Economies of Scale and Consolidation
Economies of scale are a basic business concept that suggests that any business with fixed costs (costs that do not increase or decrease with revenue) should become more profitable as it grows larger.
This industrial logic applies to groups of highly trained clinicians whether they are human doctors, veterinarians, dental, physical therapists etc, because all of these businesses incur fixed costs. Rent is a prime example of a fixed cost in veterinary medicine.
Within veterinary medicine, many business functions – legal, accounting, finance, HR etc – are imminently scalable and tend to be inconsistently managed by DVM owners. The advantages gained by grouping clinicians, or practices together to scale these functions so they can be provided at a higher quality and for less have been proven in the market again and again by the veterinary consolidators.
Yet, there is another strategic benefit of grouping together veterinary clinicians and veterinary practices. A group with many clinicians and practice managers may be able to make every clinician and manager better by disseminating clinical or business best practices from one clinic or one DVM / Tech to the next. Done well, this allows the entire group to organically increase the average quality of every clinician and every clinic. Whether the best practices apply to clinical elements or business elements, the basic premise is that clinicians or managers should be able to learn from each other under certain circumstances.
To me, this is the holy grail of consolidation, but it is not an easy feat to accomplish. It’s no surprise that I don’t see a lot of this happening in the veterinary market today, particularly among consolidators. It is much harder to create a company that is good at cross pollinating best practice than it is to scale your accounting department.
But this is not a new revelation. Some have found ways to effectively disperse best business practices across a group of clinics or practice owners.
Study Group Background
My first experience in this industry was working as an investment banker on the sale of CAPNA to VCA. Owen McCafferty, who I got to know well, was one of the executives at CAPNA (great guy). He was also a founder of VMG and their Study Group concept. In the course of our time working together, Owen told me much about the benefits Study Group membership created for the CAPNA hospitals.
Prior to selling itself to Covetrus, VMG was one of the most effective advocates for independent veterinary practice owners. The Study Groups program was a big reason for that. VMG, through its Study Groups, would facilitate and subtlety push, practice owners to learn from each other using standardized practice data and mild peer pressure. As a result, study group members formed lifelong relationships with their peers, who held each other accountable, and learned together to build better practices.
This is a highly impactful program, but some cracks have appeared, in my estimation. For one, VMG sold itself to Covetrus. Surely, Covetrus’ primary interest was the buying group assets that VMG had built. Even still, it’s a big deal for an organization that strenuously resisted consolidation for decades to sell to a distributor.
Secondly, VMG hasn’t developed much technology behind the Study Group offering. As I understand it, the KPI reports were developed by Terry Oneil’s firm and haven’t changed in years. Compiling such reports requires users to submit their data manually. Meetings today, as they’ve always been, are multi-day affairs and in person. Members have to find their own ways to communicate. Some use Slack or Facebook; many use email or phone.
Thirdly, the program is one-size-fits-all. All practices are required to use the same chart of accounts. Fees are the same and come with the same services. The VMG Study Groups are designed for new owners or owners who expect to own for many years. There is very little for owners seeking to develop an exit plan.
As a result, VMG has been around since 1984 but only has ~1500 members. There are 20K+ veterinary hospitals in the U.S., so as good as that Study Group solution may be, it is not nearly as accessible as it needs to be to help the practices that, likely, need the most help improving their businesses.
A New Approach
Fundamentally, VetValue’s Practice Owner EcoSystem is an attempt to facilitate the dispersion of best business practices from practice owner to practice owner using modern technology, our experiences, and the experiences of successful DVM Owners we know. We believe what we have built is more accessible and more flexible than the Study Group program, but still retains the elements that made that program so successful.
The EcoSystem is a fully cloud-based and available only to independent practice owners, their practice managers and in some cases, former practice owners that we know well. Every member must register and receive approval, though membership is complimentary.
Flexibility was, and remains one of our north-stars guiding our approach to developing technology. It is clear that not every person learns the same way, and not everyone has the same time and budget to devote to improving their business processes. We offer complimentary and for-fee services and active and self-directed learning. Data and Analytics services or practice valuations can be purchased a la carte (only pay for what you need) and in many different forms.
Another north star for us is accessibility. We want any practice owner to be able to take something away from membership in the Ecosystem. Whether you are a solo practitioner just beginning the practice ownership journey or a multi-practice owner nearing retirement, we have complementary and for-fee resources that can benefit you.
When building our technology, we wanted to facilitate giving back to the industry. Much better, in our minds, is to give to the industry what others might spend on a field sales force. We underpinned our ecosystem with a system of credits that can be given to another member or donated to a veterinary industry charity. Members earn these credits through referrals. Our members choose the charities and peers that benefit. Some of these referral credits can be quite meaningful. Since inception, we’ve administered multiple 5 figure donations to animal health-focused charities.
Finally, our ecosystem has no corporate sponsorship at this time and is financed privately 100%. No corporates are allowed access and we do not sell, or otherwise share any data or insights we receive with any third parties. It is very important to us and to our mission that we remain independent, so we built a business model that does not require us to monetize our users’ data.
If you have questions about any of this, please reach out. I’m always happy to speak to practice owners. If you do choose to become a member, you may use this link, which provides my referral code, for a discount on any product you may choose to purchase in the future. https://app.vetvalue.pet/register?code=Xd91wE.
Carson Taylor
VetValue Co-Founder