Finally owning your own veterinary practice is a special moment in your career. But what makes more sense—to start a new practice from scratch or buy an existing one? Shane Conroy reports
So you’ve come to that point in your career when the urge to run your own practice has become too strong to ignore. You’ve got big ideas and the experience to make them happen. But the question is: should you start a new practice from scratch or buy an existing one? Both options present a range of pros and cons, so it’s a question you shouldn’t rush to answer.
Starting a new practice may come with more financial stress in the early days, but offers the opportunity to execute your specific vision. Buying an existing practice, on the other hand, will go easier on your bank account, but you may inherit some unexpected problems.
Starting from scratch
If you have a strong vision for your practice, starting from scratch will likely appeal to you. You’ll have the control to design your own fit-out, hand-pick your staff and create all the work processes that will ensure your new practice runs like a well-oiled machine. You’ll also get the opportunity to create a brand that will communicate exactly what you stand for.
However, starting a new practice from scratch is hardly a walk in the park. Dr Jared Addison should know. Now managing director of Perth Vet Emergency, he has been at the practice since day one and is the first to admit that the early days were tough.
“The big challenge in starting from scratch is that you don’t have the existing client base and goodwill that comes with an established practice,” he says.
Dr Addison says that’s why it’s vital to have the start-up cash in place to get you through the development period: “It takes a while for your cashflow to kick in, so you’ll need to have the funds to cover your operational experiences over the first few months while you’re building your client base.”
Dr Addison has since built Perth Vet Emergency into a successful practice, but warns you’ll need to commit to a significant period of practice development.
“It’s hard work,” he says. “You’ll need to do at least 40 hours per week as a practising vet, then there’s all the practice management work on top of that. The tipping point for us really came when we could afford to employ a middle manager to handle the business side of the practice, which allowed me to focus on the clinical side. But it was a long road to get to that point.”
Funding a new practice requires careful consideration. Luke Truscott from BOQ Specialist says that exercising thorough due diligence and planning is important for the success of your practice.
“The big challenge in starting from scratch is that you don’t have the existing client base and goodwill that comes with an established practice.”
Dr Jared Addison, managing director, Perth Vet Emergency
“Finding a location with enough demand for a new vet practice is extremely important,” he says. “You’ll also need to have a good marketing plan in place, as well as accurate cashflow projections. You’ll need to plan for any potential losses in the early months and ensure you have access to funds to assist with cashflow during this period. This could be from your own funds injected into the practice or a facility like an overdraft.”
Buying an existing practice
One of the challenges of financing a new practice is the repayment schedule, says Truscott.
“Generally, we’ll want you to repay the fit-out and equipment costs for a new practice in about seven years, however we’ll usually give you a longer term to pay back the goodwill cost that is associated with buying an existing practice.”
That means purchasing an existing practice can potentially come with less financial stress. It will also have an existing client base, which means immediate income for the practice.
That’s one reason Dr Matthew Muir decided to buy into All Natural Vet Care over starting his own practice from scratch. More attractive, however, was the opportunity to work closely with the leading experts in integrated vet care.
“It is a unique practice that’s seen as a global leader in integrative veterinary medicine, and I wanted to be in the thick of it,” he says. “I felt that value creation was possible with a fresh perspective, and the capital outlay and time to break even was also much more attractive than starting a new practice.”
While buying an existing practice may be a little easier on your wallet, there are some drawbacks to consider. Branding and work processes will most likely already be in place, and you’ll also inherit employees and a workplace culture—for better or worse.
Truscott often sees his clients putting existing employees on casual contracts to allow an assessment period, and also points out the importance of building a positive relationship with the vendor so they may be more helpful during the handover period.
“I usually say to my clients to be careful during the negotiations on price,” he says. “It needs to be a win-win situation for both the vendor and purchaser. If the vendor feels like they are receiving a fair price, they may be more willing to pass on their support and expertise to help ensure a smooth transition.”