David King, DVM, CVA – Simmons Southcentral
Many moons ago the recently graduated DVM had several options when deciding on a career path. Most of the time the path led to practice ownership, now that may not be the case. The reasons may include a fear of taking on even more debt, watching a window slowly close on starting a family or maybe it is just a lack of desire to take on the risks and responsibilities as a practice owner. However, for those without the above reasons who still see practice ownership as the path to independence and financial security, the path has become harder. This is due in large part to the ever increasing market share of the Corporate Consolidators (CC). The CC are actively pursuing the multi-doctor more profitable practices and thus the options for the private DVM buyer is becoming more limited. Because of this, it is now vitally important to plan a strategy to obtain practice ownership. The path to ownership includes three choices; start a practice, buy into a practice over time or buy out a practice. Each choice has its own challenges.
Because of the high costs and the lack of income in the initial period, this option is becoming less common than in years past. This is due in part to the financial pressures created by large student loans, which were not present for veterinarians 20-30 years ago. As a result, it has become hard for young practitioners to have little or no income for any extended period. Also keep in mind that a start up has to compete with the CC for not only clients but staff as well. The CC can usually offer better pay and benefits than the new startup owner’s cash flow will allow. Starting a practice can still be done, but there is little room for any error.
Buying into an existing practice, especially the practice where the associate is already employed, was a common way a young veterinarian could acquire a large profitable practice. This was low risk for both the selling owner and buying associate as each gained something as the ownership transitioned. Now, if the practice is profitable and desirable, it is in the cross hairs of the CC. The CC will often offer well above fair market value for the practice effectively eliminating any hope of the associate DVM making a competitive offer.
So with the CC making start ups more difficult and essentially taking the buy-in off the table, all which is left is to purchase a practice outright. However, even this has been influenced by the CC. As with the buy-in the CC has basically removed all the larger more profitable practices from any consideration by the individual buyer. This leaves only the smaller grossing practices, and practices not of the CC radar (mixed animal or less desirable locations) as options for the young buyer. Some might consider these as crumbs but they should be looked as at diamonds. There are many practices on the market that are not CC targets that would still make a sound investment opportunity for an individual buyer.
This changing landscape of practice ownership now requires the young entrepreneur to start planning even earlier and stay alert to opportunities. If the buy-in path is chosen, be sure it does not result in a dead end after several years of waiting. Too often an owner is swayed by the big payday of a CC buy out. No one can blame the owner for taking the money but this is little comfort to the associate who now must fall back and make adjustments.
The best plan may be to always keep an option open to purchase a practice that is not on the CC radar. Considering the 1-2 DVM practice that will be grossing less than $1.5M with average profitability, can lead to a successful career. Of course, the definition of success is determined by the individual. Success may be defined as the rewards from acquiring this type of practice, serving the community, and providing for family and employees. Here, one may be able to compete with the CC on a field where they don’t match up well, the smaller more intimate practice. Of course success can also be defined as growing the practice to a point where one day the exit is with a CC and that large payday.
There is no right or wrong answer, no right way or wrong way to pursue a veterinary career. However, it is best to look ahead and plan, thinking about consequences of path choices and potential outcome. This becomes even more important to the potential practice buyer in this ever changing practice ownership landscape. Practice ownership can be not only achievable, but a rewarding and successful endeavor.