From Outdated to Outstanding: The Risks and Rewards of Buying a Fixer-Upper Veterinary Practice
By: Max Truesdel
The idea of buying a fixer-upper veterinary practice might remind you of those popular home renovation shows—where vision, investment, and hard work transform a dated property into a dream space. Similarly, purchasing a veterinary practice in need of upgrades can be a rewarding venture, but it comes with its own set of opportunities and challenges. If you’re considering this path, here’s how to approach it wisely.
Why a Fixer-Upper Might Be Right for You
For many aspiring practice owners, a fixer-upper veterinary clinic offers a unique opportunity to enter the market at a lower cost while building a practice tailored to their vision. These practices often come with a lower upfront price tag compared to turnkey operations, making ownership more accessible.
One reason for this lower cost is the reduced competition. Many buyers are looking for fully operational, modern clinics, which means fixer-uppers often attract fewer offers. With fewer buyers vying for these opportunities, you may have more room to negotiate favorable terms and secure a deal that works for you.
One of the most appealing aspects of a fixer-upper is the chance to customize the practice to your exact needs. Whether it’s modernizing outdated equipment, refreshing the clinic’s branding, or redesigning the facility layout, you have the freedom to shape the practice into a space that truly reflects your vision and values. Additionally, these practices often have untapped potential. By introducing modern tools, efficient workflows, and effective marketing strategies, you can significantly boost profitability and client satisfaction.
Perhaps the biggest advantage is the existing client base. Unlike starting from scratch, a fixer-upper comes with a built-in roster of clients. With the right improvements and a focus on exceptional service, you can enhance their experience, build loyalty, and attract new clients—all while avoiding the challenges of building a practice from the ground up.
What to Watch Out For
While the opportunities are compelling, buying a fixer-upper practice isn’t without its risks. One of the most common pitfalls is underestimating the costs involved. Renovating a practice can quickly become expensive, with equipment upgrades, facility repairs, and software investments adding up. Before committing, it’s essential to conduct a thorough financial analysis and consult with experts to understand the full scope of costs.
Another potential challenge is structural or zoning issues. If the building requires major repairs or isn’t zoned for veterinary use, you could face unexpected expenses and delays. Always have the facility inspected and verify zoning regulations before finalizing the purchase.
Reputation can also be a hurdle. If the practice has a history of poor service or outdated practices, rebuilding trust with clients will take time. Research online reviews, talk to current clients, and develop a plan to address any negative perceptions.
Staffing concerns are another factor to consider. A struggling practice may have overworked employees, outdated training, or high turnover. Assess the current team’s strengths and weaknesses, and plan for training or hiring to align with your vision.
Finally, rapid or drastic changes can unsettle long-time clients. A thoughtful transition plan—with clear communication and gradual improvements—can help retain their trust and loyalty during the transformation.
Navigating the Process Successfully
To turn a fixer-upper practice into a thriving business, careful planning and execution are key. Start by performing thorough due diligence. Review financial records, client retention rates, and facility conditions. Partnering with an experienced veterinary practice broker can provide valuable insights into the practice’s strengths and weaknesses.
Once you’ve assessed the practice, create a detailed renovation and investment plan. Identify immediate needs versus long-term goals, and prioritize upgrades that improve patient care and client experience. For example, modernizing medical equipment or refreshing the waiting area can have an immediate impact.
Securing financing is another critical step. Account for the purchase price, renovation costs, and working capital to cover expenses during the transition. Work with a lender familiar with veterinary practice financing to ensure you have the resources needed to succeed.
Engaging the current team and clients is equally important. Involve staff in the transition process, listen to their feedback, and address their concerns. Clear communication and a shared vision can help build trust and buy-in. Similarly, keep clients informed about the changes and reassure them that their care remains a top priority.
Finally, focus on marketing and branding to showcase your revitalized practice. Update your website, social media, and local listings to highlight improvements and attract new clients. A strong digital presence can help position your practice as a modern, client-focused destination.
Final Thoughts
Buying a fixer-upper veterinary practice can be a rewarding investment if approached strategically. With careful planning, the right financial approach, and a commitment to revitalization, you can transform an underperforming clinic into a thriving, modern practice. Much like the home renovation shows we love, success comes from vision, persistence, and a well-executed plan.
If you’re considering this path, Omni Practice Group can help you navigate the process, from valuation to transition strategy, ensuring your dream practice becomes a reality.
Read MoreThe Veterinary Future: Why Young Veterinarians Should Consider Practice Ownership
By: Jen Bennett
As the veterinary landscape continues to evolve, a growing number of young veterinarians find themselves at a crossroads: to remain employees in established practices or take the bold step towards ownership. While the security of a salaried position can be appealing, there are compelling reasons for young veterinarians to consider purchasing a practice. This article explores the benefits of ownership and why taking the initiative to invest in one’s future can lead to both personal and professional fulfillment.
