What are some key performance indicators (KPIs) for veterinary practices?

Running a successful veterinary practice isn’t just about providing excellent medical care, it is also about keeping a close eye on the business side of operations. One of the best ways to do that is by regularly monitoring key performance indicators (KPIs) tied to your Profit & Loss statement and Balance Sheet. These KPIs help ensure your practice remains financially healthy, sustainable, and primed for growth. In this blog, we’ll break down the most important KPIs every veterinary practice owner should watch.

Profit & Loss (or Income Statement: revenues, expenses and net income) KPIs

Revenue Metrics:

  • Gross Revenue Growth: Track your year-over-year revenue increases to measure overall practice growth.
  • Revenue per Veterinarian: Total revenue divided by the number of veterinarians. This benchmarks individual productivity.
  • Revenue per Client Visit: Total revenue divided by the number of client visits. It helps track pricing strategies and service utilization.

Expense Metrics:

  • Cost of Goods Sold (COGS) %: COGS divided by total revenue. Target range is 18%-22%.
  • Labor Costs % (non-doctor staff): Staff wages (excluding veterinarians) divided by total revenue. Aim for 18%-22%.
  • Doctor Compensation %: Veterinarian salaries divided by total revenue. Typical target is around 20%-22%.
  • Marketing Costs %: Marketing expenses divided by total revenue. A healthy range is 2%-3%.

Profitability Metrics:

  • EBITDA (Earnings before interest, taxes, depreciation, amortization) Margin: EBITDA divided by total revenue with strong practices seeing a range of 15%-20%.
  • Net Profit Margin: Net income divided by total revenue. Practices aim for 10%-15% or more.
  • Owner Discretionary Earnings (ODE): Net income plus owner salary, perks, depreciation, and interest. This is critical for practice valuation.

Balance Sheet (the assets, liabilities and equity) KPIs

Liquidity and Cash Flow Metrics:

  • Current Ratio: Current assets which is the sum of cash, accounts receivable and inventory is divided by current liabilities such as accounts payable, payroll taxes payable, and other short-term/current debts, where the ideal ratio is greater than 1.5 for healthy liquidity. Meaning you should be able to pay all current liabilities timely without incurring additional debt or running into cash flow shortages.
  • Quick Ratio or Acid-Test of the current ratio: Where the most liquid assets of cash and accounts receivable are divided by current liabilities. The target is for a ratio above 1.0 for financial safety. Your most liquid assets are what will pay your current liabilities, since inventory takes the sales process and turnover that results in a delay in cash flow.

Accounts Receivable Metrics:

  • Accounts Receivable Days (A/R Turnover): This is computed by net credit sales divided by average AR. Ideally vet practices should have a payment upon receipt of services policy, so the AR turnover would not be necessary. However, when this ratio is computed and divided into 365 days, it should show average number of days clients take to pay.

Debt and Leverage Metrics:

  • Debt-to-Equity Ratio: Total liabilities divided by total equity with a lower ratio indicating stronger financial stability.
  • Debt Service Coverage Ratio (DSCR): EBITDA divided by total debt service. A DSCR above 1.25 is ideal.

Veterinary-Specific Bonus KPIs

  • Active Clients per Veterinarian: The number of clients seen per veterinarian annually.
  • New Client Growth Rate: New clients divided by total client base, year-over-year.
  • Client Retention Rate: Percentage of clients retained from the previous year.
  • Average Invoice per Transaction: Total revenue divided by number of transactions.
  • Utilization of Veterinarians: The percentage of available doctor hours that are billed. A goal of 85%-90% indicates strong productivity, however this will vary widely with ambulatory equine and large animal practices.

Why Monitoring KPIs Matters: Tracking these KPIs helps veterinary owners identify early warning signs of financial trouble, make strategic decisions about pricing, staffing, and services, plan for growth, expansion, or eventual sale and maintain healthy cash flow to weather business cycles

Whether you’re running a small animal clinic, an equine practice, or a mixed animal hospital, keeping a close watch on your KPIs will help you move from surviving to thriving. Start tracking these KPIs today because your future self (and your bottom line) will thank you.