Is Your Veterinary Practice Ready to Add An Associate?

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.

Stats & Figures: How much can you earn?

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.

What are the 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 -

• whether it is necessary to lower your income level in order to improve the quality of your life?
• Is it possible to maintain or increase your income while improving the quality of your life and at the same time put in place a successor for the time when you are ready to cut back or retire?
• The answer depends on whether you have too much for you but not enough for two?
• This raises the question of how much is enough in terms of patients and clients?

Let's consider the following scenario -

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.

How can an associate add value?

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

1. You instantly have an associate in place which makes it possible for you to take vacations of two weeks or longer.
2. While you are away, your practice continues to earn income because the associate is there to make sure that it does.
3. You eliminate someone who used to be a competitor making your practice even more profitable.
4. You have someone in your office with years and decades of experience.
5. You not only do not have to give your new associate any of your patients, this associate brings their own patients.
6. When this associate no longer wants to work due to age, health, or the desire to travel, you now have all the extra patients you need to hire your eventual successor.

To Conclude..

Finally, there is the question of what your quality-of-life is really worth?

• Let us assume for a moment that you have more than enough patients for you but not enough for two.
• Let’s further assume that you cannot locate a practice to buy and merge.
• Let’s further assume that you cannot locate an associate who will perform procedures that you currently refer out or who will add extra patient to the practice based on their own reputation.
• Finally, let’s assume that the addition of hours to your schedule would not render additional patients for your practice.

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.