Whether you’re a veterinary practice owner looking to sell your business or a brand-new veterinary school graduate evaluating opportunities for your first post-grad position, it’s a good idea to think through the pros and cons of becoming part of a corporation or practice group. John Volk, senior analyst with Brakke Consulting in Chicago (brakkeconsulting.com) — which specializes in animal health and veterinary consulting — lays out the landscape when it comes to the benefits and drawbacks of corporate veterinary practice.
Potential Benefits
Major payout. Owners who sell to corporations are getting more lucrative offers for their practices than ever before, Volk says, thanks to years of bidding up the market. When the transaction includes the real estate, the payout is even larger.
More HR support. Many consolidators, particularly larger ones, offer well-established employee benefit programs, a recruiting staff and a range of other attractive human resource benefits. “Given that HR is a perennial problem for many practices, that can be a real plus,” Volk says.
Ability to benchmark. When you are part of a group, you have access to data about how your location is doing vs. others in the group, Volk says. There’s opportunity for sharing best practices and collegiality with your peers across the practice group.
Upward mobility. Volk knows of veterinarians who have sold their practices to corporations and then moved into a management role within the company. “Certainly for younger veterinarians coming along, there’s opportunity for a career path beyond working at an individual practice location,” Volk says.
Potential Drawbacks
Less control. Practice owners who sell to corporations no longer make major decisions about the business, such as hiring or how medicine is practiced. The name of the practice may also change. Initially, this can be a tough transition, especially for those sellers who continue working in the practice.
ROI goes elsewhere. “The corporate beast has to be fed,” Volk says, so profits may or may not go back into the hospital. However, a recent trend has been creative ownership agreements where, for example, a corporation might buy 55% and let the seller retain 45% ownership, or they might give associates an opportunity to own shares. “We used to not see that,” Volk says. “It was a 100% buyout or nothing.”
Less of a local business. Practices that join corporations may find themselves giving up some of their role in the community. The new corporate owner may not want to sponsor softball teams or Scout troops, Volk says: “Those decisions are going to be made elsewhere.”
Longer chain of command. In an independent practice, a receptionist who has an idea may have one or two steps to reach the owner’s ear. In a corporate-owned practice, this chain of command is much longer, making it more of a challenge to consider suggestions, enact changes or get questions answered.