What to Expect When Starting a Veterinary Practice

Starting your own veterinary practice is both a rewarding and challenging endeavor. It requires not only clinical expertise but also sound financial management and business savvy. In this article, I’ll walk through a few critical steps to help get your journey started.

Financial projections and analysis

Before taking any concrete steps toward opening your practice, it’s critical to develop a comprehensive financial projection. This will help guide your decision-making process, determine funding needs, and set realistic expectations for when your practice will become profitable.

Key components of financial projections:

• Start-up costs: This includes real estate or leasing, medical equipment, technology (such as practice management software), inventory, and initial marketing efforts. These costs can range anywhere from $250,000 to over $1 million depending on the size and scale of your practice.
• Operating costs: Ongoing expenses like rent/mortgage, staff salaries, utilities, insurance, and administrative costs need to be accounted for. Don’t forget to include costs for equipment maintenance and replenishing inventory regularly.
• Revenue projections: In the early months of your practice, you may experience slow growth as you build your client base. Estimate your revenue based on the services you plan to offer (wellness exams, surgeries, telemedicine, retail items, etc.) and the average client volume you expect.
• Break-even point: Calculate when your revenue will cover your operating expenses. This is an essential metric to track because it will help you manage cash flow and understand how long your practice will need to be sustained by initial investments or loans.

A thorough financial plan with a mix of conservative and optimistic projections will help you prepare for both best-case and worst-case scenarios. These projections can also greatly assist when you’re securing financing. Consulting a veterinary-specific practice consultant can be a wise decision. Since this is one of the biggest decisions in your life, professional guidance is highly recommended (and if you need a referral, we’d be happy to provide one).

Finding a location: Lease or purchase?

Once you have your financial projections in place, the next step is to find the right location for your practice. Your decision to lease or purchase will significantly impact your start-up costs and long-term financial health.

• Leasing a space: This is often the preferred option for new practice owners due to the lower upfront costs. Leasing allows flexibility if your business grows or if you need to relocate. However, you have less control over renovations and may face increasing rent over time.
• Purchasing property: Buying real estate is a more expensive initial investment, but it allows you to build equity and gives you full control over the space. You also have the option of leasing part of the property to other tenants, providing an additional revenue stream. However, this option comes with the responsibility of maintenance and repairs.

When evaluating potential locations, consider visibility, accessibility, and the local demand for veterinary services. Also, think about future growth—will this location still serve your practice as it expands? A veterinary-specific commercial real estate broker, in conjunction with a practice consultant, can help guide you on this decision.

Securing financing

After selecting a location, the next step is securing financing. Whether you are leasing or purchasing property, you’ll need capital to cover start-up costs, equipment, and working capital to sustain operations during the first few months.

Types of loans:

• SBA (Small Business Administration) loans: These loans are popular among new practice owners due to their relatively low down payments and longer repayment terms. The SBA 7(a) loan is particularly suitable for veterinary practices, as it can be used for purchasing real estate, equipment, or working capital.
• Conventional business loans: Some veterinarians opt for conventional loans from banks, which may offer faster approval processes. However, these loans typically require a higher down payment and may come with shorter repayment terms.

Down payment requirements: Depending on the type of loan you choose, expect to put down anywhere from 10% to 20% of the total loan amount. Additionally, you’ll need to budget for closing costs, legal fees, and initial operating expenses.

Balancing practice finances and personal finances

One of the most challenging aspects of owning a veterinary practice is balancing the financial needs of your business with your personal financial goals. As a practice owner, it’s crucial to maintain separation between personal and business finances while ensuring that both are well-managed.

Separate finances:
Keeping personal and business finances distinct is essential. Set up separate bank accounts, credit cards, and financial statements for your practice. This will simplify tax filings, provide clearer insights into your practice’s financial health, and help you track personal vs. business expenses more effectively. It’s also important to hire a bookkeeper and accountant to assist with maintaining clean books (we’d be happy to provide a referral if needed).

Loan repayment strategies:
Many veterinarians still have student loans when starting their practice. It’s important to integrate your student loan repayment into your personal financial plan. Have questions about student loans? Click here to view my article on student loan repayment.

Emergency fund:
Just as with personal finances, it’s critical to have an emergency fund for your practice. Unexpected expenses like equipment failure, staff turnover, or a slow month can disrupt cash flow. Setting aside an emergency fund can help you weather these challenges without taking on additional debt or sacrificing personal income. It is also important to note that your open date could be delayed for a number of reasons, and you may be on the hook for various payments before your practice officially opens. Thus, having an adequate emergency reserve is imperative.

Final thoughts

Opening a veterinary practice is a complex yet rewarding journey. By creating solid financial projections, selecting the right location, securing appropriate financing, and carefully balancing your personal and practice finances, you’ll be setting yourself up for success.

It is important to note that starting a practice is not for everyone. There are significantly more risks in starting a practice versus remaining in an associate role, but with a well-run practice, your financial upside is virtually unlimited.

With the right planning and support, you can turn your vision of practice ownership into reality and build a thriving business that serves your community and provides personal fulfillment. As you can see, there are many moving parts to starting a practice. Consulting a competent, trustworthy, and veterinary-specific financial advisor can help ease the burden and improve your chances of success.

Curious if practice ownership is for you? Schedule a complimentary consultation with us.