The economic landscape for vets is complicated
According to recent insights shared during the 2024 AVMA Veterinary Business and Economic Forum, the veterinary industry is facing a period of economic challenges marked by decreased patient visits and changing revenue dynamics., these trends are driven by broader macroeconomic factors impacting U.S. households and businesses. The forum, held virtually in October 2024, featured expert commentary from economists and industry professionals who provided valuable context on what this means for veterinary practices.
The data presented shows that while pet ownership has risen over the past decades, inflation and economic pressures have reduced consumer spending power. Experts like Katelyn McCullock, AVMA chief economist, noted that these trends may persist into 2025, influencing both client behavior and practice revenues.
Understanding the economic trends impacting veterinary practices
During the Forum, McCullock and Sheri Gilmartin, vice president of data services for Vetsource, highlighted key statistics and factors contributing to these economic shifts.
1. Inflation and consumer spending
While pet ownership in the U.S. has increased steadily from 1991 to 2024, inflation has led to reduced consumer spending power. This has impacted how frequently clients seek veterinary services, resulting in fewer patient visits and reduced product purchases.
2. Revenue growth trends
Data collected from 6,000 veterinary practices between August 2023 and August 2024 shows a 2.3% decrease in patient visits, while revenue increased by 3.9%, primarily due to price hikes. This indicates that practices are relying more on price increases to sustain revenue growth amid declining visit numbers
3. Historical comparison
Between 2021 and 2023, patient visits also trended downward (-2.7%), although revenue grew at an average of 5.7%. In contrast, 2019 and 2020 saw both patient visits and revenue grow at rates around 2% and 6.7-10.1%, respectively. This shift underscores a change in the sustainability of relying solely on price increases to drive revenue.
McCullock noted several economic indicators suggesting that a recession may be on the horizon or already underway:
The yield curve, a measure of the relationship between interest rates on bonds of different maturities, has been inverted since July 2022. This is the longest period of inversion in U.S. history, signaling potential economic contraction.
Consumer debt has increased to $4.9 trillion, and spending has slowed, while confidence has waned. For example, 9.1% of credit card balances and 8.0% of auto loans transitioned to delinquency between July 2023 and July 2024, according to the Federal Reserve Bank of New York.
The Federal Reserve has shifted from raising interest rates to cutting them, with a half-percent cut in September 2024. This move reflects weakening economic data and rising unemployment.
These trends indicate that while the specifics of how an anticipated recession will impact veterinary spending are uncertain, a general reduction in consumer spending is likely.
Revenue and pricing dynamics
The data shared during the 2024 Forum highlighted how practices have been managing revenue growth amidst declining patient visits.
Revenue supported by price increases
Despite a 2.3% average decline in patient visits from August 2023 to August 2024, revenue rose by 3.9%, driven largely by price increases. Sheri Gilmartin noted that practices have increasingly relied on raising prices to offset fewer patient visits. However, experts caution that this strategy may have limitations if client budgets become tighter due to economic pressure.
Comparison to prior years
Between July 2022 and July 2023, prices increased by 9.81%, which led to an 8.8% rise in revenue. The previous year saw similar trends, with prices up 7.3% and revenue increasing 9.8%. While these price hikes initially helped sustain revenue, the more recent period (August 2023 to August 2024) saw a smaller revenue gain (6.1%), indicating that the impact of price increases might be diminishing.
Long-term impact of price strategies
Gilmartin explained that the effects of price increases were more pronounced 24-36 months ago, but recent data shows diminishing returns due to a continued decline in patient visits. This suggests that veterinary practices may need to explore other strategies beyond pricing adjustments to maintain sustainable revenue growth
Challenges with sustaining revenue
While price increases have temporarily buoyed revenue, the declining number of active patients poses significant challenges. Notably, canine patients, who contribute approximately 81% of practice revenue, decreased by 3.3% year over year. This drop has had a direct impact on overall revenue growth. Gilmartin also pointed out that new client numbers are down by 8.6%, further compounding the difficulty in offsetting the decline in existing patient visits.
Revenue from product-only visits, such as purchases of food or medications, fell by 7% on average. Although sick visits have stabilized since 2023, wellness visits continue to lag, with a 1.5% decline. This trend underscores the importance of maintaining a balanced revenue mix to navigate economic uncertainties.
