Are You Ready for Practice Ownership?
There are several key factors to consider when deciding to buy a veterinary practice. Owning a practice is a decision that can seem daunting to even the most experienced veterinarian. Self-evaluation, financial foundation, and practice structure are all elements that deserve thoughtful consideration when taking on the venture.
First, the decision to buy a practice should come with a lot of thought, consultation, and research. A great place to start this process is with self-evaluation.
Ask yourself, “Am I ready to own a practice?” The thought of being your own boss may seem like a daydream, but not understanding what the role of ownership truly entails can quickly turn this fantasy into a nightmare.
How well do you manage your finances at home? Asking this can give you a good idea of what to expect when you run your own business.
Do you enjoy managing your own finances or would you rather someone else handle the nitty gritty of the numbers? You can hire someone to manage your financials or even set up a strenuous financial plan of your own. Most owners like managing their own cash and desire to quickly put it to work building the practice financially. However, one can actually lose money to ambitious ideas or excessive expenditures and cause financial issues down the road that could lead to unneeded stress.
A solid financial foundation is an essential factor to consider when deciding to purchase a practice.
Do you have the credit score and cash on hand that will be required for the practice loan? Banks like to see a strong credit score on a loan application and it is usually necessary for a 10% down payment, depending on the loan type. If you do not meet those requirements, it’s okay. Don’t give up! You could still qualify for a loan. I encourage you to seek personal financial advice on how to boost your credit score and start doing some serious saving. With that being said, make sure you put in a hard financial evaluation before making the leap to practice ownership. It does no harm to delay the purchase until you become more financially sound. Beginning practice ownership with firm finances will allow you more flexibility in structuring your new business. In the meantime, take some online classes, read finance books, get advice from financial advisors and loan officers, and do whatever you can to prepare yourself and improve those numbers. It will be worth it!
Once you have prepared yourself personally and financially, you next need to consider the type of practice you are interested in buying. Structures that work for one practice owner may not work for you. The way one veterinarian makes most of their money may not be the way you want to make money. For example, a clinic you are looking to buy may be 20% equine and have a solid clientele basis for equine medicine. Ask yourself “Are they doing this because they love equine medicine or is it because they needed an extra venture to fulfill an income need?” You may have no interest in equine medicine, but you assume that you can make up the 20% difference by replacing it with extra small animal business. If you go in with this assumption, you could put yourself in a bind down the road. Do not buy a practice with the idea you can make major structural changes overnight and be more profitable. Look at the practice as it stands and be prepared for the possibility of a slight decline in profits during the transition. Always expect the unexpected in finance and you will profit from your preparedness. I am not saying you should not have an open mind or remain creative, but always hedge to the safe side and do not try to reinvent the wheel. There are infinite ways to make money in veterinary medicine and you need make sure you choose a practice that fits your personal and financial needs.
Before you buy your veterinary practice, do a self-evaluation, prepare a financial foundation, and think about practice structure. Should you have questions or need more information, feel free to call or email me.
Good luck on your new venture and remember, be patient and prepare yourself.