New Ways of Working -Collaborative Business Models in the New Economy Alan Robinson B.V.Sc. MRCVS DMS www.vetdynamics.co.uk
Collaborative Business Models• The ‘Old’ Business Model• The Corporate Collaboration• Collaborative Models that deliver Value and Vision in your Practice to Your Clients• Platinum Academy – A New Collaborative Model
Hang On!! I thought Alan Robinson was giving this talk??• The Wonder from Down Under
Hello. I’m Not Alan….• Scott Crae MRCVS• Edinburgh Graduate 1992• Platinum Partner with VetDynamics• Inventor of the ‘Internet’ Vaccination Amnesty• Consultant to Industry on Pharma• Interests - the Clinician –Client Interface, emerging social and biotechnology trends
Turnover Growth 1998 - 2008 14.0 TURNOVER AND ITS COMPONENTS MAT GROWTH 1998 - 2010 12.0 Turnover 10.0 Transactions Av.Trans Value 8.0 6.0Percentage 4.0 2.0 0.0 -2.0 -4.0
The Veterinary Challenges of The ‘Old Economy’• Competition – Expanding veterinary practice – Deregulation from 1997 – Spay, vaccination & neutering clinics – Retail and Internet competition• Legislation – Marsh Report / Competitions Enquiry – Deregulation – Regulation• Demographics – Foreign graduates – Expectations of younger graduates – Women in the profession
Competition Enquiry?• Are we in Competition Then??
What’s Changed? - The 3 S’S• Strategy – What we do• Systems – How we do it• pSychology – Why we do it
Business StrategyActive Clients Transaction volume Average number of visits TURNOVER per year Average transaction fee
The Strategy of the ‘Old Economy’Uses the exponential effects ofTransaction Volume • More Clients • More Visits from clientsTransaction Value • Clients Spend more per visit (prices) More work = more money
The Systems of the ‘Old Economy’• Poor (non-existent) accounting & financial knowledge, systems & processes• Poor (non-existent) leadership• Poor (non-existent) business management• Poor (non-existent) communication systems• Focus on Drug sales vs. Professional fees
Financial Results of the ‘Old Economy’• Low profit (<5%)• Consumable costs >30%• Drug Sales providing >75% of profit• Staff costs high >50% • Either over staffed or under performing• No Marketing budget for client attraction & retention.• No CPD budget for training and improving skills.• Return on Investment too low • For re-investment and Future Business Development
The Behaviour of the ‘Old Economy’• Clinicians acting as practice managers (clinical vs. management mind-set)• Failure to recommend and charge for professional services - Guilt, Fear and Obligation induced• Complacency being tolerated• Conflicts not being handled inside and outside the practice• Difficult decisions avoided altogether, or delayed too long,• Poor Implementation & time management• Procrastination - Problems not tackled early on but escalate almost beyond control• Reactivity - Fewer initiatives will be taken, so that outdated methods will be retained and opportunities will be lost
The pSychology of the ‘Old Economy’• Frustration• Anger, Aggression & Avoidance• Insecurity• Loneliness• Uncertainty• Resentment• Emptiness
Too many vets work far too long,for too little return,due to inefficiency, frustration and poor profitability.
The Opportunity of the ‘New Economic Model’ (N.E.M.)’ For every Threat therein lies an Opportunity• Competition• Compliance• Commoditization• Corporatisation• Collaboration – the opportunity in Private Practice
Vet Industry ‘Playing Field’• Fragmented, unconsolidated, unregulated• Increasingly consolidating and competitive industry• Centralisation of services – marketing & accounting• Few ‘large’ acquisition opportunities for corporates.• Independents’ livelihoods squeezed by corporates’ lower costs of capital, scale economies and online efficiencies
The ‘Uneven’ Playing Field• Lower returns demanded from investors of corporates than independents, due to higher long-term growth prospects• KKR (P@H) invested in Companion Care at a 7% return,• Public shareholders into CVS at 9%,• Independents seek 20-25% returns
Veterinary Trends 14.0 TURNOVER AND ITS COMPONENTS MAT GROWTH 1998 - 2011 12.0 Turnover 10.0 Transactions Av.Trans Value 8.0Percentage 6.0 4.0 2.0 0.0 -2.0 -4.0
The next 10 years…? = the economy 1946 1996 2016 2036
The Next Decade…? Cash Cash-flow Credit Survival Opportunity ???2008 2012 2013 2017 2020 2nd longer All Mini Dip Assets Boom
So How Are Others approaching this New Economy?
