Do you remember when you first wanted to be a veterinary professional? Most of you do, and that goal became a calling that carried you through school and to where you are today. Once out in the big world, whether as a veterinarian, manager or support team member, you might get the itch to start your own practice. When I teach at veterinary schools, students ask me whether practice ownership is still possible, with corporate clinics seemingly on every street corner. My answer is a resounding “Yes!” In addition to pursuing that path and living it firsthand, I’m fortunate to work every day with doctors all over the country who succeed at it.
Multiple paths lead to practice ownership, and a variety of ownership structures help make the dream a reality. Eighteen months ago, I wrote about one of the most common options: purchasing a hospital (bit.ly/ownership-TVB). Now, I want to explore and provide a roadmap for an increasingly popular route: opening a brand-new hospital.
How do you do it? One step at a time.
Step One: Decide Why
The first step to practice ownership is to look closely at why you want to do it. Perhaps your family has a business background, and you’ve always wanted to own a veterinary clinic. Many aspiring entrepreneurs have this gut feeling: “Given the chance, I could create a better working environment than I’ve experienced.”
Controlling your work schedule and potentially earning a far greater income are significant benefits of becoming a business owner. Other motivations include choosing where you want to live and participating in and giving back to your community.
A clear vision of what you want out of ownership and what success looks like are critical to building a solid foundation for a fulfilling career as a practice owner. Once you take the first step, you can venture further.
Step Two: Find a Support Team
You see yourself running a veterinary practice, but how do you get from where you are now to the boss’s chair? The answer: Surround yourself with advisers who can help you achieve your vision.
Mentors of mine who successfully launched start-ups shared this piece of wisdom: Don’t try to be everything yourself. One of the most valuable lessons I learned in this profession and am reminded of daily as a practice owner is to focus on what I do best. You cannot be an elite veterinary professional and a top-notch accountant, attorney, real estate agent, consultant and architect. Instead, look for advisers who have experience working with veterinarians.
For example, you will want:
- An attorney to set up your company’s legal structure.
- An accountant comfortable with the AAHA/VMG Chart of Accounts, a veterinary industry bookkeeping standard that makes benchmarking practice numbers easier and helps with management decisions.
- An architect and a contractor to design and build your clinic.
- A banker who understands how to launch a successful veterinary practice.
- A marketing expert to assist you with websites, social media, signage and more.
- A commercial real estate agent with health care and veterinary experience to identify optimal locations for your practice.
Working with consultants to pull everything together, generate financial projections and evaluate the demographic feasibility will make a huge difference in how quickly and smoothly you get your veterinary practice into operation.
Step Three: Write a Business Plan
Although the task sounds daunting, breaking down a business plan into its components is a great way to clarify what you intend to accomplish. It describes the practice you envision and what you will do to ensure success. You must show financial lenders why they should invest in your venture. For you, a business plan is a tangible link to your original why. Plan to review it once or twice a year to maintain a big-picture look at what you are accomplishing and how.
Let’s examine a business plan’s five components one at a time.
1. EXECUTIVE SUMMARY
It’s a one-page outline of the business you intend to create. It should answer questions like: What is the clinic’s name? Where will it be located? What kind of practice will it be? Who will be our clientele? Why am I qualified to run the practice?
The executive summary should also include your mission statement, which says what your business is in a memorable 10 words or less. The mission statement might be your tagline, but it can’t be fluff. It must be meaningful and inspiring so you can refer to it as a guidepost. Here are two examples:
- “Best Care. Every Patient. Every Client. Every Time.”
- “Embracing the Human-Feline Bond.”
2. MARKET ANALYSIS
This section explores the proposed location’s demographics and competition. For companion animal hospitals, the market analysis will look at the area’s pet-owning households, household income and practicing veterinarians. You’ll use the data to estimate your market share and revenue.
Most aspiring practice owners will hire a consulting service to collect the data. Also included here might be a SWOT analysis to explore the strengths, weaknesses, opportunities and threats of your proposed location. For example, a veterinary practice on a corner with a stoplight will have greater visibility than if it were on a side street, which is something to point out.
3. MARKETING STRATEGY
This section outlines how you will attract clients. Admit it: Veterinarians aren’t experts at advertising, marketing and graphic design, so don’t think of them as do-it-yourself responsibilities.
Digital marketing is essential, so you’ll need to pay a veterinary-savvy marketing specialist to build you a competitive presence in today’s online world. At a minimum, you’ll need an active social media plan and a professional website with search engine optimization. Begin creating your website six months before your practice’s opening date, and get your social media humming as soon as the clinic’s construction starts.
Generate early buzz, and begin accepting appointment requests a month before you open so you have a busy practice from Day One.
4. OPERATIONS PLAN
This section explains how you’ll run the day-to-day practice. What days and hours will your hospital be open? What types of cases and surgeries will you handle? What other services will you provide? What roles will your employees fill, and what will their duties be?
