24 Feb 2023
For anyone hoping to take the significant step of moving into ownership, it is worth considering all the options first. Vicky Robinson from Vet Dynamics looks at the pros and cons of partnerships, joint venture opportunities and setting up from scratch…
Vicky Robinson
Job Title
Image: © 3D_generator / iStock
Although it’s February now, at the time of writing in December it feels like the veterinary landscape is approaching a time of great change. Some might fear it may drop off a cliff, while alternatively, we see the fresh buds of optimism from young (and not so young) entrepreneurs.
Of course, if you are a vet or nurse considering a partnership or ownership, you might not consider yourself an entrepreneur. Not that long ago, it was natural to graduate, work a few years, move around a bit, decide if heaving a calf out on a cold winter’s night, having just dealt with a colic is for you – or small animal is more appealing – and then simply be offered a junior partnership.
Those days seem long gone since the changes to practice ownership from MRCVS only in 1999 and the arrival of corporate money. Fiercely independent practices are still trying to continue this model, but most have gone to the corporate market because they just can’t attract new partners from their ranks or afford not to take the corporate valuation. We also hear of those prospective wannabe partners leaving their now corporate-owned practice and looking for new opportunities because they don’t want to be employees, and the lure of ownership is still strong.
So, what are your options?
Buying into an established, healthy business should give you the confidence that your income looks stable and will grow; you will have to submit previous accounts and a business plan with projections to obtain a loan. The work you do to become a partner will show you whether it’s a sound financial decision, and it would definitely pay to take advice from a veterinary finance broker and/or business consultant.
If you are fortunate enough to be in a practice you like and are offered a partnership, a few things in the partnership or shareholder agreement must be considered. Firstly, what would be the structure of remuneration for the partnership or directorship? Questions such as: what are the partners/directors shareholdings? Do you all take a salary or drawings according to your veterinary and/or management hours? And how do you split the profit?
If your remuneration is based only on a proportional shareholding profit split and your income hasn’t been adjusted, perceived inequalities can cause problems. You may be unhappy if, for example, you are full time and on the OOH rota, and another partner is doing far less and taking the same share, or more, of the pie because they own a greater number of shares or have seniority. If role allocation, management responsibilities, working hours, holiday, exit strategy, and so forth are all agreed in the partnership/shareholders agreement, it could save much angst further down the line.
Do invest in a good accountant and solicitor to act on your behalf. Getting into a partnership is usually easier than getting out. We often say to clients to be more careful in the choice of who you go into partnership with than who you might marry.
While divorce can be messy, ending a sour business partnership without a clear agreement can be very lengthy, expensive and stressful.
New veterinary business ventures are emerging into the market, looking to acquire a majority or minority stake in existing practices, keeping the owner in as a partner or introducing a new partner. This allows the seller to raise capital from the practice and to remain as an independent part-owner, have the provision of back-office support and business experience, with the option to be more clinical than managerial, and have a path to exit. We have seen former practice owners who are interested in joint venturing in a similar way with younger vets, sharing their business knowledge and providing financial backing.
Two shared ownership options from current UK corporate businesses exist: Medivet offers a partnership, and Vets4Pets’ joint venture partnership (JVP) models.
They aren’t the same and, like any business agreement, should be looked at carefully, as any negative feedback appears to come from a lack of clear understanding of what’s being entered into. Many partners and JVPs enjoy a happy, profitable and beneficial working relationship with their corporate partners.
Creating your own veterinary practice can be very exciting and rewarding – especially if you are creative and enjoy planning. If you find the idea daunting, plenty of help is available from business coaches and consultants worth investing in. Much needs to be considered. Finding the right location and building is most important. A location that you can grow into is ideal, with good visibility, access and parking.
With the planning rules relaxing post-lockdown, you will see a wider range of commercial premises available for sale or lease. Some great vet practice designers exist who can help with the design, planning regulations and vet-specific, local and other legal requirements. Again, you’ll need a business plan and projected income to get funding (and you should, of course, still prepare those if you don’t need to look for funding). It can be complex, so don’t try to do it yourself – ask an experienced practice owner or a veterinary business coach or consultancy for advice.
Here’s a tip: if you are considering a start-up (or expanding), it’s worth checking for any closed or redundant branch surgeries, or unused veterinary buildings in your area. The pandemic and staff shortages caused many independent and corporate practices to consolidate resources into their main surgeries, and found it cost effective to continue doing this, but may be paying out rents on redundant veterinary buildings. It’s worth checking if a building that’s good to go is in your desired location. As a part of our brokerage, we have practices and premises available if you require help.
Another option for a start-up is to take on a small practice that’s facing closure due to retirement or, all too commonly these days, under-staffing and burnout.
As a company that helps independent vets, we find it painful when approached for help by a vet looking to retire, only to discover they have little to sell after a lifetime’s work.
The smaller, below two FTVE practices (depending on turnover, location, and so forth) aren’t likely to be of interest to the corporates, and if they aren’t snapped up by a local independent, can actually face closure.
In this situation, the owner could be liable to pay redundancy to their team and leave their clients without a service. Some of these are saved by their ownership of a building they can either rent or sell, but not always fulfilling the pension imagined.
Of course, these practices aren’t likely to be state of the art, but they are functioning businesses with basic equipment, a client base with footfall and turnover from day one, and the owners are often willing to take flexible payment.
All these options can be very difficult to negotiate without the right connections and network of practices, owners, buyers and sellers, as well as professional advisors and funders. This begs a need for a matchmaking service – “Tinder for vets” for veterinary business, perhaps? I was beginning to think that this “matchmaking” might be an idealistic view of mine, but we have successfully introduced new owners to small businesses potentially facing closure and have several in due diligence who will emerge in 2023, and hopefully more to come.
The matchmaking service could be the way forward to help exiting owners to find the interested entrepreneurs and save independent practice closure. If you are thinking of ownership, then please do ask for some free advice and register your interest with us.
A wave of change is occurring across the profession from now. The pendulum is swinging back.
This could be the opportunity many of you have been waiting for as the emergent practice owners of the future. This is an amazing profession with amazing people capable of amazing things, given the chance.
We suggest you take a look at the opportunities and support available if you are considering being amazing.
