Bert Hockenberry is the national sales manager, veterinary, at Provide Inc., a national fintech company. He guides Provide’s veterinary market expansion strategy and has over 15 years of experience in the veterinary practice lending space, with an emphasis on practice ownership and industry partnerships.Read Articles Written by Bert Hockenberry
It’s never too early to start planning financially for veterinary hospital ownership. Developing strong financial habits early on and setting a foundation will give you an exciting range of options when you’re ready to own a practice.
As you begin your career in the veterinary industry, a few key components will optimize your financial position.
Understand Good Debt Versus Bad Debt
While you develop a financial plan, remember that not all debt will impact you negatively. Knowing the difference between “good” debt and “bad” debt and how lenders will look at both is crucial to executing your plan successfully.
“Good” debt is seen as an asset that can help build wealth and increases in value over time. Student loan debt falls under this category and is inevitable for most veterinary graduates as they work to turn their degree into an income that outweighs the original loans. This type of educational investment often pays for itself within a few years of someone entering the workforce. A home mortgage or similar real estate investment also is considered “good” debt and has the potential to produce a high return on investment.
On the other hand, “bad” debt typically refers to any credit card or consumer debt incurred for items that immediately depreciate. In other words, we all require basic necessities like clothes, food and furniture, but high-interest credit card debt could impact your ability to borrow money.
As you think about your financial priorities with hospital ownership in mind, make sure to have a plan of action to attack your personal debt.
Create a Budget and Savings Plan
Personal liquidity is one of the pillars of your financial profile. Devising a disciplined budget to spend and save accordingly will optimize your chances for financing when you are ready to pursue hospital ownership.
Start by evaluating your daily and monthly expenses, both big and small, whether it be on a piece of paper or budgeting app. Focus on the essentials, and think about how much money you might save if you eliminate unnecessary items, such as a subscription service you never use or a coffee you get on your way to work. Those expenses might seem insignificant, but taking the time to assess your spending habits could improve your savings, giving you extra income to pay off existing debts.
Next, evaluate your top debt priorities and what you can afford to pay off to improve your debt quality before you approach lenders. Utilize the tools of your choice to determine a realistic timeline and create a specific budgeting plan. Once you put your income, spending and savings into perspective, you generally should have a certain amount of personal living expenses set aside before making the leap into hospital ownership, allowing time for your investment to generate profit. A savings plan will help you reach financial stability and provide clarity when you decide the best path for hospital ownership.
Align Your Mission With Your Money
Think about what your ideal veterinary hospital structure might look like, and assess the financial commitment needed to move forward. Are you looking to build your income and get your feet wet? A phased buy-in might be the right option for you. If you believe you are financially ready for the autonomy of hospital ownership, then it’s a matter of deciding whether an acquisition or startup aligns with your goals, values and bank account.
When you start a veterinary hospital, the upfront financing can be greater than what’s needed to acquire an established practice. The financing of a new hospital covers everything from the floor plan and equipment to decorating and landscaping. When it comes to a hospital acquisition, evaluate what assets are included in the purchase price and their projected cash flow. The assets could be both intangible and tangible. For example, equipment and real estate are as valuable as loyal client rosters and the hospital’s community reputation.
A number of professionals can assist you during your path to hospital ownership. Aligning with an industry-specific practice lender is a great place to start. Veterinary CPAs, financial advisers, and program directors or mentors at veterinary schools also can be valuable resources as you navigate the ownership process and determine your financial readiness.