Why conditions are right for a renaissance of independent veterinary practice ownership.
Today, an estimated 7,300 of the 25,000 to 30,000 veterinary practices in the United States have been consolidated, says veterinary industry consultant Martin Traub-Werner. That means about one-quarter of all practices are now under corporate ownership.
And when it comes to total revenue from that corporate consolidation, Traub-Werner says, the number is even higher—likely one-half of all U.S. veterinary practice revenue. That’s because corporate buyers first purchased and consolidated larger, higher-revenue practices.
Traub-Werner, CEO and founder of VetBooks, a veterinary bookkeeping company, and Matt Salois, president of Veterinary Study Groups, Inc., are bullish about opportunities for veterinarians who want to own practices. Traub-Werner and Salois believe that now is the time to consider independent veterinary practice ownership.
“If we don’t leverage this opportunity, then we’ll have missed the chance and the industry will be dominated by corporate practices,” says Traub-Werner.
Economic and Tech Advancements
While consolidation is industry agnostic—it’s happening in dentistry, other medical specialties and even home improvement retail—Salois notes that there are some specific opportunities that make now a good time for an independent-ownership renaissance.
Salois stresses the changes that the U.S. economy has experienced. “There’s been some volatility, but if you start at 1982 and draw a line to 2020, you’ve basically got the best sledding hill ever,” he says. “There’s just a freefall down.” That means that consolidators—in every industry, not just veterinary—are having to grapple with a market environment that they haven’t known in the past.
Salois adds, “Beginning in early to mid-2021, the 10-year real interest rate took a turning point and began a steep ascent. The good news is that from a general economy standpoint, it has plateaued and leveled off, albeit at higher levels than we have seen in the last 20 years or so.” And that uncertainty gives a leg up to independent operators who know the veterinary business well.
Corporate Pain Points
Corporate-owned practices may struggle due to tangible diseconomies of scale, where certain costs increase as the business gets bigger, such as the costs of leases or mortgages on large headquarters buildings. “Those buildings are full of people who are not touching pets on a daily basis. And those people have to get paid,” Salois says. “The buildings have to be paid for. And that comes from somewhere. You either reduce costs in your service delivery or you increase prices. Those are the only choices.”
Service delivery is another pain point for some corporate-owned practices. When the distance between the decision-maker and the decision-implementer increases in a consolidated business, so do inefficiencies. Doctor-owned and -run practices have the opportunity to operate more efficiently. Technology that used to be financially feasible only for large businesses, such as virtual waiting lists, mentoring, bookkeeping and payroll services, are now in reach for small businesses. Taking advantage of those allows veterinarians to focus on the complexities of running an independent practice.
Of course, Traub-Werner stresses, entrepreneurship is not for everyone. Just because you are a good veterinarian doesn’t mean you’ll make a good practice owner. Look for “homework assignments” from Traub-Werner and Salois to determine if veterinary practice ownership is right for you (and steps to take if it is) in a future issue of Insider.