Category: Know Your Numbers

Most practice owners I talk to get a P&L from their accountant weeks after the month closes, glance at the bottom line, and go back to seeing appointments. By the time a problem shows up there, it has usually been costing you money for a quarter or more.

You don’t need forty KPIs. You need a short list you look at every single month, in the same format, so you can see the trend before it becomes a crisis. Here are the seven I’d put on that list, how to calculate each one, and what to do when one moves.

Numbers 1–3: Is money coming in, and is it staying?

1. Gross revenue, compared with the same month last year. Month-over-month comparisons fool you because of seasonality, so compare each month with the same month a year ago. Today’s Veterinary Business columnists Jason Castner and Robert Sparrow put a simple floor on it: if revenue isn’t growing at least 3% a year, something needs attention. With inflation in the mix, flat revenue means you’re shrinking.

2. Cost of goods sold as a percent of revenue. COGS % = (drugs, supplies, lab and other direct costs) ÷ gross revenue. A dvm360 article on COGS puts the target for a general hospital at or below 23% to 27%, depending on your service mix, and treats a number approaching 30% as a warning sign. I wrote a whole post on reading your COGS, so I won’t repeat it here. The point for this list: watch it monthly, because inventory leaks don’t wait for year-end.

3. Support-staff payroll as a percent of revenue. Staff payroll % = non-DVM gross wages ÷ gross revenue. Castner and Sparrow suggest a useful combined check: when COGS plus non-DVM payroll exceeds 45% of revenue, look hard at both. These two lines are where most of the money goes after doctor pay, and they’re the two you control most directly.

Numbers 4–5: Are your doctors and visits productive?

4. Production per doctor, and doctor pay as a percent of production. Pull each doctor’s monthly production from your practice software. Then divide what you pay each doctor by what they produced. My benchmark is 17% to 20% of production. For context, a long-running dvm360 guide to ProSal puts typical associate pay at 18% to 25%. This isn’t about squeezing anyone. It’s about knowing whether doctor pay and doctor production are moving together. When that percentage creeps up, the fix is rarely the doctor’s paycheck. It’s usually how the doctor’s day is being spent.

Make sure your doctors are doing doctor things: diagnosing, prescribing and performing surgery. Everything else (restraint, history, blood draws, radiographs, client education, callbacks) belongs to a well-trained team. A doctor who isn’t using their team is doing team-level work at a doctor’s cost, and production per doctor will show it. AVMA’s analysis of gross revenue per veterinarian points to an optimum of about 4 to 5 support staff per doctor, including about one credentialed technician per doctor. If your doctors are short on help, or not leaning on the help they have, start there.

5. Average client transaction (ACT) and invoice count. ACT = gross revenue ÷ number of client invoices. Always look at it next to the invoice count, because revenue is just those two multiplied together. Revenue up because ACT rose while invoices fell is a very different month from revenue up because more clients came through the door. One tells you prices or service mix changed; the other tells you demand did.

Number 6: Is your client base growing?

6. Active clients, new clients, and bonding rate. The benchmark studies Dr. Karen Felsted describes in Today’s Veterinary Business define an active client as one with at least one transaction in the last 12 months. Track three things:

• Active clients (rolling 12 months). Is the base growing or shrinking?
• New clients per month. This is the fuel. If it’s falling, your marketing, phones, or online reviews deserve a look.
• Bonding rate: of the clients you saw last year, what share came back this year? Felsted’s example: if 68% of last year’s clients returned, 32% lapsed. That lapsed group is your cheapest growth opportunity, because they already know you.

Define these once and lock the definition. If your software counts “active” differently than last year, your trend line is worthless.

Number 7: What’s left over?

7. EBITDA (earnings before interest, taxes, depreciation and amortization). Start with net income, then add back interest, taxes, depreciation and amortization. Many owners also normalize it by adjusting their own pay to a market-rate doctor salary, which is how a buyer will look at it. Castner, writing in Today’s Veterinary Business, calls more than 20% excellent. Treat that as one experienced CPA’s yardstick, not a survey average. The real value is the trend: if EBITDA margin slides for three months while revenue grows, your costs are outrunning you, and numbers 2 through 4 will tell you where.

