Apr 01, 2007
Ship without a captain
To illustrate this problem, I'm going to share my experiences with practices I've worked with. For example, I conducted an on-site consultation at a large practice in the Northeast not long ago. About a year ago, the owner decided to sell to three of his associate doctors. The new owners were equals; each owned one-third of the practice. The previous owner was kept on as an associate veterinarian.The problem: The new owners had little knowledge of how the practice was run or how they wanted to run it. The previous owner didn't want to interfere and had little or nothing to do with the management of the practice; he stood back with an "I told you so" attitude.
Unfortunately, I'm seeing more of this every day. Across the country, associate veterinarians are buying into their practices or, in some cases, buying the entire practice with little or no knowledge of how to manage the hospital. And some of these new owners tackle the job with unrealistic expectations. I call these doctors the new breed of practice owner.
I recently talked to a doctor who bought a practice with two other partners. She told me how frustrated she was that she was working 30 hours a week between seeing clients and managing the practice. She felt as if the "inmates were running the prison." She had little control over what was going on in the practice and was frustrated.
She also told me she was unwilling to stay later than 5 p.m. during the week and missed most doctor and team meetings because she wouldn't come in when she wasn't scheduled to work. Mission control, we have a problem!
New graduates seeking employment know they have a lot to learn, so many seek practices with doctors who'll mentor them. Associates buying into a practice must also understand the importance of mentoring. You need to learn about practice finances, inventory control, personnel management, and basic marketing. You need to know how to run the practice before you buy it, so you don't run the business into the ground.
In many cases, if this mentoring and training doesn't occur, the seller is in jeopardy, too. Many veterinarians sell to their associates and, as part of the purchase agreement, take back a portion of the note. If the practice doesn't perform well and the money isn't available to pay that note, the purchaser may have no recourse other than to default.
If this occurs, the practice normally reverts back to the original seller—which is probably the last thing the seller wants. So it behooves both the buyer and the seller to safeguard the profitability of the practice.