Here are some points to consider if you want to bring on an equity partner within a veterinary practice
Content submitted by Florida Veterinary Advisors, a dvm360® Strategic Alliance Partner
Business ownership can feel like being on an island. Consider the president of the United States. Every day, decisions must be made, and some could affect the fates of those in the country as well as ties with other nations. The president has counsel but ultimately makes the hard decisions, for better or for worse. The same thing happens when a veterinary professional opens a clinic. Most veterinarians start loving the idea of practicing medicine their own way. They dream of having the flexibility and freedom to come and go as they please.
The downside is that too few practice owners get to live like this today. Most are sucked into the daily grind and take on too many responsibilities due to wanting to be helpful and perhaps a bit of a perfectionist, like me. Also, the potential owner or current owner may not be business savvy, so there is a lack of leadership and guidance on the inside. Imagine that you are the person who will have to live with the positive and negative consequences of decisions inside the practice. This can create tremendous stress.
What is the best solution? You can find counsel to support your practice while you continue to practice medicine, or you can start working with a business partner. There is a term that is thrown around when you bring on a business partner—being “business married.” Depending on the amount of ownership each person receives, this can create a multiheaded dragon that can affect the overall direction of the practice and decisions that are made. Sometimes ownership is tossed around as an employee retention tool; this can be a huge mistake for the owner because, once given, the ownership might be impossible to take back. There could be a small amount of ownership, but now that person is obligated to see the financials and they could provide input in the practice.
When you are majority owner, the decisions are solely on your shoulders and getting input can be helpful. However, if the sole purpose was to give someone ownership to retain them in the business, this could backfire. There are other options like phantom stock and deferred compensation arrangements that can give that person the upside of profits and extra money without having to relinquish ownership.
Ability to split the workload
Each person has their “native genius,” and duties can be divided accordingly. When there is another person involved, especially when they have skin in the game, the desire to do better will usually be higher because they have something to potentially lose. Depending on what is desired from both or multiple partners, the duties can be broken up so each person can spend time doing what they truly enjoy instead of feeling stuck having to do everything.
Specialize in specific areas rather than being the jack of all trades
Maybe your strengths are more on the business side or the medicine side. There could be a specific type of medicine that you want to practice, like holistic or surgical. When 1 person must be everything to everyone, the time and energy to focus on being a specialist can feel impossible. There are times when other employees like a practice manager could take on specific duties not requiring a lengthy education, but with a business partner the idea is that they are equally committed. That will usually provide each person the time and space to focus on what they want to do instead of what they must do.
Someone to build something with
Business ownership can be lonely because you are the sole person taking the risks and responsibilities. A business partner can provide a balance, helping with direction of the veterinary practice. Sometimes knowing which decisions to make and what is good or bad can be difficult when you are doing everything alone.
At times, a partner can dramatically increase productivity. Think about your team for a moment and those individuals who appear to be doing multiple jobs. When someone on the team is aligned with a vision and has complementary skill sets, the veterinary practice can excel at a different level, medically and financially.
Business married and ownership splits could lead to conflict
When taking on a business partner, the person you choose to provide equity should not be taken lightly. Owners often will attempt to provide ownership to employees as an incentive, but once the equity is given to someone, conflict could result.
Whenever someone has 51% or more ownership, they are considered a majority partner. Ultimately, they call the shots, but the person who owns the remaining equity could cause problems for the majority. Make sure you have a well-written and well-funded buy-sell agreement along with being at least 90% confident that the individual you are going to partner with is the right person.
Different visions for the veterinary practice
Some individuals will do a handshake deal or talk about things without writing them down. As time passes, we all change, as will the vision we have for our lives and business. Perhaps when the practice was started, you both were on the same page, but the why became lost in the whirlwind of life. As a solo owner, you likely do not spend enough time working on the business; when a partner gets involved, it can be the downfall of many relationships. Be sure to set up regular check-ins and quarterly business discussions every so often to maintain alignment and make decisions as a team.
The person you started the business with might not be who you thought they were. Maybe they were perceived as being good at the finances or medicine, or they seemed in alignment with what you wanted as the bigger picture for the practice. We each have struggles we work through; things like disagreement, divorce, death, retirement, sickness, and more could hurt the culture, direction, and overall success of the veterinary practice.
You might want to partner with someone to delegate certain responsibilities, or maybe you enjoy working on your own and decide to build a team around you that can take on unappealing duties. Whichever way you decide to go, understand your why for the veterinary practice and the vision for where you want the practice to go. This will be your beacon for whenever you are lost, and you can easily correct course or adjust when necessary.
Tom Seeko, CExP, has worked with practice owners and veterinarians since 2014. He is the cofounder of Florida Veterinary Advisors, which works with veterinarians throughout the United States. He also is a certified exit planner (CExP), a business and personal financial adviser, and cohost of the Smarter Vet Financial Podcast.
DISCLAIMER: This material is intended for general public use. By providing this content, Park Avenue Securities LLC (PAS) is not undertaking to provide investment advice or a recommendation for any specific individual or situation, or to otherwise act in a fiduciary capacity. Please contact a financial representative for guidance and information that is specific to your individual situation. Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation. This material contains the opinions of the author but not necessarily those of PAS or Guardian. Registered Representative and Financial Adviser of PAS. Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial representative of The Guardian Life Insurance Company of America (Guardian), New York, New York. PAS is a wholly owned subsidiary of Guardian. Florida Veterinary Advisors is not an affiliate or subsidiary of PAS or Guardian. Florida Veterinary Advisors is not registered in any state or with the US Securities and Exchange Commission as a Registered Investment Advisor. The individuals associated with Florida Veterinary Advisors do not maintain specialized licenses or qualifications for the financial services provided to veterinary professionals. CA Insurance License #0K80141. 2023-156577 Exp 8/25