As recently as three years ago, the ribbon-cutting ceremony at the traditional veterinary practice start-up should have been on the endangered species list. Financing was difficult, competition was fierce, and many of our profession's entrepreneurs were opting to purchase thriving practices with solid cash flow instead of creating their own.
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In the past two years, however, many of the lenders and veterinary consultants I've spoken to have seen a noticeable spike in practice start-ups throughout the country. These new businesses run the gamut from small operations (a mobile house-call practice, for instance) to large (a multispecialty hospital) to those in between (a feline practice).
Regardless of practice size, the number of young, aggressive veterinarians hanging out their own shingles has surged. The question is, why in this shaky economy would any veterinarian choose to start his or her own business?
FEWER HIGH-QUALITY PRACTICES FOR SALE
The recession has negatively impacted the profits of many practices across the country. This declining profit margin has led to declining practice value. (See "Impact of a 5 percent revenue drop.") Given the current economic situation, many practice owners have opted to delay selling their practices until the market has recovered. Instead, they've (wisely) decided to hunker down, improve practice cash flow, and ride out the recession. Therefore, many high-quality practices that normally would come up for sale during a typical business cycle are sitting on the sidelines.
Impact of a 5 percent revenue drop
The result? Many—not all, but many—of the practices currently for sale across the country are flawed. As one potential buyer told me a few weeks ago, "There are a lot of damaged goods on the market right now."
A byproduct of this trend is a slew of impatient buyers in the profession. Most of these men and women—who are young, driven, and business-savvy—know what they want in a practice and won't settle for less.
Unlike the previous generation, these practice buyers received a high-quality business education at an early age. This is thanks to veterinary colleges doing a better job of introducing business education to students, veterinary business groups growing more active on campuses, and convention organizers increasing and improving practice management CE.
These buyers understand finances, cash flow, charging appropriately, and profit. They've seen some of their colleagues or mentors struggle with poor decisions, and they don't want to follow them down that path.
These young buyers understand the enormity of the implications of their decisions and don't want to "make do" with a damaged or flawed practice. Their options are to wait for a practice worth buying to come along, to remain an associate for the foreseeable future, or take the leap and start their own practice. Many are choosing the latter.