Is it crazy to start up a veterinary clinic?
Practice chains are paying many times what the next generation of practice owners can afford for good veterinary hospitals. Associates feel left out in the cold. Find out what expert Karen Felsted, CPA, MS, DVM, CVPM, CVA, says about the alternative: starting up a practice with zero clients when you open your doors.
"We're all mad here," said the Cheshire Cat. But is starting up a veterinary practice that crazy? (HolyLazyCrazy/stock.adobe.com)You want to own a practice sooner rather than later, and you can't find the right practice to buy. So is it time to start up a new one? Only after you've asked yourself some probing questions and considered your appetite for a revenue-less kickoff and know, according to Karen Felsted, DVM, CPA, MS, CVPM, CVA, owner of PantheraT Consulting in Dallas, Texas, and a frequent speaker at the Fetch dvm360 conferences on subjects like this.
If you're too busy to get through this whole article (no judgment from us), at least take time to reflect and answer some questions for yourself and get some help considering financial and legal issues of starting up a new practice:
• To find a better practice to buy, could I be more flexible about where I want to live in the state or the country?
• If I start up a practice, do I know that I can manage a year or more on little to no revenue (or salary)?
• Am I confident practicing medicine exclusively or mostly on my own?
• Am I OK with spending some time without a giant hospital's-or teaching hospital's-worth of expensive, top-of-the-line equipment?
• Do I have a marketing and client service plan to attract pet owners who don't visit veterinary hospitals now or attract competitors' current clients?
• Do I want to work a lot of hours to get your hospital up and running? Will I enjoy it?
Dr. Karen Felsted says, if you're starting a practice, you'll need help for:
• Cash-flow projections. Your lender will require them in one form or another. It helps you understand how many clients you'll need to service your debt and pay expenses. Dr. Felsted recommends a veterinary-specific consultant for this-how would a nonveterinary expert ballpark revenue and expenses?
• Legal help to set up your legal entity from an attorney.
• Identifying possible properties with a real estate broker.
• Marketing help, as needed.
• A veterinary distributor, to plan how much to buy for equipment and starting inventory.
Before you start up, have you considering buying?
Because, in most situations, that makes more sense than starting new, says Dr. Felsted.
Look for a practice to purchase in the area you want to be in. And, if you can, have a little "geographical flexibility," she says. Many aspiring practice owners know where they want to live, and they do look for a practice buy, but can't find something in a reasonable time frame.
"People have very specific ideas where they want to live, and that's often where a lot of other veterinarians want to live too," she says. "It can be difficult to find a practice to purchase.
"I personally feel if you have a good option to buy a practice, it works financially better. Assuming it's a decent practice at a fair price, it's already got cash flow there. It's got clientele, people who come to the practice, revenue."
Nobody starts with revenue with a startup, Dr. Felsted warns.
"If you start a practice, it could be easily a year before you take any money home. And it could be longer than that," she says. "The point being, you can't count on take-home cash flow in a startup practice. Maybe you'll get $75,000 working capital from the bank, buy you'll need that for business expenses, not to pay your mortgage or car payment."
Dr. Felsted admits this could work if you have a lot of money saved, a big inheritance coming to you or somebody else to pay the bills while you get your hospital off the ground. Or work side jobs: "Somebody could work overnights in an emergency clinic, and that would help."
Questions to ask yourself: Could I be more flexible about where I want to live in the state or the country if it meant a better clientele, a better opportunity for business growth or a better deal on a practice? Have I consulted with an expert to make sure I can financially manage a year or more on little to no revenue (or salary) from my startup practice?
If you start a practice, will you finally be able to do things your way?
Yes, says Dr. Felsted. You're in charge, as the business owner, the principal hirer and firer, and the setter of protocols and procedures. If you have a strong vision for branding, for workplace culture, for systems, starting up may be the way.
"It's easier to set those at the get-go rather than changing a practice you purchased," she says. "But you have a lot of economic limitations, unless you've got family money or outside investors. You're not going to get endless amounts of money to start."
