MAR 28, 2023 AT 12:01 PM Published at https://www.vetpartners.org/the-traditional-veterinary-business-model-is-broken/
VETERINARY TRENDS
My premise is that the traditional veterinary business model is broken and, in many cases, cannot be fixed. I base my premise on the evidence: The data shows that revenue is up, pet ownership is up, new client numbers are down, and patient visits are down.1,2
The data tells the tale of veterinary business metrics… or does it? For example, how has pet ownership increased, but new clients and patient visits are down? As the American Pet Products Association (APPA) reported, where are those new pet owners? Are they ignoring veterinary care for their pets? Is the APPA data incorrect? Is the data from VHMA and Vetsource wrong? Or is something else happening in the veterinary industry? And does this signal to veterinary practices that change is more pressing than they might think? My position is that there is a strong signal, and you need to help your practices pay attention and change—if they can.
WHAT DOES THE DATA TELL US?
According to the 2021—2022 APPA National Pet Owners Survey Statistics:
- The number of U.S. households owning a pet has steadily increased from 56% in 1998 to 67% in 2019 to 70% in 2022.1,3
- Dogs and cats remain the number one and two pets of choice at 69% and 45.3% respectively. A distant third place is freshwater fish, followed by birds, small animals, reptiles, horses, and saltwater fish.
More households owning pets, especially dogs and cats, should mean more clients and more patient visits for the veterinary industry. But the VHMA Insiders’ Insights Key Performance Indicators through Vetsource told a different story throughout 2022.
According to a VHMA December 2022 report, patient visits during the year averaged -4.4%, and new clients averaged -11.5% for VHMA and non-VHMA practices.2 Going back another year, the December 2021 report documents the decline in new clients starting as far back as May 2021.4
If the APPA reports that more households have pets, why are veterinary practices not showing a similar growth in new patient visits and new clients?
The answer is in the source of the data.
According to Insiders’ Insights commentary by Karen E. Felsted, CPA, MS, DVM, CVPM, CVA, the data is “from ‘traditional’ veterinary hospital models; it does not include data from alternate care models such as mobile vaccine clinics, pop-up clinics…or other retail locations, and the newer de novo practice types.”2
And herein lies the alert to all “traditional” veterinary hospital models: Alternate care and de novo models are growing and attracting new clients.
Alternate care models (e.g., VIP Pet Care, PetSmart, VetIQ Petcare, and Vetco Mobile Clinics) and de novo practices (e.g., Petfolk, Small Door, Bond Vet, and Sploot) are not your “traditional” veterinary hospitals. Both of these models are responding to the needs and wants of new pet parents—Gen Zers and Millennials, in particular.
Before discounting the importance of generational differences, consider the data from the APPA:
- 32% of pet owners are Millennials.
- 14% of pet owners are Gen Zers.
- 24% of pet owners are Gen Xers.
- 27% of pet owners are Baby Boomers.
- 3% of pet owners are Builders, the oldest generation.1
According to the APPA’s Generational Report, there are differences between the generations regarding pet care and spending. There is no doubt that all generations love their pets—they just show it in different ways.
- Millennial and Gen Z pet owners are more likely to purchase pet care items online and prefer subscription-based businesses.5
Ask yourself: Does my practice have a subscription service? Better yet, does my team even know what that means? - Millennials tend to use technology more than the other generations to buy pet products and services.6
- Gen Xers and Baby Boomers consistently spend more for food and veterinary care, but are also less likely to change their pet-care behaviors.5
Veterinary care is growing, and there is a corresponding growth in new pet-related business ventures.6 This data explains the growth in alternate care models and de novo practices. These models are responding to the demands of the fastest-growing segment of pet owners: Millennials and Gen Zers.
HOW ARE ALTERNATE MODELS MEETING THE NEEDS OF NEW PET OWNERS?
What makes alternative care models and de novo practices different from traditional brick-and-mortar veterinary business? They are more client-focused. A quick scan of the websites reveals a different way of delivering veterinary services, such as:
- Instant online appointment booking (not requesting an appointment, but actually booking it)
- Calming, stress-free clinic designs, including no waiting rooms
- More portable medical records access
- Membership plans
- Price transparency
- On-demand virtual care
- Same-day and/or walk-in appointments
- Primary and urgent care
- Mobile pet care access
- Focus on the client’s experience
- Tech-enabled tools for clients
The pet parent can access veterinary care across multiple channels, 24/7. And it doesn’t stop there. Some alternate care and de novo models are also breaking barriers in staffing with transparent pay bands, higher wages, profit-sharing, shareholder opportunities, and other benefits. Make no mistake: Traditional brick-and-mortar veterinary businesses are facing stiff competition. According to Petfolk, they anticipated providing care to over 40,000 pets in 2022.7
HOW CAN TRADITIONAL VETERINARY PRACTICES COMPETE?
What does all this mean for the traditional veterinary business? Minimal or negative growth in new clients and patient visits at your practice may mean that pet parents desire what alternate and de novo practices offer. Being “traditional” costs you new clients if you ignore what today’s pet parents want from their veterinary healthcare team.
A business model that makes it tough to do business with the veterinary team is broken and needs an update.
Traditional business model practices need to explore new ways of interacting with clients and increasing access to veterinary care while providing value at a reasonable cost. Traditional does not mean just independent practices—corporate-owned practices face the same risk. Some corporate groups bought at very high multiples and now need a much higher rate of return. Achieving higher returns means digging deeper and implementing change.
Raising prices to increase revenue may be a good short-term plan for dealing with declining visits. But, you can only raise prices so high before they exceed pet parents’ reasonable expectations (AKA sticker shock). Instead, make it easier to do business with your practice by implementing online appointment booking and virtual visits. Offer a membership plan and price transparency to reduce sticker shock or poor compliance with medical recommendations. None of these changes require tearing down the brick-and-mortar structure of the practice, but they do expand the business beyond the four walls of the exam room, opening up more access to veterinary care for both new and regular clients.
The traditional veterinary business model shows weaknesses and breakdowns. As a result, independents and corporate practices—not just alternate care and de novo practices—must participate in driving change in this profession. Hiring a practice management consultant can help practices fix their business model. However, what worked well in the past is insufficient in today’s marketplace. A more strategic change is needed, which moves beyond operational efficiencies and introduces new technologies such as subscription models, instant booking, and cloud PIMS with great functionality. This change may be difficult for some, but it gives clients what they want and need, which is more access to care.
UPDATE / AUTHOR’S NOTE:
April 3, 2023: Recently, the APPA released its 2023 report on pet ownership, which showed a surprising decline in pet ownership. This was for households, so I question if you can say pet ownership, thus further adding to the mystery around the actual increase or decrease in pets. When this article was written, we knew that visits to traditional brick-and-mortar veterinary practices had been on the decline. Whether that decline is related to the APPA-reported decrease in pet ownership or a true shift to de novo and alternate care models is a mystery.
References
1 APPA Pet Industry Market Size, Trends & Ownership Statistics.
2 VHMA Insiders’ Insights Key Performance Indicators December 2022.
3 US Dog Ownership Statistics – (2021-2022) Facts, Charts, and Tables. May 24, 2022.
4 Insiders’ Insight KPI – December 2021.
5 American Pet Products Association Releases Generational Report press release. March 23, 2022.
6 22 Fascinating Pet Industry Statistics & Facts (2022 UPDATE), Sanela Puac. December 9, 2020.