Veterinary medicine has shifted dramatically over the past five years. Although consolidators own around a quarter of veterinary practices, consolidated practices represent almost half of the industry’s revenues. But, thanks to recent changes in market conditions, technological advances, and industry support from organizations like the IVPA, independent practice ownership is more attainable than ever.
In my previous blog post, I discussed why independent practices are important and the organizations supporting them. Today, I want to share additional details from a recent talk I gave with Matt Salois, President of Veterinary Study Groups about why this is a good time for an independent practice renaissance.
Independent versus corporate practices
The debate isn’t about whether corporate or independent practices are inherently better—it’s about choice for pet owners and veterinary professional employees. A thriving veterinary industry benefits from competition, and what’s right for one veterinarian isn’t always right for the next.
Many corporate practices are typically owned by investors who lack a veterinary background and prioritize financial returns over helping pets. On the other hand, independent practices are owned by individuals or groups who are already grounded in the veterinary space and invested in good quality medicine for their communities. Obviously, profit also matters for independents, but the fundamental difference is their reason for being.
Why do corporations buy veterinary practices?
If corporate owners and private equity firms differ from veterinarians in their mission and purpose, why are they buying clinics? The answer is simple: Veterinary practices are strong, resilient businesses. Here’s why:
- Veterinary businesses are resilient during economic downturns.
- Pet ownership continues to rise, increasing demand for services.
- Historically undervalued practices are attractive investments.
- Markets tend to consolidate naturally. In the wake of dentistry, optometry, and pharmacy consolidation, it’s now vet med’s time.
Leveling the playing field
For years, corporate consolidators benefited from historically low interest rates. However, current rising interest rates mean that borrowing money costs more, cutting into investment returns. Plus, the business knowledge from other sectors isn’t necessarily sufficient to run a veterinary clinic, which demands an understanding of veterinary workflows and the complexity of veterinary practice.
Where private equity and corporate investors may want to benefit from efficiencies and synergies, they often encounter the opposite effect. Large purchasers buy multiple practices under one umbrella to unify purchasing, human resources, IT, and other departments. Although this can save money, the larger a corporation becomes, the more these “efficiencies” hamper operations and profits.
These “diseconomies of scale” can lead to:
- Slow communication
- Team member irrelevance
- A disconnect between staff and leadership
- A diluted mission and culture
Succeeding as an independent practice owner
Owning a veterinary practice is challenging, and it isn’t for everyone. Business ownership is hard, but it’s something motivated individuals can learn. To succeed as an independent owner, you must:
- Manage risk — Mitigate risks by planning for the worst-case scenarios.
- Lead effectively — Surround yourself with a knowledgeable, engaged team of consultants and experts.
- Develop financial acumen — Know your numbers inside and out.
- Stay profitable — Maximize revenue and sustain a healthy business without sacrificing people or purpose.
Supporting independent practice ownership
Although groups like the IVPA provide resources and community for independent practice owners, we can do more as an industry. Here are some ideas:
- Training— Encourage veterinary students to explore ownership and build business skills.
- Mentorship — Guide new vets who are interested in ownership.
- Innovation — Explore new models, such as employee stock ownership plans (ESOPs) or non-DVM co-ownership models, to create sustainability.
Here’s how individuals and industry players can show support:
- Manufacturers and suppliers — Avoid race-to-the-bottom pricing, which hurts the industry as a whole. Embrace minimum advertised pricing (MAP).
- Veterinary teams — Engage and invest in practice success by understanding and contributing to financial goals.
- Future owners — Be proactive, open-minded, and creative, and learn from current independent owners.
Veterinary professionals who want more control of their careers should work to support independent practice ownership and ensure healthy competition with consolidators in the future market. With planning, financial literacy, and industry support, independent practice owners can thrive.
VetBooks proudly supports independent veterinary practices by helping them organize and understand their books and cash flow—schedule a meeting to learn more.
