Own it: Take the lead on a path to financial freedom
Sarah Mouton Dowdy, a former associate content specialist for dvm360.com, is a freelance writer and editor in Kansas City, Missouri.
Crippling debt + more debt = less debt? We promise theres method to this math madness, but it requires veterinary graduates to pull their heads out of their debt and consider practice ownership.
Steven Bognar/Shutterstock.comIf you're weighed down by an astronomical student debt load, the thought of taking on even more debt by starting, buying or buying into a practice may sound like a direct path to destruction. But what if, instead, increasing your debt burden in this way actually set you on a path out of your student debt woes?
We reached out to four veterinarians with practice ownership experience and an accountant/financial planner in the veterinary industry to get more details about this path. While their answers varied with regards to the specifics (as you'll read below), they all agree that practice ownership offers young veterinarians the best chance at financial freedom.
“Other than winning the lottery, receiving a giant inheritance or marrying into wealth, I can't think of another way out of student debt,” jokes Ryan Gates, DVM, owner of Cuyahoga Falls Veterinary Clinic in Cuyahoga Falls, Ohio. “An associate's salary has limits, and you can only make so much headway on your debt when your salary has a ceiling,” he says.
Peter Weinstein, DVM, MBA, who started a practice he later sold to a corporate consolidator before becoming a consultant with Simple Solutions for Vets, goes so far as to ask whether recent graduates with six-figure debt loads can afford not to receive two paychecks a month-one as a veterinarian and one as an owner. “It's the best way for a young veterinarian to be able to increase their income, retire their debt and live a comfortable lifestyle,” he explains.
Still, practice ownership isn't for everyone. But if you think it might be right for you, what are your options?
In support of saving up and starting up
As long as you can afford to live while establishing a client base, Christopher Allen, DVM, JD, who provides legal counsel to veterinarians at Associates in Veterinary Law, says starting a new practice is likely the most lucrative option (in the long term) for young veterinarians.
“There's no question that if you were to start with a client base of zero and end up with a practice that's grossing a million dollars, you're ultimately better off than if you were to buy a practice for a million dollars and eventually work to where it's worth a million and a half,” he explains.
Allen readily acknowledges that this path is more difficult than it was for earlier generations. He still believes it's possible, though it may require delaying life events like marriage and children in order to survive the months (years?) it will take to build a client base.
The benefits of buying
Allen is not, however, against buying. “It's certainly easier to get funding when you're buying an established practice,” he says.
If you're intimidated by corporate consolidators, don't be, says Weinstein. “There are plenty of quality, profitable practices that can be purchased by young veterinarians if they take their time and find the right practice,” he says. The advice is simple enough, but what does it look to take your time and find the right practice?
Take your time
Fresh graduates need time to practice and polish their clinical and leadership skills before buying (or starting) a hospital, says Dani McVety, DVM, owner of Lap of Love Veterinary Hospice and In-Home Euthanasia in Lutz, Florida. “Simply put,” she says, “the vast majority of young veterinarians will not be ready to lead a team of technicians, doctors, accountants and lawyers without first understanding and implementing the medicine they were trained to do.”
That's why McVety is adamant that “good mentorship should be the most important factor in choosing a first job-more important than salary.” Gates echoes these sentiments: “New graduates with ownership aspirations should first work toward being the best veterinarian they can be, and if they can do this at a hospital with quality mentoring, all the better.”
McVety advises young veterinarians to use this time wisely and thoughtfully. “You will find yourself pulled into and out of things you like and dislike,” she says. “Embrace those differences and cultivate your strengths, but also be aware of weaknesses-both in yourself and in those around you.” Learn what you can and cannot tolerate. This will come in handy when choosing the right practice.
“For example,” McVety explains, “your first job may be at a practice that gives steroids and penicillin to every patient because they offer the highest profit margin. This may help you realize that working for a clinic in which you can't choose which drugs to stock would be unacceptable.”
McVety believes you're ready to consider ownership when you meet the following conditions:
You feel confident with 80 percent of the patients that walk through the hospital door.
You enjoy looking at charts and graphs and listening to business advisors.
Everyone's timeframe for meeting these conditions is different. It may take you three months or three years, “but once these things don't scare you, go for it,” she says.
McVety also offers a side note about franchises: “I don't suggest buying a franchise right out of graduation, and I think most franchisors would agree with me,” she says. “We are no longer franchising at Lap of Love, but I can tell you that while I have no problems hiring new graduates, it is the doctors with two to six years of experience that really flourish. They have their ‘flow' down and better understand the intricacies and inconsistencies of veterinary medicine.”
Choose the right practice
Taking your time is also good advice when it comes to finding the right practice to buy or buy into. “You can't be in a rush,” Weinstein says. “This isn't speed dating. Even if you find the right practice, the owner might not be ready to sell.”
Location deliberation. The most basic first step you can take is to decide where you want to live. Allen implores young veterinarians to do so with cost and competition in mind. If you want to live in an urban area, buying a practice is going to be more difficult. “For example, if you want to live somewhere like Orlando, you're going to have a tough time because everyone wants to be there,” Allen says. “Even if you're able to buy a practice, keeping clients will be challenging because there's a competitor on every corner.”
Cost of living adds up too. “I know a veterinarian in New York City making $200,000 a year who is barely scraping by,” he says.
Still, “there are still a lot of profitable small practices in isolated areas around the country,” Allen continues. “I can think of six rural practices off the top of my head that would make new graduates a ton of money, but they're in the snowbelt and just aren't selling.”
Successful and appropriate. Though Weinstein sees practice ownership as the quickest way out of debt, it isn't a foolproof path. “Buying a practice that hasn't been successful in the past or that doesn't have sufficient profitability or cash flow can exacerbate your situation,” he says. Weinstein defines sufficient cash flow as a million dollars or more and advises young veterinarians to only consider practices that are grossing that amount.
Better still, look at practices with sufficient cash flow that are fixer-uppers, says Fritz Wood, CPA, CFP, a veterinary business and financial consultant. If the building's appearance is a little dated, you might get a better price and then make easy cosmetic changes that bring the practice into 2017 (and bring you more business).
To determine an appropriate practice, return to McVety's advice: Know your strengths and what you can and cannot tolerate, and pursue a practice that ticks your boxes.
Keep your veterinary professional friends close. Once you have a practice in mind, seek advice from people you trust who also have experience in the veterinary field, including accountants, attorneys, consultants and bankers. “All of these people can help you make logical decisions as opposed to emotional ones,” says Weinstein.
It also helps to have friends as partners if work-life balance is a primary concern. Weinstein posits that three veterinarians who want more control over their lives may want to join together to buy a two-person practice in order to have more schedule flexibility. “You can even add a technician and a manager, and all five of you could come together to buy a practice,” he says. “That way, everyone has skin in the business and is looking to make it more successful and profitable.”
If you aren't convinced you want to own a practice, that's OK-it's definitely not for everyone. Just make sure your decision hinges on your interests and aspirations and not your current debt load.