Last Updated: December 2025
Running a profitable veterinary practice requires balancing clinical excellence with business fundamentals. Your practice has high fixed costs (rent, equipment, staff), significant inventory investment, and revenue that depends on patient volume and service mix. Understanding your numbers lets you make better decisions about pricing, staffing, and growth.
Veterinary practice costs have increased significantly in recent years. Staff wages, rent, and supply costs have all risen while competitive pressure limits price increases. Practices without clear financial visibility often discover profitability problems only when cash runs short. Proactive financial management identifies issues early when they can still be addressed.
Veterinary practices generate revenue from three main sources: professional services (consultations, procedures, surgery), product sales (medications, food, preventatives), and ancillary services (grooming, boarding, training). Each has different margin profiles.
Professional services typically generate 60 to 70 percent gross margins but require expensive clinical staff. Product sales generate 20 to 40 percent margins but are less labour intensive. The mix determines overall practice profitability.
Staff costs represent the largest expense, typically 40 to 50 percent of revenue. Veterinarians, nurses, and support staff are essential for service delivery but create high fixed costs that must be covered regardless of patient volume.
Inventory investment is substantial. Medications, vaccines, surgical supplies, and retail products require capital and create waste risk from expiry or damage.
Revenue categories:
Cost of sales:
Operating expenses:
Revenue analysis:
Look at revenue by category to understand your service mix. Healthy practices typically show 50 to 60 percent from professional services, 25 to 35 percent from product sales, and the remainder from allied services.
Track revenue per clinical FTE (full-time equivalent veterinarian). Australian benchmarks suggest $400,000 to $600,000 revenue per veterinarian FTE for established practices.
Gross margin analysis:
Calculate gross margin by category. Professional services should deliver 65 to 75 percent margins. Product sales should deliver 25 to 40 percent margins.
Overall gross margin target: 55 to 65 percent.
Labour cost analysis:
Total staff costs (including super) as percentage of revenue. Target 42 to 48 percent.
Break this down by role: veterinarian costs, nursing costs, support staff costs. Identify if any category is disproportionate.
Operating expense analysis:
Rent should be 5 to 8 percent of revenue. Higher suggests either expensive premises or underperforming revenue.
Total overhead (non-staff operating expenses) should be 20 to 25 percent of revenue.
Net profit:
Target net profit margin of 10 to 20 percent for well-run practices. Below 10 percent suggests pricing, efficiency, or cost issues requiring attention.
Practice management software:
Your PMS (ezyVet, RxWorks, or similar) is the source of truth for clinical and billing data. Ensure it integrates with your accounting software to avoid double handling.
Accounting integration:
Set up automatic or regular feeds from PMS to accounting software (Xero or MYOB). Map PMS revenue categories to your chart of accounts. Reconcile daily to catch discrepancies quickly.
Inventory management:
Use PMS inventory modules to track stock levels, costs, and movements. Conduct physical stocktakes quarterly minimum. Investigate variances promptly.
First week:
Second week:
Third week:
Fourth week:
- Practice management: ezyVet (cloud-based, from $250 monthly) or RxWorks (from $300 monthly) are Australian market leaders. Both handle clinical records, billing, inventory, and basic reporting.
- Accounting: Xero Business at $78 monthly integrates with major PMS platforms. Use the integration to automate revenue recording.
- Payroll: Xero Payroll (included in Business plan) handles award interpretation for veterinary staff.
- Rostering: Deputy from $5 per user monthly or Tanda from $5 per user monthly for staff scheduling and time tracking.
Example costs for 5-vet practice:
How should veterinary practices price services?
Calculate your cost per clinical minute (total clinical staff costs plus overhead, divided by available clinical minutes). Add target margin. Compare to market rates. Price premium services (surgery, dental, imaging) to subsidise competitive pricing on routine consultations that drive patient acquisition.
What gross margins should we target on product sales?
Target 30 to 40 percent margin on medications and 35 to 45 percent on retail products. Lower margins may be acceptable on high-volume items. Review supplier pricing regularly and consolidate purchasing where possible for better terms.
How do we reduce inventory waste?
Track expiry dates systematically. Order smaller quantities more frequently for slow-moving items. Review usage patterns quarterly and discontinue products with insufficient turnover. Implement first-in-first-out stock rotation. Investigate variances between system stock and physical counts.
What staff-to-revenue ratio should we target?
Total staff costs (including super and leave provisions) at 42 to 48 percent of revenue is healthy. Above 50 percent suggests overstaffing, under-pricing, or efficiency issues. Break down by role to identify specific problems.
How often should we review pricing?
Review pricing annually at minimum, more frequently during periods of cost inflation. Analyse profitability by service type to identify underpriced services. Implement increases gradually to minimise client resistance.
Scale Suite delivers embedded finance and human resource services for ambitious Australian businesses. Our Sydney-based team integrates with your daily operations, working like part of your internal staff but with senior-level expertise.
Disclaimer: This guide provides general information only and does not constitute tax, legal, or financial advice. Veterinary practice regulations, employment award interpretation, and accounting treatment for specific transactions require professional advice for your circumstances.
Scale Suite delivers embedded finance and human resource services for ambitious Australian businesses.Our Sydney-based team integrates with your daily operations through a shared platform, working like part of your internal staff but with senior-level expertise. From complete bookkeeping to strategic CFO insights, we deliver better outcomes than a single hire - without the recruitment risk, training time, or full-time salary commitment.
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