Industry Corporate Players Company No of Clinics Mkt Share Company Description Market leader, founded in 1999. Floated on AIM by Sovereign Capital in 2007. CEO is Simon1 CVS 225 10% Innes (ex Vision Express), Chairman is Richard Connel (also Chairman of aquisitive funeral services business Dignity). Nationwide presence. Target 30-50 surgery acquisitions p.a. Companion Care, founded in 2001. Part of leading pet food/prodcut retailer Pets at Home (3002 Companion Care 92 4% stores), itself owned by Private Equity firm KKR. Aiming to double in size in 5 years. Expanding by c.10-15 practices p.a. Sunday Times 2010 Top 100 Best Companies to work for. Founded 1986. Operates as partnership of over 50 vets. Investigated by BBCs Panorama3 Medivet 87 4% programme in July 2010; subject to widespread press about some malpractise at clinics. Founded in 2001 by MD Peter Watson, whos background is in branch expansion/franchising at the4 Vets 4 Pets 78 3% optics chains Vision Express and SpecSavers. Founded 1952 and still privately owned. Greater London focussed. Gradual acquisitive growth.5 Goddards 45 2% Well respected in industry. Founded October 2011 via a consolidation by Private Equity firm August Equity, of Bath-based6 Independent Vetcare 22 1% Advanced Vetcare Limited and Rowe Veterinary. SW-focussed. Chairman is Terry Norris (ex- CVS). Total Corporates 549 24% Total UK Small Animal 2,300 100%
Corporate Collaboration Strategy• Optimising Group Size• Optimising Shareholder Profits• Minimize Operational Costs• Fixed Investment Period – hold & divest• Maximising Exit Sale Value• – for shareholders
Corporate Practice Independent Practice Strategy Strategy • Optimising Practice Profit• Optimising Group Profit through cost control and through cost control increased performance• Fixed cost model HR CPD • Discretionary spend• Difficult to manage vet • Motivated staff performance • Optimising Owner Profits• Centralised marketing • Optimising Owner Cash• Limited Ownership • Maximising Exit Sale Value• Maximising Exit Sale Value • Flexibility for Owner
Independent Strategy for the New Economy• Profit (not Turnover)• Propagation (Marketing)• Performance (of Vets)• People (Collaboration between Client Needs and Staff Engagement)
PROFITMarketing Operations PHC ClinicalClient Quality Vet QualityActive Bonded Clients Vet Performance & Systems CPD & Staff Development
New Strategy Rules for the New Economy The Rules have changed!1. You do not need to do MORE work You need to be more PROFITABLE2. You do not need MORE customers You need BETTER customers
New collaborative Strategy rules (N.E.M)A high quality veterinary service is defined by 4leveraged Collaborative Stakeholder outcomes(not shareholder)1. The Patient – the clinical health results2. The Client – the client value experience3. The Team – practice systems & protocols4. The Financial result – profitable & sustainable
New marketing rules (N.E.M)MARKETING does NOT = INCOMEMarketing = OPPORTUNITY to create income SELLING your products and time(practicing good medicine) = INCOME
New marketing rules (N.E.M) Veterinary is a Qualitative business NOT a Quantitative businessYou CANNOT have a successful HIGHquality veterinary business with LOW quality clients. (or low quality staff!)
New marketing rules (P.E.M)Quality (Bonded) CLIENTS …are defined by their ATTITUDE to pet owning…not their incomeAttitude indicators• Vaccination• Preventative health care• Premium diets• Microchips• Insurance• Compliance…
New marketing rules (N.E.M)Product marketing Value Marketing “The 4 P’s” ‘the 4 C’s’ 1. Product 1. Collaboration 2. Price 2. Customisation 3. Place 3. Community 4. Promotion 4. Conversation
New marketing rules (N.E.M) There is no shortage of veterinary servicesThere is a shortage of Quality veterinary servicesThere is a definite shortage of YOUR veterinary services Limited resources are easier to leverage!
