Being a veterinary practice owner is hard. But good. But still hard.
Stith Keiser is CEO of veterinary consulting firm Blue Heron Consulting.
Should you buy or start a veterinary hospital? Here are questions to ask to figure it out and resource paths to help you explore your options.
It's 3 in the morning, cold, dark and rainy. I'm 3 or 4 years old, sitting in the backseat of my dad's truck riding out to watch him to deliver a calf or fix a prolapsed uterus. Fast-forward a few years and my dad, a veterinarian, has traded in the life of a mixed-animal practitioner to build a small animal hospital, and my memories are filled with running around the clinic, locking myself in the cages and playing with puppies and kittens and, I'm sure, being a general nuisance to all. Another year or so goes by and Dad grows the hospital enough to pursue the profession he loves (and still does) while also taking Thursday afternoons off for “ice cream Thursdays” with me and my sister. He still worked most Saturdays, but we had time for running our own cattle operation and in the summertime, when my mom, a school counselor, was off, we were able to load up the camper and explore this country's wonderful natural treasures.
Not knowing any better, I assumed all practice owners and their families enjoyed a similar lifestyle. Veterinarians practiced medicine as their “day job” and built sustainable, profitable businesses that let them enjoy the fruits of their labor. Unfortunately, the more immersed I've become in our profession, the more I've realized what I experienced growing up was more of an outlier than the norm. Whether it's practice owners I meet when speaking at conferences, or veterinary student friends of mine interviewing for jobs and relaying their experiences to me, I've seen the other side of the coin. For many, practice ownership means long, grueling hours managing a business and employees-tasks for which most veterinarians receive no formal training. It means pouring their heart and soul into a hospital only to find that, when they're ready to retire, the hospital-due to years of poor financial management-isn't the retirement nest egg they planned for.
I'm not trying to talk you out of it!
For an article encouraging practice ownership, I realize I'm off to a dismal start. But stick with me. I was recently speaking to a group of Veterinary Business Management Association (VBMA) students about this very topic, and I asked why they wanted to own practices. Now, before I tell you what they told me, stop and take a moment to reflect on where you are now in your career, what you love about it and what you feel is lacking. Upon considering this, think about what practice ownership could mean for you personally and professionally. Then turn the page.
When I asked these VBMA students why they wanted to own, they told me:
- “I want to be in charge.”
- “I want to practice a certain level of medicine.”
- “I want to build my own team and design my own clinic culture.”
- “I want the freedom that comes with successful practice ownership.”
- “I want to reap the financial rewards of successful practice ownership.”
Most of these reasons are pretty self-explanatory, so let's just dig a little deeper into the last one: I've rarely met anyone in our profession who got into this for the money, but that doesn't mean money isn't an important result of what we do. In other words, it may not be why we do what we do, but it's often a tangible benefit.
How to cram for practice ownership
My suggestions to veterinary school students-and to experienced practitioners-pondering practice ownership are to consider the following steps:
> Establish your personal values, mission and vision. These are your North Star. Without knowing where you're going, the odds of getting there are pretty slim.
> Create personal goals involving practice ownership. Leverage the SMART (Specific, Measurable, Action-oriented, Realistic, Time-based) approach. Writing down goals might seem too basic, but whether you're in school or practice, written goals will help you keep your eye on the ball.
> Hone your business, leadership and communication skills. These are paramount to successful practice ownership. Jumping into ownership without them will still make you an owner but will position you to miss out on many of the benefits.
> Learn veterinary economics. I'm talking specifically about how to read and interpret a hospital's financial statements, practice management information system reports and relevant key performance indicators.
> Network. This includes mentors, potential sellers and advisors (consultant, broker, attorney, practice valuator and lender). VetPartners is a great place to start. It can be tough to find a great hospital and then compete with corporate consolidators to buy it. Developing a network may give you access to an acquisition before it's listed publicly.
> Study models of practice ownership and practice types. There is no necessarily right or wrong model or practice type. The key is determining which model-both practice type and ownership style-best aligns with your values, mission and vision.
Successful practices make money!
It's hard to argue against the positive financial impact of successful practice ownership. An article back in 2011 suggested an “average” small animal practice owner earns $75,000 more each year than an associate. More recent data convey a similar, even stronger message with figures that owners earn almost 25% more than associates and that an associate with six to 10 years of experience, earning a median income of $93,000, takes home $213,611 less per year than a practice owner. Where does all this money come from? I love walking practice owners through an exercise to convey just this.
Answer the question, please: what do you get paid to do as an associate veterinarian? (I'm not asking how you get paid-salary vs. ProSal vs. straight production vs. hourly-I'm asking what you get paid to do.)
The answer: You get paid to show up and practice medicine. When you're not working (aside from paid days off), you're not getting paid. When you retire, what happens to your paycheck? It stops the day you stop.
