Allansville Veterinary Practice Case Study

A week had passed since Tony was offered the Allansville Veterinary Practice by his boss, Dr Kay Milton, and Tony was wondering if purchasing the practice would be a good idea.

The offer from Kay included:

• Building and land value (based on two independent valuations)
• Stock, plant and equipment at book value
• Debtors
• $50,000 for client list and histories
• Opportunity to lease, with option to buy within 3 years

Tony planned to take up Kay's offer of leasing the practice, with the option to buy within three years at a pre-arranged price. Tony decided to prepare a strategic plan prior to his next meeting with Kay.

Kay has owned the clinic for 25 years. The building, a converted house with three additional rooms, requires maintenance inside and out. The outside of the building is red brick and no windows face onto the street. The block is a large double block, but there is no parking provision for parking on the block and clients must park on the main road.

Kay has seen the community dynamic change from farming families to government funded housing over the years she has lived in the area. In the past few years, the practice has become a target for break-ins and vandalism. Drugs have been taken from unlocked safes and cupboards. Recently, Kay has had iron bars welded to the windows at the back of the building and a heavy iron door installed at the entry to the building. Unfortunately, the building now looks more like a jail than a veterinary surgery.

The practice is in a good location on a main road. However, signage is poor and cannot be seen from the road. There are three other small animal clinics within a five kilometre radius, all of a reasonable standard and service mix and offering an after hour's service. They too have survived under the same community culture but have attended to graffiti, and have attempted to use alarms and security monitoring services that deter many vandals.

The practice employs Kay, the business owner, a book keeper, Jan, two unqualified veterinary assistants, Deb and Lisa, and Tony, the second vet. The book keeper, Jan, is part-time and works fifteen hours a week. The staff work with an outdated computer system which they find can waste time as they wait for the system to reboot or search for lost information. The veterinary equipment at the practice is also old and requires upgrading.

Tony is aware that the practice finances have not been well handled by the bookkeeper, Kay, and record keeping is poor. Wholesalers ring the practice to seek payment and some have threatened to put the account on hold. Tony is also aware that staff superannuation is not paid regularly. Bad debts are at approximately 20% and there is little chance of retrieving a quarter of these debts. Tony knows that Kay and the other staff can be persuaded to give credit and the practice has not had a policy of following up on bad debt, or refusing service to clients with outstanding accounts. From Kay's perspective it is all about helping the animals, and she is not worried about the practice finances as she trusts Jan to work it out.
The practice is open from 9am - 5pm Monday to Friday, and 9am - 12 noon on Saturdays. No staff are rostered over the weekend to care for hospitalised animals. As a result, surgery cases that present late in the week are often turned away.

Allansville Veterinary Clinic has a contract with the local council to help with cat control. However, the clinic does not supply personal protective equipment (PPE) to staff who deal with feral cats. Recently, Deb, one of the veterinary assistants, was hospitalised with cat scratch fever after being attacked by a feral cat. Kay's response was that she should be more careful. Along with assisting with the feral cat problem, Allansville Veterinary Clinic also receives duty of care cases from the RSPCA on a daily basis. Staff have suggested that the RSPCA should have a permanent car park outside of the practice as they are consistently delivering cruelty cases for assessment and treatment.

Tony suspects that a large amount of valium, some ketamine, some methadone and a vial of morphine have gone missing during the last month. However, record keeping is poor and it is difficult to be certain if this is the case. Tony is aware that Deb, one of the veterinary assistants, has had some mental stress issues and has put a claim in for Work Cover. Kay insists her issues result from her home life, and that Deb should just get on with it. But Tony wonders if there is a relationship between Deb's issues and the possible missing drugs.

Staff

• Kay: 35+ years experience, consults only (retiring)
• Tony: 5 years experience, consults, orthopaedics, surgery
• Jan: part time bookkeeper
• Deb: unqualified vet assistant, undertakes very little animal care, main duties are cleaning and administration
• Lisa: unqualified vet assistant, undertakes very little animal care, main duties are cleaning and administration

Staff wellbeing

• Mental health related WorkCover claim
• Possible missing drugs, but difficult to prove due to poor record keeping
• Lack of PPE for staff

Positives

• Located on a main road
• Large block
• Three additional rooms built onto original house
• Secure

Negatives

• Building in need of repair
• Vandalism
• Drugs insecure
• Unwelcoming due to bars for security
• Lack of visible signage
• Three other vet clinics within 5km radius
• Equipment old and requires maintenance
• Computer system old and requires update

Financial status

• Bookkeeping is poor
• Wholesalers requesting payment
• Superannuation not paid regularly
• Slow payers with little chance of recouping a large portion of the receivables outstanding

Tony considered that veterinary business management is like undertaking an examination of a patient. The fundamentals are the same: construct a problem list, make a diagnosis and embark on a treatment plan, it's just applied to a different type of patient. For Tony, the practice health check is in essence a strategic management review of the practice, including analysis of strengths, weaknesses, opportunities and threats (SWOT analysis).

Tony shared with Kay the scope of the review and outline for the business plan, and he also explained how the health check would allow him to develop check a series of short, medium and long term recommendations for implementation. Tony's business health check covered four key aspects of the business:

• Physical Findings (clients' impressions) - Examine branding and visual identity, and arrange "secret shopper" visits to determine how clients view the clinic
• Temperature (team) - Examine organisational structure, operational controls, human resources (HR) issues, and occupational health and safety (OHS) issues
• Pulse (finances) - Review cash flow budget, fee schedule and stock turnover, and KPIs, then compare to similar practices
• Respiration (professional conduct) - Review record keeping and certificates, and protocols for handling difficult cases or situations

Kay was impressed with Tony's plan and agreed to lease the business to him at a very reasonable rate, with the future option to purchase the practice.