The Shift Toward Ownership
The veterinary profession is witnessing a significant shift, with many seasoned practitioners nearing retirement and looking to sell their practices. This transition presents a unique opportunity for young veterinarians to step in and take the reins of an existing practice or establish a new one. By seizing this chance, young professionals can shape their careers and influence the future of veterinarians in their community.
Financial Independence and Potential for Wealth
One of the most enticing aspects of practice ownership is the potential for financial independence. As an employee, a veterinarian’s income is often capped by the salary set by the practice owner. In contrast, owning a practice allows for direct control over earnings. With the right strategies, a practice can become a significant source of wealth, providing not only a sustainable income but also the potential for long-term financial growth. Practice owners have the opportunity to build equity, which can be leveraged for future investments or retirement.
Autonomy and Professional Satisfaction
Ownership brings a level of autonomy that is hard to achieve as an employee. As a practice owner, veterinarians have the freedom to make decisions about the practice’s direction, from the services offered to the marketing strategies employed. This autonomy fosters a greater sense of professional satisfaction and pride. Young veterinarians can create a work environment that aligns with their values and vision, leading to increased job satisfaction and a more fulfilling career.
Building Patient Relationships
In a practice ownership scenario, veterinarians can cultivate long-term relationships with their patients. This continuity of care allows for a deeper understanding of patient needs and preferences, ultimately leading to improved patient outcomes and loyalty. As an employee, transitioning from one practice to another can disrupt these relationships, while ownership allows for the establishment of a dedicated patient base that can be nurtured over time.
Enhanced Career Development
Owning a practice provides young veterinarians with invaluable experience in various aspects of business management, including financial planning, marketing, human resources, and patient care. This multifaceted experience not only enhances their clinical skills but also equips them with essential business acumen. As the healthcare landscape becomes increasingly complex, these skills will be invaluable for navigating the challenges and opportunities that lie ahead.
Flexibility and Work-Life Balance
While practice ownership can be demanding, it also offers the potential for greater flexibility. Owners can create their schedules and determine the number of hours they wish to work, allowing for a better work-life balance. This flexibility is particularly appealing to young veterinarians who may want to prioritize family, personal interests, or community involvement alongside their careers.
Overcoming Challenges
It’s important to acknowledge that ownership comes with its own set of challenges, including financial risk, the responsibility of managing staff, and the need for effective business strategies. However, with the right support systems in place, such as mentorship, networking, and continuing education, young veterinarians can navigate these challenges successfully. Investing in a practice management program or seeking guidance from experienced colleagues can provide the necessary tools for success.
Conclusion
As the veterinary profession evolves, young professionals have a unique opportunity to shape their futures through practice ownership. The benefits of financial independence, autonomy, patient relationship building, and professional development far outweigh the challenges. By taking the initiative to purchase their practice, young veterinarians can create a fulfilling career that reflects their values, goals, and aspirations. In doing so, they will not only secure their financial future but also contribute positively to the ever-changing veterinary landscape. Embracing ownership is not just a career choice; it’s a bold step toward creating a legacy in the veterinary field.
Read More5 Considerations when Buying a Veterinary Practice
How many years you should have under your belt before you own a practice? Typically, the number is five years, but that the number really depends on the doctor. We’ve had doctors who were able to purchase a practice after three years and do quite well. A lot depends on your comfort level, skill set and experience.
Here are some things to consider before you buy:
- Are you comfortable with your clinical skills? If you have been out of veterinary school 3 to 5 years, you should have a feel for where you are with your skills. A lot depends on the clinic(s) or hospital(s) you’ve been working. Some may limit what you’re doing and others just may not be busy. If you’re in a location that’s given you a variety and volume of experience, you should be getting a good amount of experience.
- Have you seen a good practice in operation? Sure, you’ve been working in one or more clinics, but are they well run? Or, if they’re not, you know the difference. If you are in a well-run practice, you should be observing how the doctor and/or office manager treat the staff. Whether a veterinary assistant, office manager, or veterinary technician, they should all be treated well. How about the patients and clients? They should be given good, Nordstrom-like treatment. They pay your rent and you want them coming back.
- Do you know how to read financial statements? Most veterinarians in the early stages of their career don’t know what a financial statement is let alone how to read one. There are on-line courses such as accounting for non-accountants and other courses on financial statements and bookkeeping that can fairly quickly teach you what the financial statements are and how to read them. Understanding them is imperative in running any business.
- Now that you know how to read a financial statement, do you know what the numbers should be? What percentage of collections should your payroll numbers be? What about rent? Etc., If you don’t know, there are resources you can look at on-line where you can learn. Watch all of the White-Board Wednesday videos from Joel Parker, DVM that are on line. They are great in teaching you numbers as well as other aspects.
- Practice Management – Learn as much as you can with the free stuff on-line. From the White-Board Wednesday videos to other on-line courses, you can learn a lot for no cost to minimal cost. This will quickly help you grasp the key concepts of managing a practice.
These are just a few things you can do to prepare you to own a practice. Keep in mind that practice owners typically make 20% to 25% more than an associate veterinarian. In addition, the equity you build in a practice is a great source of retirement.
