Build it, but will they come?

Build it, but will they come?

Weigh your options before constructing a new clinic.
May 01, 2008

My group owns a practice that grosses about $1 million in revenue. The mortgage payment for this 9,000-square-foot facility is $10,500 per month. I love the building—until I compare it to another $1 million practice in our group, an older but well-maintained 2,500-square-foot facility. That mortgage is $2,300 a month. The lesson here is that many practice owners may be forfeiting a chunk of potential profit because they want a beautiful facility. So should we pinch our pennies and refuse to build new clinics? Not always. There are many legitimate reasons to build, including these:

Dr. Jeff Rothstein
Cramped quarters. If your practice is bursting at the seams, it may be time to build a new facility.

Robust growth. If your practice is growing 15 percent to 20 percent a year and you believe this growth will continue, then you're not building because you think new clients will flock to you—they already are.

Adequate revenue. If your current practice is grossing roughly twice the cost of the real estate you plan to build on, you have a general all-clear that you can afford the project.

Veterinarians who actively engage in strategic planning often buy what they think will be choice property in their communities years before a new facility is in the cards. Then, when they meet the criteria above and interest rates are favorable, they're ready to build. Smart.

Keep in mind that mature hospitals can expect 5 percent to 8 percent of their revenue to go toward paying the rent or mortgage. A new facility can cost up to 15 percent of revenue. That should drop to 8 percent to 10 percent after a few years. Are you willing to forego that amount of profit over the next five years or more?

The housing market is a mess because folks bought more house than they could afford. Don't let the same thing happen with your practice. Remember that "if you build it, they will come" may work in the movies, but it's no guarantee for you.

Veterinary Economics Editorial Advisory Board member Dr. Jeff Rothstein, MBA, is president of The Progressive Pet Animal Hospitals and Management Group in Michigan.

Hot topics on dvm360

Dog of Dallas Ebola patient will not be euthanized, authorities say

Health officials have quarantined and will monitor dog and amid concerns surrounding deadly virus.

Video: How to perform a belt-loop gastropexy

Prevent GDV in your at-risk patients with this simple technique.

Stretch your skills to earn more in veterinary practice

Finding new tasks could be the key to generating more income for your practice—and boosting your pay.

Veterinary community stunned by Sophia Yin's unexpected death

Prominent veterinary behaviorist died of suicide Sept. 28.

Study shows sustained salary slump for veterinary support staff

Since 2009, technicians paid by the hour have experienced a bump in pay, but pay for other team members has stayed stagnant, according to data from the 2014 Firstline Career Path Study. Here’s a look at changes in team pay from 2009 to 2013.