The continued growth and success of a solo veterinary practice is becoming more difficult every day. With increased competition, commercial veterinary clinics, heavily advertised retail veterinary hospitals and an unpredictable economy, a veterinarian must be prepared to consider ways of expanding his/her traditional patient base. A veterinary practice merger (buying a practice and moving it into your office or vice-versa) can help you become more profitable.
Increase Patient Base - A veterinary practice merger is the best way to expand your current active patient base. Retention of the seller’s patients averages 95% or better if the transaction is handled properly. This additional business adds considerable financial stability to your veterinary practice and assures you a strong position in the future marketplace.
Consolidate Expenses - A veterinary practice merger will provide “economy of scale” by now having two practices operating out of one office. As the purchaser, you will not incur any additional costs to your fixed expenses such as rent, utilities and telephone; you will get more work out of your existing staff and hire one or two additional staff members to help handle the additional patients. All other expenses of the merged practices will be directly related to practice production such as lab fees, supplies and the compensation that will be paid to an associate veterinarian who may, or may not, be needed to handle the additional volume of business.
Earn Passive Income - A veterinary practice merger represents an opportunity to derive passive income from your veterinary practice (income that is generated by another doctor working in your practice). As the seller phases out, the resulting overflow of patients allows the purchaser to add an associate, thereby eliminating the need of being dependent on your own two hands to make a living.
Reduce Competition - A veterinary practice merger also allows the purchaser to reduce competition by preventing another competitor from purchasing the seller’s practice and moving into town. An outside purchaser could possibly be more aggressive and establish a foothold in your marketplace.
Increase Net Profit - In the following examples, a veterinarian collecting $600,000 sells his veterinary practice to a neighboring veterinarian for $450,000. In the first example, the practices are merged, the seller leaves the practice, and the buyer treats all of the purchased patients. In the second example, the practices are merged, the seller continues to work in the practice as an associate, and the buyer does not treat any of the purchased patients.
BUYER NET PROFIT $190,000 (32% passive income for buyer)
Every year that passes without completing a practice merger is another year of potential income that was lost. It is money that could have been generated from your practice if you had completed a practice merger. You have already made a considerable investment in your existing office facility and now it’s time to maximize its productivity through a practice merger.