Starting a new veterinary practice

Required skills & experience

More than the right person, it takes the right sum of skills, ambition, and experiences to start and run a successful business. Life has its enthusiastic dreamers and determined doers – both are needed here, along with the experience of working right across a veterinary practice. You might have started off at a companion animal clinic, gone traveling earning your way as a locum, built up your skills and experiences throughout the pet ownership cycle, and eventually come to treasure the strong bonds you form with a local community and their four-legged loved ones.

Whatever shape your journey has taken, now’s the time to surround yourself with smart people who believe in you, and start putting that wealth of experience and skills to good use!

Your Vision, Goals & Market

The next thing to visualize is what your ideal practice looks like. Is it an owner-operated general practice treating companion animals in your local area? Or have you got the expertise to handle exotics, like birds and lizards? Is it a mobile vet service, traveling from farm to farm, treating horses and production animals? Are you dreaming big and have a specialty referral animal hospital in mind? Will you do emergency? It’s important to determine early what you want.

Likewise, it’s key to know what you want from life in the medium and long term. Have you got a family or hobbies? Do plan on spending long hours in the clinic or do you treasure your time outside of work? The life of a veterinarian is intense, and responsibility only grows when you own the practice.

To retain a flexible lifestyle, found your practice on flexible cloud software – enable yourself to work remotely, wrap up a day’s admin from home, after dinner, with a glass of wine in front of the fire. Your choice of practice management software will go a long way in determining what day-to-day life in the clinic will look like for the next decade.

It’s also critical to determine whether there is a case for opening a new veterinary clinic in the area. How large is the community you will be serving? Can you estimate how many companion animals live locally? What does the competitive landscape look like? Is there room to grow a new business in the middle of all other small animal GPs?

You need to know the answers to these questions for your clinic to get off the ground. Use tools like the AVMA Market Share Estimator to help determine the potential opportunity involved.

Business Plan

As our roadmap to success, a good business plan contains the following:

• A timeline of key milestones, each with their own deadline. e.g., when can we realistically open for business, when must the insurance cover kick in, etc.
• The key steps involved broken up into tasks and deliverables. e.g., the strategy for sourcing a suitable location, the lease or new build logistics, etc.
• A financial plan with a detailed budget and breakdown of projected expenses, along with new customer goals.
• A forecast of returns based on market research. This should consider the first the six months, one year in, eighteen months, three years, etc.
• A clear plan for servicing the debt incurred.
• The bones of a marketing strategy to ensure clinic production and new customer goals are met.

Services

To achieve such a plan, you need a solid idea of what day-to-day operations at the clinic will look like. What kind of services are on offer? Are we just treating cats and dogs, doing wellness plans and minor procedures only, or do we set ourselves up with the equipment to manage dental and specialist surgery? The more you specialize, the more gear’s needed, so these investments must be factored in from the outset.

Likewise, you should be clear about any extra services like emergency work, boarding, and mobile visits. Does your chosen location have the room for 30+ dog kennels? Will the team be doing emergency equine visits in nearby paddocks? If so, you’ll have specific hardware and software costs – things like cloud-based practice management software able to handle remote work and a good internet connection.

And of course, a thought must go to what services your local competitors offer. Sure, in 2021 global pet ownership rates have soured, but there are only so many specialist veterinary eye clinics any given area can sustain. Chances are, you’re this far into your journey exactly because you know of a gap in your local market but it’s worth mentioning.

When it comes to the services different veterinary businesses provide, the opportunities for specialization are endless. Regardless of what you settle on, defining a clear set of services early for the clinic will make your life much easier in the long run.

Pricing

After services, pricing is the next activity in the line. These are the most common approaches:

1. Customer willingness to pay – If your customer is paying for services, how much is the maximum an average customer can pay? Price accordingly.
2. Cost Plus – In the cost-plus method, you add your profit margin over the cost incurred for that kind of a service. For this approach to wok, it’s key to map all costs incurred when executing any given service.
3. Competition based – If your pricing is higher than competitors offering the same services, why should potential customers choose you? Find a way to offer a cheaper alternative.

Mapping the revenue journey helps with pricing. If you can determine where the practice will generate, spend, and potentially lose money, you can in turn identify opportunities to increase profitability. Small things like charging correctly for your time can make one of the biggest improvements on the bottom line. Again, a practice management software that automates out missed charges is crucial.

If you’re unsure what to charge customers, think of the demographics of your area. Can your average local pet owner afford $100 for a consult? Obtain price lists for each of your local competitors and figure out what works well. Traditional prescription medications are typically marked up 2.5 times cost, while preventives and chronic-use medications are set at approximately 1.5-2 times cost. Vaccine prices can be set based on historical pricing and food should be set at manufacturer's suggested retail price (MSRP).

If you charge fairly for the unique and valuable service your team provides and keep an eye on what your average customer can afford, you can’t go wrong.

Location

Every veterinary practice owner will tell you location is paramount to business success. Sometimes the choice is glaringly obvious, at other times it's torture. So many factors are at play: availability, affordability, suitability, how future-proof the site is, an easy or difficult landlord, foot traffic, access, etc. So why should you choose one site over another?

For starters, let’s look at what funds are available and settle on whether we’ll operate out of an existing building or construct a new facility from the ground up. We’ll also need to decide whether to lease or buy. All options have their pros and cons, but ultimately it comes down to what we can afford and where we see the right client base finding us. Locations in residential areas with heavy traffic and visibility are more expensive, but they’re also nearer to families with pets – potential clients.

