Four figures in, and you get gross margin, staff cost ratio and EBIT margin — then where that EBIT margin falls inside the CMA's own published sample of 36 independent practices, which ranged from minus 9% to plus 34%.
Fee income plus dispensing and product sales, from your last full year. Exclude VAT.
Everything that varies with clinical activity: medicines and dispensing stock, consumables, external laboratory fees and referral costs you pay out.
Gross pay for everybody, plus employer National Insurance at 15% above £5,000 and employer pension contributions. Include locum cover. Put the owner in at a market rate if you want a comparable figure.
Premises, rates, insurance, software and practice management system, professional fees, marketing, equipment finance, depreciation, RCVS premises registration and everything else.
Illustrative figures on 2026/27 rates and simplified assumptions. This is information, not advice, and it is no substitute for a proper calculation on your practice's real numbers. Ask us for the accurate version — it's free.
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Gross margin is turnover less direct costs — drugs and medicines, consumables, external laboratory work and referral costs. It is the line the CMA remedies touch most directly, because the prescription fee cap, the published parasiticide list and the link to the register of online retailers all press on dispensing. If your gross margin depends heavily on medicines, that dependence is now a strategic question rather than a footnote.
Staff cost as a percentage of turnover is the number that moves most and gets watched least. In a clinical business it is the largest single cost, and it moves for reasons that are individually reasonable and collectively expensive: a locum covering maternity leave, an extra nurse, the April uprating, a retention rise for a vet you cannot afford to lose. Employer National Insurance at 15% above a £5,000 secondary threshold means every one of those decisions costs 15% more than the salary suggests.
EBIT margin is earnings before interest and tax as a percentage of turnover. It is the figure a buyer looks at, the figure the CMA published a distribution for, and the figure that tells you whether there is room in the business for the process cost the remedies bring with them.
Appendix C of the CMA's final report examined a sample of 36 small independent veterinary firms over 2021 to 2023. That is the only published distribution of independent practice profitability in existence, and the calculator places you in it. The figures are: EBIT margins ranging from minus 9% to plus 34%; a weighted average of 11% across the three years, being 15% in 2021, 12% in 2022 and 9% in 2023; a top sextile of 28% and a bottom sextile of 0%; and 24 of the 36 firms with declining margins across the period. The average across the six large veterinary groups was 14%.
Two things to hold in mind about that. It is a sample of 36 firms, published by a competition regulator for the purpose of assessing profitability across a market — not a benchmark anybody is holding you to, and not a target. And the trend inside it matters as much as the average: the weighted figure fell from 15% to 9% over three years, and two thirds of the sample were going the wrong way. Excluding the two firms with large animal services made no difference to the weighted averages.
The other useful reference point from the same work is the CMA's assessed pre-tax cost of capital for the sector: a range of 7.5% to 10.5% a year with a mid-point of 9%. Paragraph 35 of the final report records that four of the six large groups — CVS, IVC, Pets at Home and VetPartners — made profits which materially exceeded the cost of capital over a sustained period. Group-specific profit and return figures in the appendix are redacted in the published version, so nobody can reconstruct them, and we do not.
It assumes you have put owner's remuneration somewhere sensible. This is the single biggest source of a misleading margin in an owner-managed practice: a principal who takes £30,000 of salary and the rest as dividends will show a far better EBIT margin than one who takes £90,000 of salary for the same clinical work, and neither figure is comparable to the other or to the CMA's sample. If you want a figure that means something, put the market-rate cost of employing somebody to do your clinical and management hours into the staff cost line. The value drivers tool makes that adjustment explicitly.
It also treats the four inputs as a complete cost base, so anything you leave out flatters the result — depreciation, equipment finance interest, premises costs if they are paid personally, and any rent you do not currently charge yourself for premises you own. And it is a profit measure, not a cash measure: dispensing stock and equipment finance detach the two in a veterinary practice more than in most businesses.
Work the three ratios rather than the EBIT figure. If gross margin is the problem, the question is pricing and dispensing economics, and that conversation now has to happen alongside the four publication duties — see CMA compliance and pricing. If staff cost ratio is the problem, the question is rota design, skill mix and what your registered nurses are permitted to do under Schedule 3 of the Veterinary Surgeons Act 1966, and the cost side of it is on practice payroll. If overheads are the problem it is usually premises, equipment finance and software, and those are the three easiest to leave unexamined for a decade.
Then get the figure produced monthly rather than annually. A margin you calculate once a year is a margin you can only explain; a margin you see every month is one you can change. That reporting is part of what we do in practice accounts and management figures, and if you would rather have the number checked against your own ledgers than typed in from memory, a free practice review will do it.
These tools use sensible simplifications. A free conversation gets you the accurate version — and usually two or three things worth fixing before your year end.
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