Racetrack, reproductive work said to be hit the hardest
Posted April 15, 2009
As far as Dr. Scott A. Spaulding, Badger Veterinary Hospital's managing partner, could tell this past spring, 2008 would be the mixed animal practice's most profitable year.
Instead, the Janesville, Wis., equine veterinarian has watched the practice's small animal transactions go flat or decrease slightly since June, and horse transactions contract by as much as 15 percent to 20 percent from this time last spring.
Dr. Scott A. Spaulding, managing partner of Badger
Veterinary Hospital in Janesville, Wis., expects his
practice's revenue to grow 4.5 percent this year
compared with double-digit growth in past years.
More bad news came when the local General Motors plant closed Dec. 23, 2008. About 1,800 factory workers lost their jobs, and hundreds who worked at companies that supplied the plant also became unemployed in the town of about 60,000.
"It's yet to be determined, the impact of the GM plant closing," Dr. Spaulding said. "The question is 'Is the other shoe going to drop, and how big will it be?'"
Dr. Spaulding doesn't appear to be alone. Equine practitioners throughout the United States and from all areas of equine medicine have reported flat or declining work volumes and revenue.
Changing their minds
Elise M. Lacher has seen firsthand the effects of the economic downturn on equine practitioners. She is a certified public accountant who founded the CPA firm Lacher McDonald Consulting in Seminole, Fla., 30 years ago. A year ago, Lacher and two veterinarians started Strategic Veterinary Consulting, which advises equine practices throughout the United States on effective practice management techniques.
Lacher said from her observations, equine practice numbers are down, but not in a dramatic way. Her veterinary clients work primarily with owners of sport and pleasure horses as opposed to racetracks or large breeding facilities.
"They are very much holding their own or are off a bit. None are tanking," she said.
Prior to the recession, most equine practices saw 10 percent to 12 percent growth a year unless something drastic affected the practice, Lacher said, such as new services offered. Now, flat or one-digit growth is the norm; still, none would be considered borderline bankrupt, she said.
Lacher added that it was hard to say whether the downturn in client spending was entirely because of the economy or also because most equine veterinarians have slow winters. But less work isn't the only change they're seeing.
"They are definitely being questioned by clients in the field when recommending things," Lacher said. "There's a lot more hesitation (by clients) with older horses or physically challenged horses. The willingness to spend on these animals is not at the level they saw last year."
All of a sudden
Dr. Harry W. Werner, American Association of Equine Practitioners president, said in his encounters with U.S. and Canadian equine practice colleagues that most reported a noticeable reduction in business volume beginning last fall.
He said many practices are experiencing fewer or delayed appointments for elective patient care; delays of spring wellness care, such as examinations, vaccinations, and dental care; increased requests for telephone consultations and dispensing of medications without prior examination by the veterinarian; and fewer elective surgeries, prepurchase examinations and horses bred.
"Of course, the degree of economic impact varies considerably among different geographic regions and practice types," Dr. Werner added.
However, even equine veterinarians in affluent areas have seen clients start to pinch pennies. Dr. Mark R. Baus is a partner and director of finance at Fairfield Equine Associates in Newtown, Conn., a town of about 25,000 residents with a median household income of $90,193. The practice does principally lameness work but also offers general services that typically represent discretionary spending for its clients, according to Dr. Baus, who cares for performance horses in the New York region and Florida during the winter.
A sudden downturn in the practice's available work began the first of the year, though Dr. Baus couldn't speculate why the decrease happened when it did, mentioning that other equine practices had been affected earlier.
"I thought we were in a unique area that was buffered from the effects till now. I guess it depends on the local economy," Dr. Baus said.
"I have had horses for many years, and most veterinarians come on the property, grunt something, work on the horse, and then hand me a piece of paper with how much I owe. Equine vets are the Lone Ranger personified. That image has to go by the wayside."
—ELISE M. LACHER, CERTIFIED PUBLIC ACCOUNTANT,
STRATEGIC VETERINARY CONSULTING, SEMINOLE, FLA.
