4 essential steps when starting a practice
Once you have a cash-generating veterinary practice, the ability to expand can make the second round of funding much easier.
Much has been written about the barriers to buying and owning a veterinary practice, which may lead one to wonder, “Is this even a realistic possibility?” With emerging issues such as the high cost of building materials, a highly competitive job market, disruptive advances in computing and artificial intelligence, and the rising cost of medical and office supplies, the idea of starting a veterinary practice can become a daunting undertaking. But intimidating does not mean insurmountable. It can also create opportunities.
As someone who has spent his career surrounded by successful veterinarians starting and maintaining private practices, I know that with the right guidance, it is 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 want to achieve? A veterinary practice model and business plan focuses on the basic mechanics of who the clinic will serve, what services will be offered, and what key resources and activities are needed to bring the value proposition to life. You need to have a clear and realistic picture of what you want to achieve and who the business will serve. This impacts the services offered and the footprint required, which then drives the funding, talent, equipment and marketing needed to make it all happen.
This picture also includes having a clear idea of the desired revenue potential of the business, as it determines the spatial needs to make a decision to go or not to go to a potential location. Including all of these aspects in a business plan will create a comprehensive roadmap for explaining 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 useful indicator of the viability of a new practice in a market. Additionally, the demographics, history, and changes in the community can help you understand who is living in the area, who is moving there, who is leaving, and who will need your services. Additionally, identify other complementary businesses in the area, such as pet daycare, trainers, groomers and other pet-centric businesses, can help generate referrals to start and maintain your new practice.
The next step is to find the location that meets your needs. Whether you’re renting or buying, the amount of square footage you take can dramatically affect the finances of upfront construction costs and ongoing cash flow for line items like utilities or rent. You need a location that will be affordable enough to get you through the early start-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 customers and team members is crucial unless you are in a high density pedestrian community. And don’t forget to find and hire neighbors willing to have a veterinary clinic nearby.
How to: Fund Properly
Financing requirements include the cost of building the location and equipment as well as working capital to support the operational needs of the business prior to opening and throughout the ramp-up period. The structure of financing terms can delay or accelerate profitability, so it is essential to find the best partner, bank or investor. With the costs of construction, talent, equipment and supplies rising, the sums can be scarier than the start-up budgets of just a few years ago.
Traditional financing options are available, but with rising interest rates and higher construction and operating costs, you may be faced with downsizing the project to support loan repayments in the early years. However, once you have a cash-generating business, the opportunity for growth can make second-round financing much easier, as your clinic has a financial history that can justify paying off more debt.
New joint venture models are beginning to emerge. For example, Dr. Russell Miller, owner-manager of VO Vets in Fort Worth, Texas, unsuccessfully pursued various practice purchases before realizing that with the headwinds of the current environment, a practice partnership start-up would be a great way for him to realize his dream. . He considered various financing options and partners while evaluating ways to mitigate risk and prepare for professional and financial success. He found that by partnering with Suveto, he got the financial backing to realize his dream and a partner willing to provide the resources and services to support him in running and growing the business.
“We were able to build a practice that works for our community, our patients, our team, and our pet parents, with a partner that reduces our risk, increases our support, and creates opportunities that I wouldn’t have had in doing this myself,” Dr. Miller said.
Who: Build your firm and your team
When we think about building a practice, building the physical space is usually a priority. But in reality, practice is more than space. Building the practice also means fostering the team of people who bring it to life. First there is the team you work with to take the practice from an idea on paper to a real business, and then there is the team of people who operate and support the clinic into the future.
In the first phase, finding finance, legal, and construction team members with veterinary experience is crucial to navigating the nuances of building a veterinary business. For your practice team, finding people who are willing to learn and adapt to new situations and work together helps in the early days of opening and running the clinic. People with a positive attitude are also essential. You’ll need people who bring skills to the table that you don’t have, who communicate openly and honestly, and who align with your vision.
A survey by the American Veterinary Medical Association found that a significant percentage of veterinarians will likely retire within the next 15 years, opening up many opportunities for the next generation of owner veterinarians. Despite the headwinds in today’s ownership landscape, support for veterinarians interested in becoming owners is available and willing to provide aspiring practice owners with the resources to help them achieve their dreams.