3 Systems to Increase Client Quality.1. ATTRACTION Branding, Visibility & Differentiation • On-line • Off-line2. CONVERSION Customer service and communication3. RETENTION Preventative Health Care as a Marketing tool
Marketing Strategy N.E.M. Quality Veterinary Clinical Care Marketing, Promotion + Insurance Branding and Image Bonded Clients Nurse/Reception Client CarePreventative Healthcare + Staff Training Payment Scheme Communication …a lifetime of care….
New money rules (P.E.M)Most practices are too busy• To make money• To practice good medicine BUSY does NOT = PROFITABLE NO TIME = NO MONEY
New money rules (P.E.M)Veterinary Practice is grossly inefficient andpoorly leveraged• Buildings• Staff• Equipment• CPD• Marketing• Profit = 5-10% (20X in => 1X out)
£120 Income = £100 = •Tax •Capital Repayment PROFIT PROFIT £10 •Investment •Equipment plus •Bonus Drug £28 Costs •RemunerationDrug Costs •Return on Investment plus Wages £42 Wages plus Fixed £20Fixed Costs Costs
New money rules (P.E.M)In the New Economy Profit will be created byLeverage (80:20) X in 10 X out• Time• Money• People• Resources
New money rules (P.E.M)Quality Veterinary Practice is a High FIXED Cost business There is NO SUCH THING as LOW COST veterinary clinical treatment!
New money rules (P.E.M)MONEY is what clients will exchange for perceived VALUE So…what do your Clients VALUE? There is NO shortage of MONEY But there is a shortage of VALUE
New business rules (P.E.M)Successful veterinary businesses use the exponential effects of a Collaboration Between All Members of the Practice Team AND the Bonded Clients to Deliver High ValueTransaction Volume • Attracting & retaining Better Clients (LESS is better)Transaction Value (Offering greater value to clients) • Practice better medicine • Price based on better value • Value YOUR Service and Support
7 Steps to Increase Profits (with no more clients!)1. Branding, Visibility & Differentiation – on & off-line2. Customer service and communication3. Preventative Health Care as a Marketing tool4. Financial Control Systems – 1. Costs 2. Debt 3. Stock control5. Profitable Pricing of Clinical Professional Time6. Correct Invoicing - Put all items on the bill7. Practice Good Medicine 1. Measure and monitor vet sales performance 2. Do the work presented
4 Systems to Increase Profits4. Cost Control Systems- Financial, Debt & Stock control5. Strategic Pricing of Clinical Services – professional time6. Correct Invoicing - Put all items on the bill7. Practice Good Medicine - measure and monitor vet sales performance - do the work presented to you
•Clients £Branding •Visit FrequencyMarketing •ATVP.H.C. £ PROFIT Cost Control Correct Pricing DRUG COSTS Debt & Credit Control Accurate Invoicing Stock ControlMissed Opportunities FIXED COSTS PROFIT PROFIT
New People rules (N.E.M) Quality (Bonded) STAFF …are defined by their ATTITUDE to work…not their technical skillsAttitude indicators• Communication skills• Compassion for patients• Commercial awareness• Respect for Clients• Emotional intelligence• Willingness to learn….
Leadership Skills for the New Economy • Sense of Direction • Understanding • Courage to Act • Compassion • Esteem & self worth • Self Confidence • Self Acceptance
Platinum Academy – A New Collaborative Model• I joined a ‘Collaborative Model’ in June 2009• Platinum Academy• 8 Non-competitive vets• Meeting 2 days per week, 6 times per year.• Sharing successes, challenges, information and support• Directed Learning From world leading experts in finance, HR, Psychology, Time Management, Marketing, Tax Planning, Investment and exit strategy
Sustained Growth in the worst Economic Downturn in Decades A Vision and Strategy in Alignment with my clients needs and wants for their pets A Vision and Strategy in Alignment with the financial needs of the practice Within this Collaborative model, average growth of 18% last year Employment of 4 new team members this summer alone
Platinum Member since July 2009 Graduate Member since December 2010 Created a Vision Made a Plan (revised) Got Help – A Collaboration With Like Minded Colleagues Built a Team Vet Dynamics CPD Vets Nurse Training Reception Training
1-2-1 Performance Reviews Invoice Workshop Platinum Conference 2 days / 2 mnths Time Management Financial Objectives and Goal Setting Pricing and Performance Finance and Cost Control Staff Psychology and Motivation Stock Control Debt Management Marketing and Networking