Money Matters

Experts weigh in on financial pitfalls and ways to success for your veterinary practice customers.

The path to financial success for veterinary practices requires consistent attention to both making money and managing costs. But often, practice owners find problems along the way.

Darby Affeldt, DVM, RICP, CPFA, a partner with North Star Resource Group in Minneapolis, is a former veterinary practice owner who now advises veterinarians on financial matters. She noted the top mistake she sees involves veterinarians who don’t have a formal financial plan in place.

“This is just like a treatment plan; it’s a very deep dive. Advisors do the ‘exam, health history, diagnostic tests, imaging, etc.’ to pull it all together and figure out what trajectory someone is on,” she said. “We see if they are off track, how to get them back on track, how to make them more efficient, building their wealth and funding for all the goals along the way. We make sure risks, which can derail a beautiful plan, are managed. We ensure investments and savings and tax planning are efficient and map them to retirement. It takes many hours to build a very comprehensive plan, but it’s the only way to be sure no stone is left unturned.”

Another mistake is that they don’t start planning early enough, noting they should be thinking about integrating their business planning with their personal financial planning from Day 1.

“From exploring when and what employee benefits they might consider, to how and how much profit they should be taking out of the practice, we need to analyze this early on,” Affeldt said. “As profits increase, we leave plenty in practice emergency reserves, but then we want to distribute per the accountants’ recommendations to ensure that those are put to work.”

Josh Ervasti, CEPA, a partner with R2 Financial Strategies in Des Moines, Iowa, frequently works with practice owners who look at their financials, see a positive net income number on their P&L, and count it as good without knowing all the factors that make up the P&L and how they can use that data to improve their business.

In addition to not knowing their true numbers, passing excessive personal expenses through the business is also a common mistake.

“Coming from the perspective of factoring the value of a practice into an owner’s overall financial plan, it’s nearly impossible to truly value a business if the books are dirtied up with a bunch of personal expenses,” he said. “Not to mention, if they are in a situation where they need to sell due to factors outside of their control, it’s hard to get a strong valuation on the business if the books are not in order.”

Charlotte Weir, founder and co-owner of 2525 Sunset Veterinarians, an animal hospital in Houston, noted the biggest financial missteps she sees is an overemphasis on cutting costs rather than cultivating growth.

“It’s easy to get swept up in the daily whirlwind of practice life and lose sight of the bigger picture,” she said. “But those deep dives – the uncomfortable conversations, the financial reviews, the strategic pivots – those are the moments that unlock breakthrough growth for your practice and your team.”

Ali Dhanji, AAMS, a financial advisor for Houston-based Raymond James & Associates, Inc., said many veterinary practices can unknowingly hurt their own financial success through several common mistakes.

“One of the biggest problems is making poor staffing decisions,” he said. “Some practices understaff to save money, which means expensive veterinarians end up doing work that support staff should handle. Others overstaff without proper systems in place. Both approaches can significantly hurt profitability.”

Another major mistake he points out is paying bills too early. If vendors don’t offer early payment discounts, he said veterinarians may want to consider using the full payment terms to keep the cash flow healthy.

“Many practice owners also fail to recognize when their practice isn’t actually making money,” he said. “They confuse revenue with profit and don’t properly account for paying themselves a fair market salary as a business expense.”

Poor cash flow management creates another problem. Practices often don’t always have adequate emergency funds and fail to check their key performance numbers regularly. Without proper financial tracking, small problems can turn into big ones before owners even know what’s happening.

Identify revenue drains

Money leaks often hide in plain sight. For instance, unpaid bills from clients represent a major drain.

“If you’re not actively collecting overdue payments, you’re essentially working for free,” Dhanji said. “Inventory problems, whether from theft, products expiring or poor tracking, directly hurt profits.”

Additionally, inefficient staff costs money when procedures take longer than they should or when expensive veterinarians do tasks that support staff could handle. Equipment problems, whether from poor maintenance or outdated technology, can also reduce a practice’s ability to make money.

“Many practices also lose money through pricing services too low, not accounting for all costs including overhead, or failing to raise prices regularly for inflation and increased expenses,” Dhanji said. “Insurance claim delays and denials represent another common problem that needs systematic attention.”

Weir noted to protect from revenue leaks, the secret is for veterinarians to ask a lot of questions.

“I spend more time asking questions than making statements when I’m reviewing our finances,” she said. “Sit down with your vendors, dig into every line item, and don’t be afraid to push for clarity or better terms. These reviews often get overlooked in the chaos of daily operations, but they can uncover gold mines of opportunity. And don’t forget to negotiate – your volume has value. Don’t be shy about leveraging that to reduce fees or secure better deals. You never know unless you ask.”

Financial best practices

Savvy veterinary practice owners understand that building a comprehensive financial plan with a fiduciary advisor who knows vet med planning is the best course of success.

“Products change, taxes change, strategies change, investments change, markets rotate – there is no possible way a full-time practice owner who has expertise in veterinary medicine can know all the things a full time, comprehensive advisor knows,” Affeldt said. “A successful practice owner will find an advisor they trust and has their back, and they’ll ask questions and follow the plan, so they can stay focused on their expertise, family, lives and passions.”

By avoiding common mistakes, creating multiple income streams and following savvy financial practices, a veterinary practice can achieve both excellent patient care and financial stability.

Creating multiple income streams

A good philosophy for veterinarians is that variety is not only the spice of life, but sound financial business.

“At 2525 Sunset, we’ve diversified our services with client satisfaction and convenience top of mind and one of our most successful additions has been introducing mobile care with carefully designed profitability guardrails, and it’s been a game-changer,” Weir said. “Whether it’s wellness plans, telemedicine or niche services, the key is to listen to what your client base needs and find creative, scalable ways to meet those needs.”

Smart veterinary practices tend to expand their revenue beyond standard exams and procedures.

“Consider adding nutritional consultations, specialized dietary counseling, grooming services, and wellness programs,” Dhanji said. “These services often make more profit than traditional medical care.”

Additionally, product sales offer a significant opportunity. Think prescription diets, supplements, dental care products, and toys. Many practices also add boarding, daycare, or training services, which can create steady, predictable income.

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