Ordinarily there are many reasons why veterinary practice owners consider the addition of an associate to their practice. Some consider adding an associate in order to increase their income. Others are interested in improving their quality of life. Some veterinarians like to have a succession plan in place with their successor already on the team. From time to time, a veterinarian will become ill or have some health problems that will require the addition of an associate. On rare occasions, an owner will want to add an associate in order to be able to acquire another practice or relocate to another area while maintaining ownership of their original practice.
Most veterinarians do not give long thought to their primary trad-able commodity - the time in the day they have available to work. They merely decide to become a veterinarian and work as an associate for a while. After a little while, most veterinarians decide that they want more control over their lives and more income. At that point, they decide to become a veterinary practice owner.
It is often very late in a veterinarian’s career when they realize that they are trading a certain quality of life for the income they are receiving. Make no mistake though, there is definitely a trade taking place between income and quality-of-life. For most practice owners, the more they work, the more they earn. Inversely however, the more they work, the more their quality of life suffers.
Statistics show that an experienced associate earns approximately $80,000 per year. We also know from industry standards that the average owner of a veterinary practice earns approximately $282,000 per year. Therefore, it is clear that the average owner makes approximately $200,000 more than the average associate.
However, the average associate does not have the expenditure of time or risk of capital as does the practice owner. Long after the associate has gone home, the owner deals with practice finances, personnel issues, tax issues, landlord and rental facility issues, and other management issues. That practice owner has made the decision that the extra $200,000 per year and all of the risk of time and capital involved is worth the cost. These owners have decided that the income earned from ownership is worth the quality-of-life sacrifices.
First of many is the difficulty with taking a vacation. If a practice is collecting approximately $80,000 per month, a two-week vacation is a very expensive proposition. The practice will lose approximately $40,000 in revenue while the veterinarian is away. The overhead for the two weeks will continue and cost a veterinarian approximately $20,000. Let’s assume the veterinarian spends approximately $10,000 for the vacation itself. All in, that vacation cost a veterinarian approximately $70,000. That is the reason why veterinarians rarely take two week vacations. In addition, there is the loss of family time.
Some time deep into their careers, many veterinarians have a light bulb moment in which they come to the conclusion that the extra dollar earned is no longer worth the extra minute that it takes to earn it and they look around for solutions.
Some appropriate questions are -
If an average practice with one veterinarian needs 1000 clients to have a healthy practice, do you need 2000 clients if you are going to add an associate? - NO
Since fixed costs are fixed, they do not rise as revenue rises in a practice. Therefore, the additional dollar added by the associate costs less to produce. While you need more patients to add an associate, you do not need double. If you have approximately 80% more patients, you have enough to add an associate without affecting your income.
Let us assume that you do not have the additional patients required to support an associate veterinarian. This does not necessarily mean that you are not in a position to add a veterinarian to your practice and improve the quality of your life.
The skills of the newly hired associate have a direct impact on your practice’s future. For example, if you ordinarily refer out a particular surgery, and you add an associate who performs that surgery, revenue will be added to the practice regardless of the number of patients in the practice. In addition, if an associate who has already established a reputation in the community is hired, then that veterinarian will bring patients to the practice - minimizing the requirement that the practice needs to treat upon arrival.
Another avenue for the addition of patients to the practice is an expansion of your hours with the expansion covered by your new associate. You can also hire an associate with the personality to go out into the community and add patients based on their personality.
In summary, you can add an associate who performs procedures you currently refer out, you can add a veterinarian who will bring patients based on their personality or reputation, and you can expand your hours (assuming the additional hours would equal additional patients).
While all of the methods previously set forth are tried and true, they are not the most profitable nor the quickest way of adding patients necessary to support an associate. If you want to get there in a hurry, buy and merge.
When you buy a practice owned by a veterinarian in your community who no longer wishes to own it, a number of wonderful things happen
Finally, there is the question of what your quality-of-life is really worth?
This brings you back to the trade. You are trading time for money. It may be that you need to give up $20,000 or $40,000 a year as a supplement to your associate’s income in order to improve the quality of your life. Whether that trade is worth it, depends upon your situation. The first step in making a good decision involves a clear understanding of what you are giving up and what you are getting in return.