If you’d like to talk to us about your individual situation, contact us and we can help!
Pitfalls to Avoid in Buying a Building
By Steve Kikikis, Vice President, Broker
Money Pit or Cash Cow?
On occasion when a doctor purchases a practice there is also an option to purchase the real estate. Historically, real estate has been a good investment over time, but owning a commercial building has its own nuances.
There are a lot of similarities between owning a commercial building and a residential house. As the building owner or homeowner, you are responsible for paying the insurance, maintenance, and property taxes. Be sure to understand what your out-of-pocket costs are before you take on the responsibility of purchasing a property. Investing in a building or home inspection conducted by a reputable building inspector is always worth it.
Before you purchase a commercial building, know your demographics, and do your research. If a building is a steal, make sure you do some research to find out why. A commercial real estate broker that specializes in your industry can assist you in looking at the demographic information to fully understand the value of the real estate.
After you’ve purchased the practice, you are now the king of your castle and if you are business savvy, you can make a profit from owning your building. Having some knowledge of what to expect and what the pitfalls are of owning a building can save a lot of headaches down the road. For this article, we will consider that you are the owner and sole tenant of your building.
Maintenance – You’re now responsible for everything from the leaky roof, sweeping the parking lot, HVAC systems, lighting, ADA compliance, security systems, plumbing, and possibly the water and sewer mains underneath the property. The best advice is to adhere to a schedule with regular and preventive maintenance. Don’t skimp on issues that may seem small but that can turn into a bigger safety issue (both expensive and potential lawsuit if hazardous) in the long run.
A lot of potential challenges are dependent on the age of the building and how the previous owner took care of the property. You can hire a property manager to be the point of contact so you’re not distracted and can concentrate on your work. Some owners like to be involved in every decision, while others don’t want the hassle of being contacted for leaky pipes, clogged toilets, etc.
Insurance – a commercial building policy will differ from a residential homeowner’s policy on your home. A commercial policy will also have coverage for the business operations, its products, and operations liability. Much like homeowner’s insurance, the age and construction type of the commercial property will determine the premiums. Commercial insurance is also based on the neighborhood where the building is located.
Although chances are slim, some policies cover loss of income in the event of a fire or other loss of the building. These are usually additional policies that can provide peace of mind.
City ordinances – Although you may own the building, ownership doesn’t necessarily mean you can do anything you want. An example is a new building owner who wanted to utilize a specific size of a sign for his business, but the city ordinances stated a sign can be no bigger than 30 square feet. Be sure to reach out to the city before you decide to change or update the signage on your building and also verify if there are any restrictions for the exterior of your building such as signage, color, material, etc.
Taxes – There are two points on the taxes. First, for the building taxes, make sure your ownership is properly transferred to you during the purchase, and make sure that you keep up-to-date on your taxes. Set up an account directly within the municipality you are located or make sure your loan program is paying it directly. For your business taxes, owning your own commercial real estate has many tax advantages. Connect with your CPA, make sure you’re paying your real estate entity as a business expense, and more.
Money Pit or Cash Cow? There will be costs to owning your own commercial real estate, but taking the proper steps and working with an experienced commercial real estate broker that specializes in medical/dental purchases will save you time and a lot of money. Just think, if you are leasing a space, after 10 years you will be signing up for paying the landlord another 5 years of income. If you own, after 10 years, you will be working towards paying that building off and have the equity in the building.
Read MoreIdeal Practice Benchmarks
by Jim Vander Mey
Practice Transition Advisor
People love benchmarks. They want to know how many glasses of water we should drink each day. How much we should work out every week. Or, how many miles per gallon our cars can achieve. There are benchmarks to look at when you are buying a practice. They may not necessarily be deal-breakers, but they help determine what you will need to do to right the ship if the benchmarks are a little out of whack. Here are some of the benchmarks you should look at and calculate when buying a practice:
- Staff overhead as a percentage of collections – 20% to 25%. If it’s higher, the practice is overpaying staff, underperforming collections, or too many staff.
- Facilities Expense – 7% to 9% of collections – Too high and the practice is either paying high rent, space is underutilized or production is too low.
- Supplies – 5% to 7% of collections – If this is too high, it could be that the practice is using high-end supplies, or the supplies inventory (or vendor) is not managed properly.
- Marketing expense – 3% to 5% depending on the growth stage. A practice that is looking to grow will have a high percentage. A static practice may not spend much on marketing at all.
- Collection Rate – Minimum of 98% for a well-run practice. A low rate means the front desk is not keeping up or managing the accounts receivables very well.
- Total Overhead (all expenses less owner and associate pay) – Ideally should be less than 65%.
These are just a few benchmarks to analyze when looking at a practice. Again, these are benchmarks and if the practice you are analyzing does not meet or exceed these benchmarks, it does not mean it’s a bad practice. It simply means you have work to do in those specific areas.
Contact me if you would like more information – jim@omnipg-vet.com.