Fairfield Equine hasn't seen a cutback on life-saving measures by clients and doesn't expect a drop in preventive care this spring, Dr. Baus said, but clients have cut back dramatically on performance-related work. The clinic's gross revenue is down 10 percent to 15 percent from a year ago, he estimated.
"I've never seen anything quite like this. We're definitely seeing a significantly reduced number of purchasing exams. Clients aren't buying horses," Dr. Baus said.
Quick and nimble
Though extensive data on the extent to which the equine industry has been affected by the recession are not available, anecdotally, performance, reproductive, and racetrack work appear to be hardest hit.
Dr. Werner said some of the most sensitive equine markets are those heavily dependent on owners of pleasure horses. For these horse owners, he said, "veterinary expenses represent discretionary spending, so when personal income falls significantly, families are forced to cut back on horse-related expenses."
Dr. Werner said in his own sport horse practice, located in the foothills of the Berkshire Mountains in North Granby, Conn., the first "crunch" from the down economy was a sharp drop in requests for prepurchase examinations.
"Clients continue to provide good care for their existing horses, but most are holding off on new purchases," Dr. Werner said.
Practices dependent on racing stock sales nationwide also have reported sizeable reductions from last year's numbers, he noted. Some of the large horse shows are experiencing substantial reductions in entries. Large referral hospitals cite fewer referrals, surgical cases, and foal care cases, Dr. Werner said.
Lacher says stallions will not be as busy as they were before, "but the mares that bred last year are still going to have foals this year."
Some farms, not many, she says, will breed this year to take advantage of what they see as an opportunity.
"They are taking their chances in the hopes that the economy will turn around by 2010 or so and they will be one of the few to have foals ready by then," Lacher said.
As far as racetrack work goes, she says that market is suffering. In early March, Magna Entertainment, the largest owner of racetracks in North America, including Santa Anita and Pimlico, filed for Chapter 11 bankruptcy protection.
Lacher's clients in practices that previously focused on racetrack work now reach out to other areas, such as performance and show horse work.
"They're looking outside of their box and discovering there are other horses than the ones running on oval tracks," Lacher said. "The practices that are smart and can learn how to do it and look at a different focus ... Some are doing this successfully, at least as successfully as they can."
So in this dismal economic climate, what's an equine veterinarian to do?
A simple piece of advice Lacher gives clients is to talk with their clients.
"I have had horses for many years, and most veterinarians come on the property, grunt something, work on the horse, and then hand me a piece of paper with how much I owe," Lacher said. "Equine vets are the Lone Ranger personified. That image has to go by the wayside."
If not, clients may figure they might as well order supplies from a catalog instead, she said.
Lacher repeatedly tells her clients to have a Web site, even if it involves some upfront cost, because, she says, "Equine clientele, they tend to be extremely Web-savvy." Newsletters also can help, but nothing replaces one-on-one communication, she said.
Maintaining profitability isn't limited to cutting expenses, Lacher likes to remind clients. Simply paying attention to business practices can be enough. By that she means taking a closer look at financial statements. Lacher says not analyzing how the business is doing is like making a diagnosis without performing the proper tests first.
"You need financial statements to tell you what is going on in your practice," she said.
Dr. Spaulding said after looking at his practice's financial statements, he anticipates revenue growing 4.5 percent this year. For the past 10 years, the practice has seen 10 percent to 15 percent growth.
Looking through May—the practice's busiest time for equine work and when most of the year's profits are made—he says he just has to wait and see. Dr. Spaulding hopes to add another equine veterinarian this fall in anticipation of a better spring 2010.
"We'll be fine," Dr. Spaulding said. "We just need to be vigilant and optimistic for the future."
That upbeat attitude appears to be echoed by most equine veterinarians, according to Dr. Werner.
"Most of my colleagues are taking a positive attitude, controlling costs, ratcheting up the quality of their client communications and patient care and using any 'down time' to look critically at their practices and make appropriate changes," he said. "These veterinary practices are poised to emerge from this recession stronger and ready to prosper as the economy regains its strength."