These dynamics show that while raising prices can provide short-term financial relief, veterinary practices must remain vigilant and consider alternative strategies to ensure long-term sustainability.
Shifts in patient visits and client behavior
The data shared at the Forum reveals significant shifts in client behavior that have impacted patient visits at veterinary practices. Understanding these trends is crucial for practices looking to navigate current challenges and adapt to the changing landscape.
Decrease in active patients
On average, veterinary practices reported a 1.9% decline in active patients. While feline patient visits increased slightly (0.8%), the overall decrease was driven by a 3.3% drop in canine patient visits, which typically account for around 81% of practice revenue. This decline poses a major challenge for practices that rely heavily on revenue from dog owners.
New client acquisition challenges
One of the most concerning trends highlighted by Sheri Gilmartin is the 8.6% decrease in new clients. This drop has significant implications, as new clients contribute about 8% of total practice revenue. The lack of new client growth makes it difficult to balance out the reduction in visits from existing clients.
Extended intervals between visits
Pet owners have been extending the time between veterinary visits. Data shows that from July 2020 to July 2021, the average interval between visits was 57.6 days. By comparison, between July 2023 and July 2024, that average increased to 85.8 days - a 48% jump. This trend indicates that pet owners are more cautious about spending and are likely prioritizing fewer, more essential visits.
Trends in visit types
Product-only visits declining
Practices also reported a 7% decline in product-only visits, where clients come solely to purchase items like food or medications. This reduction may reflect clients' shifting preference toward online shopping or budget constraints that limit their purchases at veterinary clinics.
Stabilization of sick visits vs. well visits
While sick visits have remained stable since 2023, well visits are still down by 1.5% on average. This decline in preventive care could have long-term consequences for both pet health and practice revenue, as well visits are often key opportunities to identify health issues early and recommend additional services.
Impact on practice operations
The data presented by Gilmartin also indicated a downward trend in transactions, days worked, and the number of monthly patients per veterinarian over the past three years. This trend suggests that macroeconomic pressures are impacting practices across the board, not just a select few. Gilmartin emphasized that the shrinking gap between average practices and the top 20% indicates that these trends are being felt industry-wide.
Strategic recommendations for veterinary practices
Given the economic trends and shifts in client behavior, veterinary practices need proactive strategies to sustain revenue and maintain client engagement. While price increases have been a temporary solution, experts suggest that alternative approaches may be more sustainable in the long term.
Client retention strategies
Enhanced follow-up and reminders
Implementing automated follow-up systems can help practices remind clients of upcoming appointments, encourage timely wellness check-ups, and promote consistent engagement.
Loyalty programs
Creating loyalty or rewards programs can incentivize clients to return for services and product purchases. These programs can strengthen client relationships and increase visit frequency
Wellness packages
Offering bundled preventive care packages that include multiple services at a discounted rate can encourage clients to commit to routine visits.
Diversifying service offerings
Introducing ancillary services
Practices can offset declining patient visits by diversifying the services they offer. Options include pet grooming, nutritional counseling, behavioral training, and other specialized services that add value and attract different client segments.
Wellness and preventive care plans
Structuring wellness plans that include routine vaccinations, health screenings, and check-ups can create a steady flow of revenue and emphasize the importance of preventive care.
Leveraging telehealth and digital engagement
Telehealth consultations
Expanding telehealth offerings allows practices to reach clients who may be hesitant to visit in person due to budget constraints or convenience preferences. Telehealth can be used for follow-up consultations, minor health concerns, or initial assessments that don’t require a physical exam.
Digital communication tools
Practices can utilize email newsletters, social media, and practice apps to keep clients informed about services, pet care tips, and promotions. This outreach helps maintain a connection and demonstrates ongoing value between visits.
Finding the balance between pricing and client satisfaction
Experts have noted that while price adjustments have supported revenue in the short term, practices must carefully balance price increases with client satisfaction. If prices rise too steeply, clients may look for more affordable alternatives or delay visits even further.
The overall strategy for weathering economic challenges lies in creating a client-centric experience that emphasizes trust and value. Practices that focus on clear communication, transparent pricing, and personalized care are more likely to retain clients and sustain revenue through challenging times.
These strategic recommendations from the experts can help practices adapt to shifting economic conditions while keeping their client base engaged and loyal.