For example, the startup will probably be a leasehold, so you'll be limited in space and money-and, therefore, equipment and capabilities.
"It is very doable," she says. "But you won't be the Taj Mahal practice the first day you start up."
Questions to ask yourself: Am I OK with spending some time without a giant hospital's-or teaching hospital's-worth of expensive, top-of-the-line equipment?
Did you ask around?
You can scour dvm360.com for excellent practice management and ownership information (like, *ahem*, this), but nothing will sink in like talking to your colleagues, both those who love and those who don't love running and owning practices.
"It can be really helpful to talk to colleagues who own or started a practice," says Dr. Felsted.
If you start a practice, do you know how to grab new clients in a saturated market?
If you buy someone else's relatively well-run hospital, you're paying for the privilege of starting with a client list. If you start new, you need a plan for attracting pet owners who don't go the hospital now or pet owners who visit all your local competitors.
"it's a very rare area that needs another veterinary hospital. There aren't these big pockets of pet owners who can't find a practice near them," says Dr. Felsted. "You have to ask yourself, 'What am I going to do that's genuinely unique to pet owners? And how will I market that? The biggest thing you need to think about is, 'How am I going to differentiate my practice from the 10 other practices around me?'"
There are "amazingly entrepreneurial" veterinarians out there who can do this: "They're not only thinking about what's different in medical services, but client service and convenience, which can be more of a draw than the quality of the medicine. Pet owners think the [high-quality] medicine is a given."
Questions to ask yourself: Do I have a marketing and client service plan to attract pet owners who don't visit veterinary hospitals now and/or attract competitors' current clients? Do I really know what will make my hospital unique from everyone else's?
What's 'too early' to start a practice?
Yes, a few really entrepreneurial-minded, driven veterinary graduates have popped out of a school and started practices. But most of the earliest graduates who ask for Dr. Karen Felsted's help with starting up new practices have been out of school at least three to five years.
"You do want to make sure you're comfortable with your medicine and not get stuck in a practice where you're by yourself," says Dr. Felsted. "If you're used to having colleagues around, that can be quite a shock."
Also, consider that your medicine will need to be especially efficient, she says. You'll need to devote considerable hours to management and business, at least in the beginning.
"You're not going to be able to spend all your time practicing medicine," she says. "So you want to be at a point where you're efficient at what you do."
Questions to ask yourself: Am I confident practicing medicine exclusively, or mostly, on my own? Are my diagnostic and treatment skills efficient enough to allow me time to manage business, personnel and other things until I've got my dream team of managers and technicians and receptionists in place?
If you start a practice, do you want to run a practice and lead a team?
Veterinarians sometimes don't get a lot of financial, management and marketing training in school. For DVMs who haven't been immersed in a veterinary practice's business side at all, the time commitment involved in not just being the main veterinarian, but running a business can be rough.
"In the early years of owning an existing practice or starting up, you have to put more time in there," says Dr. Felsted. "You have to practice as a veterinarian and spend just as much time time on the management side of it."
Questions to ask yourself: Do you want to work a lot of hours to get your hospital up and running? Will you enjoy it? If you don't know the answer, have you asked friends, family and colleagues who know you best?
Are you ready for this? You might be!
First, there's no harm in thinking through these questions and figuring out:
1. you want to buy, not start up a practice,
2. you want to start a practice, but not this year
3. you don't want to own a practice at all.
Veterinarians change their minds sometimes, says Dr. Felsted: "One woman who contacted me thought she wanted to start a practice. I encouraged her to consider buying a practice, she went and looked at a local one and came back and said, 'Hey, I need to back off. I'm not even sure I want to be an owner or whether I was just looking at this to escape from a practice that doesn't work for me.'"
Are you still excited about starting up a practice? Is your mind racing with ideas? You might be the right person for the job.
"The people who do the best at startups have a million ideas from the beginning," she says. "They can already see what they're gonna do differently, what's truly unique, and they think about how they'd market it. Those are the people who end up doing best. They're thinking, thinking, thinking all the time about what their practice is and will be."