3 Nov 2015
Malcolm Wright
Job Title
While I am no fortune-teller, I can give an educated guess to the direction veterinary practice will take in the next 10 years, based on a simple presumption: when a partner or owner wishes to exit, who will take his or her place?
As the diagram shows, the problem is potential owners from within the profession with the necessary cash are thin on the ground. As a result, nearly every profitable practice is now being bought by one of the corporate practices.
So who are these corporates? Well, they can be divided into three models:
You might well ask, when the corporates can offer the following:
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WIN + WIN = WIN
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So why bother to buy into a practice when they will give you everything you will ever need?
Maybe we should look at why the corporate models exist, and why they have developed within the veterinary profession. Well, the answer is simple, they saw an opportunity to develop veterinary businesses and make profits.
Their responsibility is to the shareholders/partners and so the primary purpose is to maximise profits by increasing turnover, improving management and buying power.
What is diametrically opposite to the corporates? Well, there are quite a few practices operating with a cottage industry style, making little profit, low fees, low income and often reduced practice investment.
Within this group are many independent practices, the owners of which will need a way of exiting with cash for their equity share.
As there is no real option of getting the levels of equity the corporates can offer from individual vets, they will slowly absorb a large percentage of the independent sector.
So who will think about old Miss Jones and her uninsured geriatric 16-year-old cat Billy with kidney failure? Which is the correct course? To “put Billy to sleep” or to undertake a work-up prior to being euthanised to confirm the vet’s decision? The cost could be £60 or £300.
Although insurance has helped owners pay for expensive procedures, it has also resulted in dramatic price inflation, with clients paying more as the larger groups develop and choice becomes limited, combined with more expensive treatments. This has resulted in increased insurance premiums.
According to LDF, one of the UK’s leading commercial finance groups, the UK’s biggest 100 veterinary businesses recorded a record turnover of £1.36 billion in 2014, up 17% in a year from £1.16 billion, and more than double the £655 million the largest vets brought in in 2010.
A report by the Association of British Insurers (ABI) indicated Insurers paid out more than £602 million in 2014, with an average claim of £679. Of the UK’s 17 million pet owners, only 15% have insurance.
Families that struggle to pay these fees will almost certainly not replace non-insured pets that have undergone expensive procedures. With average charges of £2,000 to £4,000 for a tibial-plateau-leveling osteotomy (TPLO) and average household income before tax at £24,000 pa, we are taking about 8% to 16% of that before tax income for the procedure.
Veterinary salaries meanwhile, have not kept pace, with some practices paying new graduates today what was the norm 10 years ago.
As this race goes on who is going to treat the non-insured 85%? Society now treats its pets as an important part of the family; however, vets have a responsibility to balance the quality of life with the benefits of the treatment, just because it is available and can be undertaken is not a reason.
The client base has been decreasing with average charges increasing over the past 15 years – a scenario that is not sustainable.
So, in the next 15 years, we could see large numbers of practices either being bought by the present corporates or newer corporates forming, resulting in a scenario of around eight to 10 companies controlling possibly 65% plus of veterinary work.
The answer is the key to what will happen to the profession – our ruling bodies have not faced up to the problem of reducing independent ownership, simply accepting it was a generational thing. The result of this is that instilling a motivated business attitude into graduates has been something that has been ignored. Giving a few token lectures is not the answer; students need to be stimulated about the benefits and satisfaction of ownership.
This may sound reactionary rather than revolutionary, but we have to ask ourselves about the way we have developed as a profession, and the type of graduates we produce and their ambitions.
My view is that as vets we should serve the pet-owning public. Increasing our clinical knowledge should be to help our patients, not for our own self-indulgence. We should be willing to undertake the work our clients require, not do what we feel is right for us. If you want a nine-to-five job, clinical practice in the veterinary profession should not be for you, we should be client-based and not based on what we are prepared to do, or what our friends do.
We need an increased number of graduates who have the potential or ambition to become owners. This unwillingness to take on the responsibility of ownership is not just generational, it is also because we are selecting graduates unsuited to the responsibilities of future ownership – the background and attitude of applicants can often give an indication of their desires and maturity.
So why not change the selection process and possibly the make up of the selectors so like does not produce like on a continual basis? Do four A-grade A levels mean you also have the dexterity and people skills to interrelate and perform successful operational procedures, or have the ability to survive outside an employed status and develop a thriving practice?
We need to instil the desire for ownership while still an undergraduate by including business studies within the degree course organised and assisted by proven successful practice owners.
The bright side of this is everything does change – within some vets there will always be a burning ambition to develop their own practice, an aspiration to create something with their ideas, their plans, their mistakes and their successes.
To take control of their life, be innovative and not be responsible to a higher authority, and follow what they think is best for their clients, staff and themselves, not for the company shareholders.
But for this to happen on a greater scale it requires a change in our attitude to selection and training and the future independent practices will not only be able to survive, but flourish.
