Like the larger American economy, the veterinary economy goes up and down over time. Barring major disruptions, the business of veterinary medicine follows long term cycles, with stronger phases and softer phases. Even major disruptions don’t really change this in the long term; once they pass, the normal cycle reasserts itself. We have experienced this, with the unusual growth in veterinary spending from the COVID pandemic returning to normal.1
Economists call these economic phases A, B, C, and D. One way to distinguish between the phases is by looking at the rate of change (Figure 1).2 Veterinary practice owners who understand each phase can act to make the most of growth phases and to maintain and even strengthen their practices during the softer phases.
Figure 1: Business cycle phases
Still growing, but more slowly
What phase is the American veterinary economy in now? To find out, look at the key numbers: sales and rate of growth.
Today, veterinary sales are still growing. In 2023, practice revenue increased by 6% over 2022, with almost 80% of companion animal practices reporting higher revenues year-on-year.3
While veterinary sales continued increasing in early 2024, the rate of growth slowed, as it has been since late 2023.4 As of midyear, the rate of growth for veterinary sales was just 1%. That’s as low as it has been since 2018.4
Pet owners are still spending money on their pets, but that trend is now slowing down. This slowing growth shows in key practice metrics. Veterinary visits and the number of patients seen in each practice have continued to trend downward.3,5
With industry sales above the previous year and a slowing rate of growth, it’s clear that the veterinary economy is in Phase C. While business is relatively stable now, the future may be bumpy. As practice owners, you need to prepare today for the challenges that may lie ahead.
Welcome to Phase C: Now what?
Knowledge is power. Act now to prepare your practice for potentially challenging times. Use basic economics and financial planning to be ready for whatever is coming in the veterinary economy. Use the fundamentals of cash flow and strategic focus to strengthen your veterinary practice.
Concentrate on cash
In tight times, cash gives you flexibility. Review your practice’s cash reserves, budgets and balance sheet now. Does your practice have enough cash on hand to hedge against a decline in business? Can you reduce any spending to conserve cash in the short term? Do that now, so that the money is there when and if you need it.
Are your account receivables creeping up? If they are, assign a capable staff member to follow up with these clients, or hire an outside provider to get payment. Reducing receivables will also boost your cash reserves.
Spend wisely
A soft economy requires smart spending. Avoid tying up money in places where it won’t be working for you. Decrease inventory where you can. Put off non-essential long-term purchase commitments. That includes non-essential capital investments: Postpone making large capital purchases that require loans. Wait for better interest rates that are likely to come.
Practice smart marketing
Every practice will be better at certain services, and different services bring in different levels of profit. Now is the time to review your offerings: Which are most profitable? Which do your clients value the most? Which can your staff do exceedingly well? What services can you start providing that will make your practice more competitive? Focus on these activities. Once you understand what your clients value, tailor your marketing activities towards those services that directly fit their needs and expectations. A strategic marketing plan will help you provide more services to existing clients and pets and attract new clients who value what you have to offer.
Act now
Phase C is a natural part of the business cycle. It’s a chance to recover from the fast-charging excitement of growth in Phase B, and to prepare for Phase D’s more challenging business environment. Practice owners who make smart choices now can make their practices more resilient. Those practices are more like to be stronger and ready for growth when the veterinary economy turns upwards again.
References
- Brakke Consulting 2023 Animal Health Industry Overview. Presented 16 January 2023 at VMX, Orlando, FL.
- ITR Economics Website. https://itreconomics.com/ Accessed 14 February 2025.
- Brakke Consulting 2024 Animal Health Industry Overview. Presented 18 February 2024 at VMX, Las Vegas, NV.
- Veterinary Management Groups website: VMG Economic Data Dashboard. https://www.myvmg.com/knowledge-center/economic-dashboard/ Accessed 2 October 2024.
- Vetwatch website. Hospital client and patient trends YTD. Available online: https://www.vetwatch.com/ Accessed 2 October 2024.
