A lot has been written about the obstacles to buying and owning a veterinary practice, which can leave one to wonder, “Is it even a realistic possibility?” With emerging issues like the high cost of construction materials, a highly competitive job market, disruptive advancements in IT and AI, and the growing cost of medical and office supplies, the idea of starting a veterinary practice can become a daunting venture. But daunting doesn’t mean insurmountable. It also can create opportunity.
As someone who’s spent her career surrounded by veterinarians succeeding in starting and maintaining private practices, I know that with the proper guidance, it’s highly possible. Here are four essential steps when starting a veterinary practice.
What: Create an Authentic Business Model and Plan
What is the goal? What do you aim to achieve? A veterinary practice’s business model and plan focus on the basic mechanics of who the clinic will serve, which services will be offered, and which key resources and activities are needed to bring the value proposition to life. You need to have a clear, realistic picture of what you want to achieve and who the business will serve. This impacts the services offered and the required footprint, which then drives the funding, talent, equipment and marketing necessary to achieve everything.
This picture also includes having a clear sense of the desired earning potential of the business as it drives the spatial requirements to make a go/no-go decision on a potential location. Including all those aspects in a business plan will create a comprehensive road map that allows you to explain the viability of your business to potential lenders and investors.
Where: Location, Location, Transportation
You want to find an area where your services are most needed and accessible. This means finding a place where pets and their humans reside and where you want to practice. Next, you want to analyze the nearest veterinary providers. The DVM-to-population ratio is a helpful indicator of the viability of a new practice in a marketplace. In addition, the demographic makeup, history and shifts in the community can help you understand who lives in the area, who is moving there, who is leaving and who will need your services. Additionally, identifying other complementary businesses in the area, such as pet day care, trainers, groomers and other pet-centric businesses, can help generate referrals to kickstart and sustain your new practice.
The next step is finding the location that meets your needs. Whether you lease or buy, the amount of square footage you take on can dramatically affect the finances in upfront build-out costs and ongoing cash flow for line items such as utilities or rent. You need a location that will be affordable enough to get you through the early ramp-up years as your business grows but will meet your needs for the next five to 10 years as your mature business grows comfortably. Other considerations, such as zoning, signage, parking and access, can quickly make or break a location’s viability.
Transportation and access are other important considerations. Parking for clients and team members is crucial unless you are in a high-density pedestrian community. And don’t forget about finding and engaging neighbors amenable to having a veterinary clinic next door.
How: Fund It Correctly
Funding requirements include the cost of building out the location and equipment and the working capital needed to sustain the business’ operational needs before opening and throughout the ramp-up period. The structure of the terms for funding can delay or accelerate profitability, so securing the best partner, bank or investor is critical. With increasing costs for construction, talent, equipment and supplies, the sums can be scarier than startup budgets from just a few years ago.
Traditional financing options are available, but with rising interest rates and higher construction and operational costs, you might be faced with scaling down the project to support the loan payments in the early years. However, once you have a cash-flowing business, the opportunity to grow can make the second round of financing significantly easier as your clinic has a financial track history that can justify repayment of a larger debt load.
New joint-venture models are starting to emerge. For example, Dr. Russell Miller, the managing owner at VO Vets in Fort Worth, Texas, unsuccessfully pursued various practice purchases before realizing that with the headwinds in today’s environment, a startup practice partnership would be a great route for him to achieve his dream. He considered various funding options and partners while weighing ways to mitigate risk and set himself up for professional and financial success. He found that by partnering with Suveto, he gained the financial backing to achieve his dream and a partner willing to provide the resources and services to support him in the management and growth of the business.
“We were able to build a practice that’s right for our community, patients, team and pet parents, with a partner that reduces our risk, increases our support, and creates opportunities I would not have had doing this on my own,” Dr. Miller said.
Who: Build Your Practice and Team
When we think about building a practice,” building out the physical space is typically top of mind. But in reality, the practice is more than the space. Building the practice is also about fostering the team of people who bring it to life. There is first the team you work with to take the practice from an idea on paper to a real-life business, and then there is the team of people who operate and support the clinic into the future.
In the first phase, finding financing, legal and construction team members with veterinary experience is crucial to navigating the nuances of setting up a veterinary business. For your practice team, finding people willing to learn and adapt to new situations and work together helps in the early days of getting the clinic open and operational. People with a positive attitude are also a must. You’ll want people who bring to the table skills you don’t have, who communicate openly and honestly, and who align with your vision.
An American Veterinary Medical Association survey found that a significant percentage of veterinarians will likely retire within the next 15 years, opening many opportunities for the next generation of veterinary owners. Despite the headwinds in the current ownership landscape, support for veterinarians interested in stepping into ownership is available and willing to provide aspiring practice owners with the resources to help them achieve their dreams.