In this episode, I am going to be talking all about why proper inventory management is so critical for our practices and how it impacts us on every level.
For general practice, small animal clinics, a generally accepted benchmark is 20% cost of goods sold as a percentage of revenue. This means that for a practice that has a revenue of 1.5$ million dollars, they spend $300,000 dollars a year on inventory. Now, let’s say this same practice does not have an inventory system and their cost of goods are quite a bit higher. Let’s say their COGS are 29%. Side note: this is a common percentage that I’ve seen. So, now that same $1.5 million dollar practice has a COGS of 29%. So, they spend $435,000 per year on inventory. That is a difference of $135,000 A YEAR! Imagine, what could your practice do with an extra $135,000 a year. Could you invest in newer equipment? Could you hire additional team members? Could you give your current team a significant raise?
One of the topics that is heavily discussed in our industry is the low wages in comparison to our credentials, experience, education, talent, and more. Creating an inventory system and reducing your cost of goods is something you could do today that creates a positive impact on your practice immediately. If we reduce our spending on inventory, it gives us the opportunity to invest more in our team.
Let’s examine a real-life example of how important an inventory strategy is to your practice.
Your 3 o’clock appointment, a 5-year-old female spayed Labrador retriever, presents for a 3-year rabies vaccine. The owner is hesitant about even paying for a wellness exam. You spend 20 glorious minutes educating the owner on the importance of other vaccinations, routine deworming, heartworm prevention, weight loss options, and joint supplementation. The owner trusts your judgment and decides to move forward with several recommendations. You bring the exuberant labrador to the treatment area, enter the approved prescriptions, and realize that the hospital is out of several items. Your heart drops and your eye twitches. You know that this already-reluctant owner will never come back to pick up the items when they come in. All that time spent educating the owner and advocating for your patient seems lost.
As an inventory manager, if you don’t have an established inventory system and little to no training, I know exactly how disheartening and frustrating it can be. Maybe you feel like you are barely keeping your head above water, maybe you spend most of your time putting out fires or reacting to things that have ran out, maybe you are getting panicked texts or phone calls on your day off that you are out of something, or maybe you don’t feel like a valued member of your team. To feel that every day going into work is such a heavy burden and impacts all different areas of our lives. If that does sound a little close to home, imagine: how would it feel to have a comprehensive inventory strategy in place, to feel confident in your skills and abilities as an inventory manager, to have clarity with your inventory and feel confident and driven, and for your team to be fully engaged and involved in your inventory strategy? How would that impact your confidence and your career?