Why outside investors want in on the veterinary profession
Michael Dicks, PhD
Raised in rural Orange County, California, Dr. Dicks began his agricultural career working in the Irvine Companys vegetable fields and ranches. He obtained degrees in Biochemistry and Animal Science from California Polytechnic State University in 1975.Dr. Dicks traveled to Kenya in 1976 to serve three and a half years with the U.S. Peace Corps as a chemistry teacher. During his tenure, he visited many of the local farms and developed technologies to provide water and energy to the rural communities. In 1978, he received funding from The Ford Foundation, the humanitarian agency CARE and the National Christian Council of Kenya to establish a rural cooperative to assist in the development and construction of water delivery and energy production technologies for rural communities.He obtained his masters degree working on a waste-to-energy project in Tunisia and his doctorate from the University of Missouri in Agricultural Economics, specializing in natural resource policy and international development.From 1984 to 1989, Dr Dicks worked with the U.S. Department of Agricultures (USDA) Economic Research Service. In 1989, he was a policy specialist responsible for developing and implementing the first Conservation Title in a U.S. Farm Bill. Dr. Dicks was also initiated into USDAs Aquaculture Industry Situation and Outlook program as well as the Industrial Crops and Products Situation and Outlook program. Dr. Dicks was hired by Oklahoma State University (OSU) in 1989 to work in the area of agricultural policy. He was the director of the Great Plains Agricultural Policy Center from 1991 to 1997 and director of the Center for International Trade and Development from 2009 to 2012. He retired from OSU as the Wes and Lou Watkins Chair for International Trade and Development in 2013. Hes been married for 30 years and has three children. When Dr. Dicks isnt working, he likes to climb mountains, swim oceans, race motorcycles across the country and spend time with his family. He has two Australian shepherds, Jake and Maggie.
Economic indicators for veterinary medicine are not all rosy. And still private equity is pouring in to buy veterinary practices. Heres where they see potential.
In a competitive market, money flows toward the best opportunity. Which suggests that veterinary hospitals offer a better return than other types of businesses. Think not? Investors are likely focused on the potential for increased client compliance. In fact, closing the gap between needed care and purchased care offers a five-fold opportunity in revenue growth. And that's enough to get (almost) anyone's attention.
Breaking it down
First, IDEXX recently estimated that, for an average dog living 12 years, total client compliance with American Animal Hospital Association standards of care would produce $17,700 of gross revenue over the dog's lifetime. However, the average veterinary practice currently provides $3,600 in services for that same dog (see Figure 1).
While it's clearly unrealistic to expect you could turn around tomorrow and capture the total value of care required by all pets, it is possible to close the gap. More profitable practices estimate that the lifetime value of care they're providing is more than double that $3,600 figure. And even relatively modest improvements represent considerable growth potential when you look at the total number of pets you see in a year (see Figure 2).
What's holding us back?
Your everyday experience shows there are barriers to overcome. When you adjust for inflation, U.S. household incomes declined over the past two decades. And at the same time, the cost of veterinary care increased at more than twice the pace of other goods and services. So we're seeing a widening gap between the veterinary care pets need and what pet owners will pay for. The future health of the veterinary profession (and those investors' returns) depends on finding effective strategies to close this gap.