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Buying A Veterinary Practice

Why Buying a Veterinary Practice is Better Than Starting a Veterinary Practice

Oct 2, 2013 1:52:00 AM

Buying Starting veterinary practiceStarting a veterinary practice is an extremely risky venture as a result of increased competition and an unpredictable economy. A veterinarian would be wise to consider buying a veterinary practice that is established instead of starting a veterinary practice from scratch.

It just makes more sense to acquire the “good will” of a veterinarian who is already established in the community. Being introduced to and treating hundreds and even thousands of patients of the acquired practice accelerates growth and income tremendously.

There is a big difference between buying a veterinary practice with an established cash flow (and substantial net income) versus starting a veterinary practice where growth and net income can be painfully slow.

Consider the following scenario where two veterinarians went into practice at the same time but ended up considerably different after their first seven years in practice:

1. Dr. “A” buys an established veterinary practice for $600,000. This practice was grossing $750,000 per year and within two years this same practice is grossing $1,250,000 per year (it was under-producing). In seven years Dr. A’s practice produces cumulative gross revenues of $8,000,000 and a cumulative net profit of $2,800,000.

2. Dr. “B” starts a veterinary practice from scratch and invests $300,000 in a new office. In seven years Dr. B builds it up to a $700,000 per year gross practice. Projected first year gross revenues is $200,000, second year $300,000, third year $450,000, etc. for seven years. The new practice produces gross revenues of approximately $3,300,000 over those same seven years and the projected cumulative net profit is $990,000.

During those same seven years, Dr. A will earn $1,810,000 more net income than Dr. B! The reason? There was an established patient-base in the purchased practice that allowed Dr. A to be busy from day one and resulted in a much greater seven year gross and net income for Dr. A. Dr. A was busy from the first day he took over the existing practice.

Dr. B, on the other hand, had to spend a great deal of time and effort trying to get established in the community and to build a patient base. Patients begin to trickle into the office, and the practice grows slowly over time. The problem for Dr. B is that the overhead is so high while the income is low, so there is little or no profit in the practice for quite a few years.

Dr. A enjoyed a substantial net income from the first month in practice and continued to enjoy a higher income during that entire period of time. Dr. B took years to get profitable and his income potential can never catch up with Dr. A.

The above reference explains why Buying a Veterinary practice is better than starting a practice.

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