1 Jul 2023
It may be a risky gambit, but starting a new business from scratch and growing it can be very rewarding. Of course, nothing in life that’s worthwhile is easy, and setting up a practice is no different – but with thought and planning, it’s perfectly possible…
Adam Bernstein
Job Title
Image © iStock.com /Bogdanhoda
Anyone wishing to start their own veterinary practice needs to have a vision: how it will be structured, what it intends to do and who it is going to serve.
Starting with structure: is it to be a sole trader where the owner is personally responsible for tax and liabilities; a partnership that is similar, but run in league with others and potentially able to limit liabilities if set up as a limited liability partnership, or LLP; or a limited company where the business is a separate legal entity, responsible for its own tax and liabilities?
All three structures can employ staff; however, while sole traders and partnerships can be privately run, LLPs and limited companies must make public certain information at Companies House.
Of course, plenty of other considerations exist when choosing the entity, and this is where a good accountant will be worth their weight in gold, as they will be able to offer guidance on the implications of each and obligations in terms of tax. Also, a good accountant can help draw up a business plan.
As to how to choose an accountant, the key is to select a member of one of the six professional accounting bodies, who will be both qualified and supervised in their activity. Worryingly, nothing exists in law to stop an individual from claiming to be either an accountant or a tax agent. For this reason alone, finding an accountant through one of the professional bodies is essential – the Financial Reporting Council is a good place to start.
Practice name is important, but restrictions exist on certain words and if “vet” or “veterinary” or similar is used, permission from the RCVS is needed. And on the RCVS, practices must follow the rules and standards it sets down.
The business plan outlines what the practice will do, how it will serve clients, and its radius of operation. It will also detail the services to be offered, the quality of products and medicines, scale of operation, as well as costs and revenue streams with projections on position over time.
Without this basic data, the practice will have no sense of direction and no benchmarks to measure progress against.
Thought needs to be given to demographics. Who, for example, lives within a 10-mile radius? What’s the density of population and what animals are they likely to have?
The plan needs to note if the practice is to offer first opinion or will carry out surgery. It should also detail if it is small animal, equine or mixed. And it should discuss the local economy – how wealthy is it?
Consider competition, too. Precious little point exists in opening up a practice in a small town if other vets are in close proximity.
On the other hand, if a rival is a sole trader close to retirement, maybe the opportunity exists to step in. Alternatively, a new practice could distinguish itself from others by offering different services targeted at a given – wealthy – clientele.
And what of pricing? Is the practice going to be Waitrose or Aldi in outlook? Some practices look at others to see what they charge. This adds value in a world suffering high inflation, where cost is an issue for many. However, it may lead to sales made at a loss or on tight margins. One answer is for bread-and-butter consultations to be on low margins, but with tailored care charged on a more realistic basis.
Then the matter of premises exists. Where are they to be located? Is it new build, or will conversion and refurbishment be needed? Will the practice buy the freehold or take on premises leasehold, and so rent? And if it is the former, how will it be bought – own funds or through a commercial mortgage?
What of size? A large building may offer scope to expand, but the cost of potentially unneeded space may bankrupt the practice before it is barely off the ground.
Equally, though, a site that is too small could be hamstrung by the need to expand, but unable to move because it either cannot sell the property or, just as problematic, cannot break the lease that it is entered into.
Practices need equipment, so thought must be given to what is required and how often it will be used. Return on investment is important; it is easy to get carried away with equipment only to be saddled with crippling monthly payments or tight working capital.
Allied to this is the need to look at practice management software to understand the best price and functionality combination.
Finance is central to success. VBJ covered this topic back in January, but in essence, while profit is the goal, only cash can really guarantee success, for without it all operations cease.
So, while own funds can be deployed, borrowing – whether through bank loans or by using asset-based finance – could release cash for everyday operation with the cost set against profits.
Apart from the high street banks, the British Business Bank offers loans to those looking to start a new business or to expand an existing business that has been trading for less than 36 months. Founders can each borrow between £500 and £25,000 over one to five years.
Another option is to exchange equity – that is, shares in the business for funding, just as entrepreneurs do on the BBC’s Dragons’ Den.
Other options exist in the form of invoice factoring and discounting, where the practice receives an advance on its sales – but this is only relevant where a practice serves a commercial clientele that pays on invoice, rather than a clientele that walks in off the street.
Beyond this is the potential for public grants that may be tapped into.
Unless the practice is to run as a pure sole trade, it is going to need staff. Obvious questions here are: how many are needed, where will they come from, and how will they be paid?
Beyond this, practices need to be aware of employment law. Pay is regulated and must not fall below the National Minimum Wage. Employees also have a multitude of rights, which begin from the moment a job is advertised and carries on beyond employment when references are given.
Discrimination can be very expensive for an employer if an award is made against them, and employees after two years of service have the right not to be unfairly dismissed.
And then the matter exists of protecting the practice from departing employees who may set up in competition. This is a huge subject where good legal advice is necessary. Unlike accountants, lawyers are regulated and can be found via the Law Society.
The law obligates new businesses to register with HMRC. Sole traders and partnerships need to register for self-assessment, while limited companies must register for Corporation Tax. Beyond that is VAT and PAYE (if there are employees).
Tax regimes differ according to entity, and a myriad of penalties exists for non-compliance – especially in the area of record keeping. Not understanding obligations is no excuse.
So much exists to say about this subject, including the not-insignificant areas of marketing, setting pay and benefits, cost control, cyber security and websites, and phone and broadband.
Indeed, what has been written in this article only just scratches the surface. However, the fact so many good and thriving practices are around only proves that setting up another is a perfectly reasonable proposition.
SPVS president Ryan Davis knows that starting a practice is not for everyone, but says that “if you are the right person then it can be a very rewarding proposition”. For him, the key is to make a start as “there will never be a perfect time or place – so learn to embrace good enough”.
Dr Davis believes much resource is available and every question has an answer. He said: “There is no such thing as a stupid question.”
He added that SPVS supports practices and offers help to new start-ups.
As to the steps to take when setting up, he said finding a suitable site is essential, and asked: “Where do you want to practise and how big do you want to be?”
He added those considering taking on an all-repairing lease should question if “the building is in good condition, or will maintenance be needed?” He said: “A Grade II-listed character building is beautiful, but four industrial walls and a roof are easy to maintain.”
Another consideration is insurance. Dr Davis recommends carrying indemnity against incapacitation in case the owner cannot work. He also suggests medical insurance to speed up treatment in the case of illness. He said: “Can you afford for key members to be off work for extended periods?”
Referring to buildings and contents, Dr Davis added: “Don’t fall into the mistake of guessing and undervaluing equipment – it is a very costly mistake should the worst happen.”
As for health and safety and employment law, this is “one area that seems really daunting – it did to me.” Here, Dr Davis recommends using consultancies such as Citation. He said: “Delegation is a key leadership skill, and if you can pay someone to do a job better and cheaper than you, then stick to fixing animals.”
Finally, he says that business ownership “can be a lonely place on low days… but things are sent to try us, so keeping ourselves motivated is important – CPD really helped me”.