There might also be local or state regulations to consider based on the clinic’s services. Are you subject to federal and state narcotics licenses for drug dispensation? Will you pay state board fees? Are you required to hold a particular business license to operate in your local jurisdiction? Specific regulatory requirements vary, so research your local requirements and talk to others who’ve been here before, as not to miss anything.

There’s also the option to cut down requirements and opt for a mobile veterinary clinic, saving money on location expenses. If you chose this route, you’ll save on outfitting costs, medical equipment, and laboratory instruments.

Alternatively, if you had a location in mind but are now having second thoughts – maybe the site isn’t as good for a startup practice as you initially thought – don’t force it. Take a step back and regroup. Taking your time to get the location right will pay dividends in the long run. With all the variables that go into getting a new practice running, expect some adjustments to your plan along the way. These course corrections only help guide you to a more defined, ideal situation.

Build vs Renovate

While many veterinarians choose to venture out on their own and build a new practice up from the ground up, you can also take over an established one, perhaps one where you previously worked as an associate. This usually entails renovations and has its own costs involved but will often be cheaper than a start-up. If you have the capital, you can also purchase the vet’s book of clients. This will make profitability a more immediate prospect.

Regardless of whether you’ll operate out of an existing building or construct a new facility, you’ll need to consider leasing vs buying. Both options have their pros and cons, but your chosen client base will drive the decision. Property near residential areas with heavy traffic and visibility likely will be more expensive, but it also will be closer to families with pets and, thus, potential clients. It can prove beneficial to hire a veterinary consultant, who can help analyze your area regarding average salaries and demographics.

If you’re looking to build or renovate, you should also get in touch with an architect in the very early stages. Good architects will guide you through the construction process and help with bureaucratic hurdles.

From a cost perspective, borrowers planning on renovating leased space will be looking at a loan ranging from $400,000–$600,000 – depending on how extensive the improvements are and how many of those improvements, if any, the landlord is happy to cover. For someone purchasing their own commercial real estate, loans can range from $700,000–$1,000,000. Once again, this depends on how much work is needed to turn the property into a functioning veterinary clinic.

An architect will play an important role here in helping you determine if the space is a reasonable option to be turned into a vet practice.

Costs & Financing

How much will starting my new practice cost? How will I finance it? These are important questions to think about because you’re unlikely to see a financial return in the first year. Veterinary practices can be expensive to start. Depending on the size of the practice, its location, and other factors, expect to spend at least $1 million on renovations, equipment, fixtures, and more before you even open the door.

Consider the following essentials just in equipment and basic services:

• Medical and surgical equipment – 40K
• Lab equipment – 30K
• Waiting room and examination room setup – 10K
• Kennel equipment – 5K
• Practice management software – 3,5K
• Bookkeeping setup – 2K
• Marketing costs – 2-10K
• Insurance – 2K

Once you go live, you then have the ongoing costs to consider. Veterinary clinics must keep a steady supply of prescription medicine on hand, as patients’ lives depend on it. Your inventory of drugs and specialty foods will prove to be one of the greatest ongoing expenses. Until your business grows, you’ll also need to dedicate a portion of your monthly budget to a marketing strategy.

Your largest and most important expense, however, will be payroll. The team on the front-end is your customer experience, while those behind the scenes are what keeps the business running smoothly. If you treat your employees like the asset they are, the business will be rewarded accordingly.

That’s why before pursuing this goal, be certain that you’re at a point in your life where you can give everything you have, plus more, to this new endeavor. It’s never too early to start thinking about the idea of practice ownership, but make sure you have the means to back it up.

As for the financing, raising capital isn’t usually a problem for veterinarians for one simple reason: vet hospitals are a good investment. Banks consider DVMs educated, low-risk borrowers, which gives you leverage with lenders.

In most circumstances, banks fund start-up veterinary practices via Small Business Administration (SBA) loans. SBA loans require a down payment of 10% for a startup practice and terms can range up to 25 years if real estate is involved. When going through the approval process for an SBA loan, you’ll need a solid business plan accompanied by three years of financial projections. Within these projections, the first two years will need a focused monthly breakdown. The business plan will rely heavily on your personal resume, plus any previous veterinary and management experience.

If your personal credit is sound, shop around for the best loan terms possible. Banks will be more likely to approve a loan if they see you’ve done your homework – good credit, a strong growth strategy – which is why this groundwork planning is crucial.

Check out this guide for more information on how to secure funding for a new veterinary practice.

Assembling the ideal project team

This is the time to surround yourself with good people. No need to worry about staffing yet, but a core team will be instrumental in getting the practice up and running. Choose a bank that understands the nuances of a veterinary practice. Find a practice consultant that works with veterinarians every day. Hire an architect who has designed veterinary practices and an accountant who understands the finances specific to veterinary practices. Selecting a team that understands the veterinary industry will be one of the most important steps you take to turn your dream into reality.

Even little things like talking to established veterinary practice owners about their own experiences are gold. People at all stages of their ownership journey. Hearing their thoughts on what worked and what didn’t, what type of resources they had in place when they first opened, is the sort of experience you can’t buy. Remember that you can always scale up, but it’s much harder to scale down.

Here are some final good questions to start asking yourself at this point:

• What are your production goals and cash flow projections?
• Will you be able to service the clinic’s debit in the first few years?
• Will you start off as a solo vet or bring in a partner?
• How many exam rooms will you need? What about kennel space?
• Do you envision the business expanding down the line and requiring more space?

Once you have answers to these questions, we move towards creating a business plan to support all of these objectives.