I watched this up close when my partners and I sold our first practice to a private equity group in 2016. Buyers price your practice on this number. You might as well know it every month, not just the year you decide to sell.

The tool: a one-page scorecard and a 30-minute monthly review

Put the seven numbers in one table. Columns: this month, same month last year, and your own target. Fill it in by the 10th of every month.

#	Number	How to calculate	This month	Same month last year	Your target
1	Gross revenue	Total from P&L or practice software
2	COGS %	Direct costs ÷ gross revenue
3	Support-staff payroll %	Non-DVM gross wages ÷ gross revenue
4	Production per doctor / doctor pay %	Each doctor’s production; pay ÷ production
5	ACT and invoice count	Gross revenue ÷ invoices
6	Active clients, new clients, bonding rate	12-month rolling counts
7	EBITDA margin	(Net income + interest + taxes + depreciation + amortization) ÷ revenue

To keep your categories consistent month to month, map your P&L to the AAHA/VMG Chart of Accounts, which the AVMA also recommends for benchmarking. If your accountant isn’t using it, ask.

Then hold a 30-minute review with your practice manager (and your accountant, quarterly):

1. Scan (5 min). Mark each number green, yellow or red against target and last year.
2. Pick one (10 min). Choose the single red number that matters most. Ask “what changed?” and pull the detail behind it.
3. Decide (10 min). Agree on one action, one owner, one date.
4. Check last month (5 min). Did last month’s action move its number? Keep it, change it, or drop it.

You can use AI to do the grunt work. I use Claude to turn practice-software exports into a dashboard across both of my hospitals. A prompt to start with:

“Here are my practice-software exports for revenue, invoices, production by doctor, and client counts for the last 24 months. Build a monthly table of these seven KPIs [paste list and formulas]. Compare each month to the same month last year, flag any number that moved more than 10%, and list the three questions I should ask my team about it. Tell me if any data looks missing or inconsistent instead of guessing.”

Check the math the first time, and strip client names before you upload anything.

Your move this week

1. Build the table. Copy the scorecard above into a spreadsheet and fill in last month and the same month a year ago. Some numbers will be hard to find. That’s useful information on its own.
2. Lock your definitions. Write down exactly how you count active clients, what goes into COGS, and which payroll lines are “support staff.” Share it with your manager and accountant.
3. Put the review on the calendar. Thirty minutes, same day every month, starting next month.

Knowing your numbers is how independent owners stay independent. If you’d like help setting up your own scorecard, you can find me on the Work with Adam page.

Sources

• Castner J, Sparrow R. “Tuneup Time” (Financial Wellness). Today’s Veterinary Business, Oct–Nov 2021.
• Castner J. “At All Costs, Know Your COGS” (Money Matters). Today’s Veterinary Business, Apr–May 2025.
• Murray B. “Understanding COGS in a veterinary hospital”. dvm360, Nov 2024.
• Opperman M. “ProSal percentages”. dvm360.
• AVMA. “Increasing practice profitability requires benchmarking, defining core values”. AVMA News, Nov 2024 (updated May 2025).
• AVMA@Work. “Chart of the month: Optimizing staff-to-veterinarian ratios”. June 2025.
• AVMA@Work. “Just one thing: Support practice health by reflecting on Q1”.
• Felsted KE. “Be the Center of Attraction”. Today’s Veterinary Business, Oct 2019.

After payroll, cost of goods sold is the biggest check your practice writes. Every vaccine, every suture pack, every bag of renal diet, every reference lab panel. Most owners know their revenue to the dollar. Far fewer can tell me their COGS percentage, what’s in it, or whether it’s moving the wrong way.

Here’s why that matters. On a $2 million practice, every one percentage point of COGS is $20,000 a year. Running 26% instead of 22% is $80,000 that never reaches your bottom line. Same doctors. Same clients. Same hours.

Real talk: you don’t fix this by buying cheaper gauze. You fix it by knowing what your number is, what it should be for your hospital, and which lever is actually broken.

The full guide covers what the AAHA/VMG Chart of Accounts counts as COGS, what the published benchmarks actually say, category-by-category benchmarks from well-managed practices, a step-by-step method for finding where your COGS is leaking, and eight ways to bring it down without cutting care.