheduling but also through realignment of prices to share the burden of increased labor costs.

Without a doubt, keeping your current employees is one of the most effective ways to manage labor costs. It’s expensive to hire and train new talent, so veterinary hospital owners should focus on retaining their existing workforce. That can be accomplished by building and maintaining a positive hospital culture and by reviewing compensation packages to make sure they’re competitive.

Direct Costs

Direct costs come in many forms: inventory costs, lab costs, imaging costs, anesthesia costs, dentistry costs, surgery costs, boarding costs, grooming costs, and more. It can be hard to know where to start to reduce costs.

Aligning your chart of accounts with the AAHA VMG chart of accounts will allow you to begin benchmarking the hospital against others, which can help you identify the largest areas of opportunity among the service lines that may require further analysis.

Reviewing margin analysis by category should be done to determine the markups of each product or service offered. You can start by pulling the quantity sold, sale price, and cost for the category to review margins.

Another place to address costs is negotiating vendor contracts. Sometimes vendors will offer an upfront cash incentive, but the best option may be requesting the lowest pricing available instead. It is important to review all the details and understand if there is a minimum or maximum annual price increase allowed by the vendor when accepting offers.

General, Administrative, and Tax Costs

General and administrative costs can be facility and equipment costs, advertising costs, utilities costs, and more. Some of these costs, like facility and equipment costs, are fixed costs, which means you won’t have much control over the expense line of these items. Other costs, like utilities costs, are variable costs, which means you can reduce them by using them less. That may mean using energy-saving lights, shutting down equipment that is rarely used, and installing a smart thermostat.

Because advertising is part of your hospital’s marketing efforts, which can help bring in business to the hospital, it might not be ideal to cut all advertising costs. Instead, consider whether you can move to a less expensive way to advertise – like social media – or ask clients for referrals instead of paying for more traditional advertising. A review of the return on investment for marketing efforts can help determine the best way for your hospital to attract and retain clients.

It’s not always possible to minimize tax costs, but proper tax planning can help veterinary hospitals avoid a large, unexpected tax bill. An accounting team that specializes in veterinary tax can also help you navigate the nuances of taxation for your hospital, helping you apply tax credits and depreciation properly.

Measuring and Monitoring Costs

Given how substantial labor and benefits are in cost reduction, it’s important to review efficiency and leverage metrics such as revenue per staff hour, invoices per full-time DVM, and staff support minutes per invoice. These metrics should be tracked over time to understand where there may be additional areas of opportunity to reduce the labor burden.

Inventory can also be assessed by counting the number of inventory turns, or how frequently inventory is being utilized. Keeping tabs on these key performance indicators can help you eliminate excess costs – or catch them before it gets out of hand. Excess inventory can result in expired goods, an opportunity for shrinkage, and unnecessarily tying up working capital. Consideration should also be given to the variety and types of products stocked.

Finding Efficiencies

Finding EfficienciesVeterinary hospitals tend to focus on revenue generation and cost management while efficiencies are avoided completely. Finding and implementing efficiencies can seem daunting, but mak­ing even small changes in your internal and external policies, systems, and procedures can have powerful results, including more empowered staff members, happier clients, and increased profits.


Finding efficiencies amongst your staff doesn’t mean eliminating jobs. It’s more about making sure everyone understands roles and that employees’ capabilities are used effectively. Even if the staff isn’t performing redundant tasks, a lack of training can create inefficiencies. Mentoring can help bridge that gap, creating structure around processes and helping pour into the team’s professional development – for both the mentor and the mentee. Structured mentorship can go a long way in helping create a positive hospital culture.

Standardized Processes

Having a standard process can help ensure all clients are receiving the same experience and level of care.

Start by mapping out the client experience – from scheduling and the front desk to the exam and billing. Identify areas for improvement and bottlenecks in the hospital flow. For example, at the end of each exam, is the client asked about forward scheduling their next checkup? It can simplify appointment booking and cut down on the need for reaching out to schedule appointments.

Templates are another tool that can help standardize processes. Start with the most common services provided by the hospital and create protocols for the best treatment plans for these cases. Having these templates can help prepare staff to anticipate needs, speed up checkout, and ensure correct charges on each pet’s invoice. Templates can also help you prevent missed charges.


In today’s culture, where many place a high value on convenience and instant gratification, technology can make all the difference in enhancing efficiencies. There are technology tools that can help you create a standardized template, develop an intelligent inventory system, implement online scheduling, issue reminders, conduct telemedicine appointments, or facilitate a client satisfaction survey.

It’s important to be thoughtful about where to use technology so you aren’t compromising quality, but don’t wait for your competitors to “work out the bugs” with new tech tools before using them at your hospital. Become an early adopter and define how technology can increase efficiency while providing excellent care.


When it comes down to it, compromising care for the sake of veterinary hospital profitability is simply not a long-term strategy for a successful and financially healthy hospital. Generating revenue, reducing expenses, and finding efficiencies has to be balanced with providing quality service to your patients. Keeping the intangibles – like quality, culture, mental and emotional wellbeing, and morale – in mind will help ensure a balanced approach. After all, though they are intangible, these factors contribute to the bottom line, too.

Do you need help assessing your veterinary hospital’s financial wellbeing? If so, we can help. Contact us to learn more about how our veterinary consulting team can help you improve profitability and help set you on a path to a brighter financial future.

A Guide to
Best Practices

Learn how you can run a healthy, efficient, and profitable veterinary hospital.

Download the Guide