Think about this from the perspective of a practice owner. What does she get paid to do? If she's running a profitable business, she should be getting not one paycheck a month (actually two in most hospitals based on two payroll periods), but several more. As a practice owner, you get paid as a producing veterinarian (payroll), but there's more:
You get paid for your work managing. Even as a veterinary professional who loves management, I still employ a practice manager at each of my hospitals. I highly recommend leveraging a manager, but that doesn't mean you as hospital owner shouldn't receive a cut of management compensation, assuming you take an active role. Hospitals should be able to pay management (anyone involved in management) a total of 3-5% of gross revenue. In my hospital, a manager typically makes 3% of that, and my partner and I each take 1% for our roles.
You get paid for your return on investment. In most cases, you'll need to put money into the hospital. This money is money you could put into any investment-the stock market, real estate, cattle, whatever. And you should expect a return on investment. Owning a hospital is no different. Don't confuse your paycheck for being a practicing veterinarian with your return on investment. I personally target a 10% return on my investment each year under the rationale that the stock market, on average, returns about the same, and if I can't make as much, or more, in an investment I'm working in, I should just invest in something else. I don't go higher than 10% because I want to make sure I also have money to reinvest in the hospital, offer profit-sharing to my staff and other considerations.
You get paid a rent check. If you own the real estate, you can create a legal entity to hold the real estate and another legal entity for your clinic. Your real estate company charges your clinic fair-market rent, just as if you were paying rent to a landlord. Your real estate company then covers the mortgage, assuming there is one, and the spread between the mortgage amount and your monthly rent flows to you as the owner. (Be sure to consult a local CPA to structure this appropriately.)
You (eventually) get paid for your equity. As an associate, when you quit working, you only walk away with your previous paychecks. As an owner of a well-run hospital, when you sell, you should receive a chunk of change for your equity that you can then invest or spend as you see fit.
Some of my favorite business resources
AAHA Veterinary Management Series available through AAHA Press
The Advantage by Patrick Lencioni
Built to Last by Jim Collins
The E-Myth Veterinarian (Michael Gerber and Peter Weinstein, DVM, MBA)
The Five Dysfunctions of a Team by Patrick Lencioni
Good to Great by Jim Collins
9 ½ Things You Would Do Differently if Disney Ran Your Hospital by Fred Lee
101 Practice Management Questions Answered by Amanda Donnelly, DVM, MBA
Rich Dad, Poor Dad by Robert Kiyosaki
Start With Why: How Great Leaders Inspire Everyone to Take Action by Simon Sinek
21 Indispensable Qualities of a Leader by John C. Maxwell
Catalyst Council catalystcouncil.org
Harvard Business Reviewhbr.org
Partners for Healthy Pets partnersforhealthypets.org
Society for Human Resource Management shrm.org
It's not just money!
Talking about money is still uncomfortable for some of you, so I don't want to focus only on the financial benefits of practice ownership. Let's look at the correlation to a topic that hits home for many in this day and age: wellness.
“An analysis of the respondents to both the 2014 AVMA Employment Survey and the 2014 AVMA Compensation Survey found a large and statistically significant relationship between income and job satisfaction. There is a clear relationship between the level of income and satisfaction. This is important, especially to preveterinary and veterinary students and new veterinarians who may harbor the belief that compensation is unimportant as long as they are ‘doing what they love to do.'”
This was followed up in a 2017 AVMA report stating that “lower income and hourly compensation were found to be statistically significant in a negative association with compassion satisfaction.”
Wellness, and all it entails, is related to far more than just money, but it's important to note that while money is not the answer to happiness, neither, necessarily, is the absence of it.
When I asked my students to list both pros and cons of ownership as it relates to work-life balance, they came up with:
Pros to owning a practice
- Determine your schedule, including your hours (may equate to more quality time with family and friends)
- Delegate tasks by hiring people you trust and training them appropriately
- Define the workplace culture so that when you're at work, you're happy more often than you're not
Cons to owning a practice
- The fact that the success of the practice falls on your shoulders may weigh on you, especially if you don't have a support system you've built in practice and in your personal life
- You won't just work in the business as a practitioner, but you'll need to work on the business as the owner
- Day or night, vacation or not, you're on speed dial for anything that goes wrong in the practice.
Fortunately, many of the “cons” can be mitigated through appropriate planning, staffing and leadership.
You ready to own?
The ability to practice medicine your way, the opportunity to build and leverage the team you want, the chance to manage your own work-life balance and financial security-these can all come with owning a successful veterinary hospital. Given trends in student debt and the debt-to-income ratio, practice ownership may also very well be one of the best avenues to enable a veterinary degree to pay for itself.
Stith Keiser is CEO of veterinary consulting firm Blue Heron Consulting.