The pet owner perspective: understanding their challenges
To build strong client relationships and encourage more consistent visits, veterinary practices need to understand the challenges as pet owners see them. Economic pressures and shifting priorities have significantly influenced how pet owners approach care for their pets, and practices that show empathy and provide solutions are more likely to foster loyalty.
Why are pet owners are delaying visits?
One of the primary reasons pet owners may delay visits is the pressure on household budgets due to inflation and economic uncertainty. Rising costs across the board mean that many owners have to prioritize essential spending, leading to fewer vet visits.
Pet owners might be extending the time between visits if they believe a check-up or non-urgent visit can be postponed without serious consequences. This perception can reduce the frequency of well visits, even when they are vital for preventive care.
Some pet owners may choose to use at-home care solutions or online resources for advice, reducing the perceived need for in-person visits. This shift can be driven by convenience or cost-saving measures.
Tips for maintaining pet health between visits
Veterinary practices can help pet owners manage their pets’ health and strengthen their relationship with clients by offering practical advice and resources.
Educational resources
Providing pet owners with guides on home health checks, common signs of illness, and when to seek veterinary care can empower them to monitor their pets’ well-being. Sharing these resources via newsletters or practice websites can reinforce the value of regular care
Preventive care advice
Reiterating the importance of preventive care, even when visits are less frequent, can help clients understand that small actions, like maintaining vaccinations and preventive treatments, are crucial to their pets’ long-term health.
Flexible service options
Offering services like telehealth consultations can help bridge the gap between visits. Practices that provide virtual assessments for minor issues or follow-up questions show that they are adapting to clients' needs.
Encouraging owners to prioritize necessary visits
Veterinary practices can use clear communication and empathetic messaging to remind clients of the value of necessary visits. Highlighting the potential risks of delaying preventive care and educating clients on how early intervention can save them money and improve their pets’ outcomes can be effective strategies.
By addressing these challenges and providing support, practices can position themselves as trusted partners in pet health, even when times are tough. This approach can build stronger relationships and help maintain a stable client base through economic fluctuations.
Preparing for the future
As veterinary practices face an economic landscape that may include further downturns, building resilience is crucial for long-term sustainability. Experts at the 2024 AVMA Veterinary Business and Economic Forum emphasized the importance of proactive strategies and adaptive thinking to help practices navigate potential challenges.
1. Building financial resilience
Budget management and cost control. Practices should evaluate their operational budgets to identify areas where they can reduce costs without compromising the quality of care. This could include negotiating with suppliers for better terms, optimizing staffing schedules, and streamlining administrative processes.
Emergency financial planning. Establishing a financial safety net or emergency fund can help practices manage unexpected dips in revenue. Planning for economic variability ensures that practices have the resources needed to maintain operations during lean periods.
2. Focusing on long-term client relationships
Client education and transparency. Educating clients about the value of preventive care and being transparent about costs helps build trust. Clients who understand the importance of regular visits and the breakdown of service costs are more likely to remain loyal, even during economic stress.
Personalized care and follow-ups. Personalizing services and maintaining follow-up communication can reinforce the practice’s commitment to pet health and client satisfaction. Building these relationships can contribute to more stable, repeat business.
3. Adaptability as a key to sustainability
Embracing technology. Implementing technology solutions, such as telehealth services and client management software, can increase efficiency and client satisfaction. These tools can also help practices keep in touch with clients, send reminders, and offer flexible service options.
Continuous training and innovation. Investing in staff training and staying updated with industry trends enables practices to adapt to new challenges. Teams that are skilled and informed are better equipped to handle shifts in client behavior and economic conditions.
Planning for economic cycles
Veterinary practices can benefit from understanding and preparing for the natural cycles of economic boom and bust. While experts like McCullock acknowledge that predicting the exact timing of recessions is difficult, practices that monitor economic indicators and adapt their business models accordingly are more likely to weather economic downturns successfully.
Anticipating seasonal trends
Economic patterns often include seasonal variations, such as higher consumer spending in the fourth quarter and slower periods in the first quarter. Practices can plan their resources, marketing efforts, and service promotions around these trends to maximize revenue during peak times and maintain stability during slower months.
Resilience and adaptability
Veterinary practices that focus on financial preparedness, strong client relationships, and adaptability are better positioned to face future economic challenges. The strategies shared by experts and supported by data emphasize that while uncertainty is inevitable, being proactive can help practices navigate change, continue to provide essential care, and grow!