Those details might seem obvious, but your operations plan should clearly outline them.
5. FINANCIAL PLAN
This last section includes your financial projections for at least the first two years. The numbers should estimate revenue and how you’ll generate it.
You also must budget for expenses. If you’re an aspiring practice owner, remember to include a practice manager in your first-year payroll budget. You can afford a manager as soon as you find yourself doing management tasks while patients wait and clients are turned away. An effective practice manager will free you to do what you do best: provide revenue-generating patient care.
Your financial plan will show your salary over the first two years. Yes, as a working veterinarian, you must pay yourself first. You deserve fair production-based compensation from Day One.
Even though one of the scariest parts about launching a business is uncertain revenue — achieving positive cash flow might take four to 18 months — strategic management can get you into the black as fast as possible. Lenders understand that profitability takes time, so they will provide working capital to carry you through those first lean months.
Step Four: Build an Exceptional Practice Culture
This step can be a prime differentiator between independent and corporate practices. I emphasize “can” because I’ve seen private hospitals where you couldn’t pay me enough to work and others that developed the secret sauce around culture, recruiting and retention. The same goes for corporate practices, though I believe that private owners have the upper hand in creating an exceptional culture due to the lack of a corporate reporting structure.
As a practice’s owner and active leader, you manage the culture. No one else will care for your clinic and employees as much as you do, so make sure all your team members know that. If you learn to intentionally and effectively appreciate your employees daily, your team will share that feeling with clients through exceptional care.
Make it your job to grow your emotional intelligence and put it to work. The most successful veterinary practices commit to regular team meetings that are fun, educational and safe for discussion. When you set those expectations from the outset, you set yourself up for success.
Finally, never underestimate the role of staff education and training in developing a tremendous culture. You must set clear expectations and provide the tools your staff needs to do things right. Use this simple cycle to train new skills: teach, apply, assess, repeat. Training your team doesn’t need to fall on one person. Delegate it to whoever has the ability and heart to elevate others. Once you delegate, remember to inspect what the trainer accomplishes so that you get what you expect, and be sure to celebrate the success.
Step Five: Grow a Business Mindset
A well-run veterinary practice is a tremendous way to bet on yourself and earn a return on investment far exceeding what you could get by putting your money in traditional financial markets. On the other hand, owning a practice that is “just getting by” will feel too much like a job.
Commit from the start that you will learn business skills and use them to make your veterinary practice financially successful. Pursue the following two goals from the day you decide to open a private practice:
- Your business must be profitable month to month.
- You must grow its value over time so you can achieve financial independence when you’re ready.
What does the future hold for you? Plenty of ownership opportunities exist. The challenges are surmountable, and the rewards are substantial. Are you excited to begin your journey? It all starts with that first step.
DOLLARS AND SENSE
The profits generated from delivering ethically sound veterinary care provide fair compensation for hard-working doctors who invest their money and sweat in running a practice. The profits also funnel back into the business to help maintain a positive culture and pay for cutting-edge medicine.
A practice manager is essential in allowing independent hospital owners to do what they love: be a veterinarian. A manager can break down monthly profit-and-loss statements and review them with the owner. While anyone can spend hours or days scrolling through a P&L statement, I suggest focusing on these five key performance indicators:
- Gross revenue
- Net revenue
- Cost of goods sold (COGS)
- Payroll expenses
- Rent expense
Those KPIs are the best numerical reflection of your ability to lead and run a hospital. They also show where your business might grow and improve. For example, price hikes often come to mind first when you think about trying to increase gross revenue. However, the hours you’re open and the type of services and level of care you provide are critical contributors.
The cost of goods sold and payroll are your most significant expenses, so how you manage them will make a big difference in your net revenue. Spending 1% less in a $1 million-a-year practice drops $10,000 into the bottom line.
Hospital owners often don’t think deeply about the value of their business until they contemplate transitioning out of clinical practice. When you open your dream practice, think of its value as part of the long game.
Practice net is the strongest indicator of practice value. The first few years of ownership might be lean, but you should aim for a healthy net of 14% to 16% of gross revenues by Year 3.
Although many quick-and-dirty methods for estimating a practice’s value are bantered around, accurately calculating it is tricky. The only reliable way to know your business’s value is to get a periodic professional assessment. Every three to five years is a good cadence for a full valuation. That frequency is enough for you to implement changes and evaluate their effects on the practice’s value.
STORY ARCHIVE
Stith Keiser is a frequent contributor to Today’s Veterinary Business. Check out:
- “How to Succeed in a Mixed Animal Practice,” bit.ly/mixed-animal-TVB
- “Turning Around Employee Turnover,” bit.ly/turnover-TVB
- “Walk, Don’t Run, for the Exit,” bit.ly/exit-planning-TVB