I recently had the opportunity to interview with a freelance author working on an article for NAVC’s Clinic Innovation Guide. The writer reached out to discuss data in Veterinary hospitals – the role it plays (or could/should play), what to track, how to track it, and then what to do with it once it’s been collected.
A sentiment I shared with her, that sometimes I think we overlook as an industry, is that Veterinary medicine is both a profession and a business. While most veterinarians receive extensive training in medicine and surgery, far fewer are taught how to interpret what data tells them about their hospital. Data can span as many different components of practice as we want – patient care, team culture, client experience, and financial health. For this article, I want to focus on financial health because it seems to be an area in which I receive a lot of questions.
Owners do not need to become accountants, but we do need to understand a handful of key metrics that reveal how the practice is performing. These numbers provide insight into efficiency, profitability, and long-term sustainability.
Here are five financial numbers every Veterinary practice owner should know.
1. Production Per Doctor
Production per doctor is one of the clearest indicators of hospital productivity and provides insight into consistency of care in a multi-doctor hospital. This metric can raise hackles for some and if it’s tracked to pressure doctors into “padding bills” or increasing production at any cost, we’ve lost sight of why it’s really valuable. Let’s start by simply defining what production by provider actually answers: How much revenue does each veterinarian generate annually?
While national averages vary slightly by report and practice type, the “average” full-time small animal general practitioner generally generates just over $600,000/year while top performing associates in top-performing hospitals stretch to $800,000 to $1M in annual production.
When evaluating this number in your own hospital, if you or your doctors are full-time and producing less than that $600,000, it may indicate any one of several of the following:
- Inefficient scheduling
- Excessive appointment gaps (according to the AVMA, the average small animal associate sees about 14 appointment/day)
- Underutilization of technicians (the national average is about 1.5 techs/assitants:1 DVM with the AVMA suggesting that an “optimal” ratio should be closer to 3:1)
- Pricing that is too low
When revenue per doctor improves, the financial health of the entire hospital improves with it.
2. Average Doctor Transaction Charge (ADT)
Average Doctor Transaction measures the average revenue generated during a client visit during which they see the veterinarian (versus “average client transaction” which includes a client that may come into the hospital for a tech visit, to purchase a bag of food, etc. not requiring a veterinarian).
ADT reflects how effectively the practice communicates value and delivers comprehensive care.
A low ADT may indicate missed opportunities such as:
- Incomplete diagnostic workups
- Underutilized preventive care services
- Weak client communication
Improving ADT should not be about pushing unnecessary services. Instead, it often involves providing more thorough medical recommendations and helping clients understand the value of the care their pets need.
3. Payroll Cost Percentage
Staffing is typically the largest expense category in Veterinary hospitals with the national average clocking in at about 48% and well-managed hospitals achieving closer to 40%.
Staff cost percentage measures how much of the hospital’s revenue goes toward wages, benefits, payroll taxes, and other team-related costs.
While every practice differs slightly, this metric helps owners determine whether staffing levels are aligned with revenue.
If staffing costs rise significantly faster than revenue, profitability will eventually suffer. Conversely, understaffing can create burnout, poor service, and reduced efficiency.
The goal is balance: a well-supported team that operates efficiently within sustainable financial boundaries.
4. Cost of Goods Sold (COGS)
COGS represents the cost of medications, medical supplies, laboratory fees, and other materials required to deliver care. The national average for small animal general practices is about 28% with closer to 20-22% being achievable through an intentional inventory management plan.
Monitoring COGS helps owners ensure that inventory and purchasing practices remain efficient.
If COGS rises too high, it may indicate:
- Poor inventory management
- Excessive waste
- Inefficient vendor pricing
Careful purchasing strategies and regular inventory review can significantly improve this metric.
5. Net Profit
Ultimately, net profit reflects the financial sustainability of the practice. The national average is about 10% with the AVMA defining a “healthy hospital” as having a margin of between 14%-16%.
Profit allows owners to:
- Reinvest in equipment
- Support team growth
- Weather economic uncertainty
- Build long-term financial security
Profit should not be viewed as a negative concept in Veterinary medicine. Healthy profitability allows hospitals to provide better care, support stronger teams, and invest in the future of the practice.
Financial Clarity Creates Better Leadership
When owners understand these key metrics, we gain the ability to make smarter strategic decisions and proactively guide our practice toward long-term stability and growth.
Veterinary medicine will always be rooted in compassion and service. But sustainable hospitals require thoughtful financial leadership.
Understanding these five numbers is a powerful step in that direction.