BUILDING AND MANAGING WEALTH AS AN EQUINE PRACTITIONER
that is to include business management or startup finance classes in our curriculum. Another way is to
advocate for government support to new DVM gradu- ates who want to start a new business. It can be simi- lar to the loan repayment program or any other incentives.” Men currently make up the majority of private practice owners, but the percentage of women owners is increasing, shifting from 29% of the total in 2007 to 41% in 2019. By 2028, the majority of US practice ownerswill bewomen, he said.3 In equine practice, in the 2016 AVMA AAEP
Equine Economic Impact Study, practice owners, numbering 334, accounted for 54.3% of the AAEP respondents, with 60% of owners male and 40% female. Of the respondents who were practice own- ers, 49.7% were sole proprietors, 36.5% were a part- ner/shareholder in an S-Corp or C-Corp, and 13.8% were a partner in a Limited Liability Corporation (LLC) or other type of practice ownership structure.1 Encouraging practice ownership in equine practice
could help retain equine veterinarians. Average am- bulatory net income from operations before deprecia- tion and amortizationwas reported in 2020 as 13.5%.7 The author commonly sees small ambulatory prac- tices with EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) of 20% or more. While this ordinary profitmay be reduced after pay- ment of principal and interest on loan obligations, it can still amount to a generous amount of additional compensation. Utilizing computed benchmarks for expenses for a
ent financial records), one can visualize the potential financial benefit of ownership (Fig. 2). With 2 doctors contributing to total practice revenue of $825,000, and Cost of Professional Services (COPS) totaling 24.33% of revenue, a gross profit of $624,250 remains. When all expenses including COPS ($619,925) are sub- tracted fromincome, this leaves $205,075 in EBITDA. After accounting for loan payments for a $60,000 truck financed over 60months at 4% and a $100,000 equipment loan financed over 120months at 4%, there still remains $179,093 to be distributed to the owners in accordance with their share of ownership in addi- tion to their salary for effort as veterinarians ($100,000 each, based on 25% of their service revenue production). This totals $189,547 in compensation for each of 2 partners in this practice if they each own 50%. If this practice had just 1 owner and an associ- ate, rather than 2 partners, and each earned service revenue of $400,000 for the practice, the associate would have total compensation of $100,000. The sole owner would have compensation of $100,000 + $179,093, or $279,093. If the sole owner of the prac- tice had no associate but instead utilized the 2 tech- nicians to increase his or her efficiency and produced $800,000 single-handedly, the veterinarian would have total compensation of more than $379,093 ($200,000 + $179,093), because expenses would be reduced due to less costs for licenses, memberships,
small (2 doctors or fewer) equine ambulatory practice (author calculation from compilation of 1-2 DVM cli-
continuing education, vehicle costs, professional liability insurance, and benefits. Business owners earn so much more than employ-
ees because the owners are taking risks in owning a business.While associates can go home at night with- out worrying whether the cash flow will be sufficient to meet payroll and other monthly obligations, or whether the horse owner whose horse fell down while sedated will sue the business, or whether the recep- tionist is going to give her notice tomorrow, the prac- tice owner may lose sleep over these concerns. A practice owner could risk bankruptcy if the economy sinks into recession and he or she cannot then make loan payments. Business owners are willing to assumetheseburdens of risk becausethey havethe opportunity to make profit, which can be substantial. One of the reasons corporate consolidators are so interested in investing in veterinary practices is that they generally produce strong, consistent profits. However, practice ownership is not only aboutmon-
etary gains. Owners can also grow their practices in the direction of their vision for their careers and lives, make the decisions on services offered and the boun- daries set, and create a culture that is an expression of their values. They can limit their services to an area of interest, limit their growth to a select group of compatible clients, or limit their work hours to fit their other priorities. Their practice is shaped by their choices, and they have control over how life as an equine veterinarian looks. Because the current paradigms of the equine veteri-
nary profession are not compatible with attracting and retaining equine veterinarians, it is sensible that some are seeking to shape their futures through prac- tice ownership. Because of the differing priorities of the next generation of horse doctors, ownership shares in existing practices may not be attractive unless these individuals have agency to make changes, have choices, and exert control over their professional lives. Consequently, if existing practice owners seeking a sale at retirement wish to engage associates as partners, it is the author’sopinion that this effort should occur early in the associate’s tenure, after 2 to 5years of service that ensures compatible values, with the offer of a meaningful percentage of ownership and control.Minor profit sharingwill likely not be satisfactory tomeet themore pressing needs of younger practitioners, who seek to shift the tradi- tionalmores of equine practice.Embracing the change desired by new partners is important in attracting themto stay in existing practices.
3. Conclusion
Whereas there are inherent risks and management tasks to attend to as a business owner, the advantages over employment as an associate are significant and far beyond themonetary. Practice ownership provides freedom to pursue a professional as well as personal
vision for one’s life, along with providing marked financial benefits. Lifetime earnings of owners far
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