If you're in a region with a small population or where there's already a veterinary practice every kilometer or two, there might be better moves than starting a new practice (a de novo). While building from the ground up has its appeal, in today's market, the smart money is on buying into existing practices. Here's why investing in what already exists often makes more sense.
The Case of My Hometown: Vancouver, Canada
Let's use my hometown, Vancouver, Canada, as an example. The city itself has a population of approximately 680,000 people, plus another 250,000 to 330,000 in neighboring cities. It is a small market; each year, 3-4 more veterinary practices open in Vancouver. Six new practices have popped up within a 12-kilometer catchment area in the last four years, further stretching an already limited client pool.
Corporate veterinary groups are buying up most multi-doctor practices, leveraging their more considerable buying power to offer more competitive pricing. For independent practices, it's becoming harder to compete. However, it's not impossible, especially if you're focused on a common goal with your team and clients.
Shrinking Client Base: The Vancouver Example
Let’s break down why the client pool is getting smaller, using Vancouver as an example:
Not all pet owners take their pets to the vet: Some don’t see the necessity unless their pets are sick or injured, meaning only a portion of the estimated 20,000 to 25,000 pets within a 12-kilometer radius of a practice are actively seeking veterinary care.
Financial limitations: Depending on the type of medicine your practice offers, you may price out certain clients. Specialty services or high-end care can be out of reach for many pet owners, especially given Vancouver's high cost of living.
Competition is fierce: Practices in Vancouver are packed into small catchment areas. With Vancouver's population of approximately 680,000, plus an additional 250,000 to 330,000 in neighboring cities, the potential client pool gets stretched thin. A practice that could ideally serve 1,500 clients may end up with only 800 to 1,200 active clients due to competition from nearby practices. This makes it difficult for many practices to sustain more than two doctors, especially as more practices continue to open in the same radius.
When you factor in price-sensitive clients, the high cost of living, and rising costs of veterinary services, the pool of potential clients gets even smaller. Many of us are fighting for the same clients.
Rural Areas Face Similar Challenges
Rural areas present their own set of difficulties. The population is smaller, and economic conditions can make attracting clients and veterinarians challenging. The cost of running a practice and the difficulty of staffing rural practices adds another layer of complexity.
The Perks of Buying an Existing Practice
Given these challenges, why does buying into an existing practice make more sense than starting fresh?
Established Client Relationships: When you buy an existing practice, you also buy into a base of loyal clients. Some families have been taking their pets to the same vet for generations. This kind of loyalty is precious and hard to build from scratch.
Financial Stability: Banks see existing practices with steady cash flow as less risky than a new venture, and you'll often get better loan terms when buying an established practice.
Build Your Vision: While a de novo practice allows you to create something from scratch, buying an existing practice doesn't mean you can't implement your ideas. Many older practice owners are looking to retire, and a gradual transition can allow you to reshape the practice into something that aligns with your vision. Plus, buying into an existing practice is often cheaper than building from scratch.
The Financial Comparison: De Novo vs. Existing
Starting a de novo practice typically costs between $700,000 to $1.2 million, depending on the size and type of medicine you plan to practice. This includes leasing or purchasing space, equipment, marketing, and building a team from the ground up.
In contrast, buying into an existing practice can cost between $300,000 to $1 million, depending on the practice's size, location, and revenue. This can often be structured as a gradual buy-in over several years, allowing you to take on ownership in phases while learning from the current owner. This way, you reduce the financial risk while benefiting from their mentorship and experience.
What About the Competition with Corporate Practices?
Corporate groups are or have brought many multi-doctor practices, giving them a pricing advantage due to their more considerable buying power. Competing with these larger groups can be challenging, but it's not impossible. Your best ally is having a common goal with your team and clients—something corporate practices often struggle to foster. Independent practices can still differentiate themselves by offering more personalized care and building strong community relationships.
The Benefits of Existing Practices
When you buy an existing practice, you also inherit the systems, equipment, and infrastructure already in place. Ideally, this includes:
Established SOPs (Standard Operating Procedures)
Equipment
A trained team
Cash flow
Existing marketing strategies
These assets can take years (and significant investment) to build from scratch. With a de novo practice, you're not just fighting for clients; you're also building everything from the ground up, which takes time, money, and resources.
Over-Saturation Hurts Us All
Continuing to open more practices in an already crowded market stretches the client base thin, especially in areas where the pet population needs to grow. More practices mean more competition, which hurts profitability for everyone. It's not just a financial issue—it's a strain on the veterinary community as a whole.
Local governing boards must consider the broader impact when approving new practices in saturated areas. We all appreciate the rise of Vetpreneurs, but opening a new practice in an over-crowded market often does more harm than good, especially when there's little room for growth.
Keep the Industry Healthy by Investing in What's Already There
By investing in existing practices, you're helping to ensure the long-term health of the veterinary industry. You're buying into an established client base, a stable revenue stream, and a community that already trusts the practice. This allows you to focus on providing excellent care without the constant pressure of fighting for new clients.
The goal should be to keep the industry alive and sustainable for everyone—existing practices, new investors, and most importantly, the pets we serve. If you're considering opening a new practice, take a hard look at the benefits of buying into an existing practice first. You might find that the stability, support, and opportunity to grow your vision make it a far better option than starting from scratch.
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