Running a successful veterinary clinic requires understanding the financial landscape, from start-up costs and revenue streams to profit margins and expense management. Whether you’re opening a new practice or seeking to optimize an existing one, having a clear grasp of financial metrics is essential.
Veterinary professionals can make informed decisions to ensure profitability and sustainability by examining revenue benchmarks, break-even calculations, and cost structures.
In this guide, we’ll break down the critical financial aspects of running a vet clinic, helping you effectively navigate the complexities of vet practice management.
According to Business Valuation Resources, most vet practices generate between $300,000 and $600,000 in revenue per full-time veterinarian, depending on location, clinic type, and local factors. Those in rural areas will typically generate less than those in urban areas catering to different species and clientele.
Still, rural areas usually have lower living costs, allowing clinic owners to generate a good living regardless of their location.
When starting a veterinary practice, there are many things to consider, from location to equipment purchases to client demographics. The cost to open a vet practice can vary widely, depending on the area and the type of practice being set up. However, on average, it costs between $541,000 to $901,000 to open a clinic.
These start-up costs include renting and modifying the facility and purchasing furniture for the office, waiting room, and exam room. They also involve purchasing and installing kennels and buying veterinarian tools like medical and surgical equipment. Your practice also needs a quality X-ray machine.
The best veterinary X-ray machines depend on your practice, typical patient size and needs, and patient turnover. Paying for veterinary X-ray machines doesn’t have to be stressful; Maven Imaging offers plenty of flexible in-house financing options to help you get started. Buying the right machine from the start will save you significant costs and headaches in the long run.
Additional start-up costs include advertising and promotional offers to inform the community about your clinic and its offerings, as well as insurance and licensing fees. Finally, you will also need to start paying salaries before you can start generating revenue.
According to Today’s Veterinary Business, the average profit margin for a vet clinic is 10% to 15% for small animal hospitals or 15% to 25% for emergency clinics and other specialty practices. To put this into perspective, profit margins greater than 18% are considered exceptionally good, while margins lower than 8% are considered poor.
Studies by Statista indicate that the US veterinary services market will reach nearly $55 billion by the end of 2024, leaving plenty of room for profits.
To calculate profits, you first need to forecast your revenues and expenses. Then, you can calculate profit with the following equation:
Profits = Revenue – Expenses
For expenses, keep in mind there are variable expenses known as Cost of Goods Sold or COGS. These increase with revenue since they are proportional to the number of patients and include consumables like vaccines, surgical supplies, and extra utility fees above baseline for increasing numbers of X-rays or other energy-consumptive procedures.
The more patients you see, the higher your COGS will be. Fixed operating expenses include baseline utility bills, rent, and salaries that will not vary with your revenue; these are the bulk of your expenses.
Therefore, your profits before interest, taxes, depreciation, and amortization can be calculated using this equation:
Profit = Revenue – COGS – Operating Expenses
The break-even point of any business is the point at which total costs and revenue are equal. At that point, if you generate more revenue, you turn a profit. Since you have those fixed operational costs like rent and salary that do not increase with revenue, at a bare minimum, your break-even point is at least more than the sum of all those fixed operational costs.
We can also calculate this more easily, assuming most vet clinics have an average gross margin of 85% because most expenses are fixed costs.
Then, you can use the following equation:
Break-even point = Fixed costs / Gross margin
Here, let’s assume your fixed costs are $40,000. Then:
Break-even point = $40,000 / 85%
= $47,059
This means you need to generate over $47,059 to start turning a profit.
The percentage of the payroll in a vet clinic will vary with the location, the type of practice, and the staffing needed. However, in general, payroll for staff is somewhere between 20% and 30% of the clinic’s gross revenue.
Understanding the financial dynamics of a veterinarian clinic is key to ensuring long-term success. Each aspect plays a critical role in your clinic's financial health, from forecasting profits and calculating break-even points to managing payroll and operational expenses.
With the right strategies and tools, including high-quality, cost-effective equipment like veterinary X-ray machines, your clinic can achieve profitability and growth. Maven Imaging supports your journey with flexible financing options and expert advice to help you build a thriving veterinary practice. Contact us today to get started.