Creating a business plan (Sponsored by Intervet/Schering-Plough Animal Health)

The reason business owners create a business plan is the same reason why horse owners keep up with annual exams. Giving a horse vaccinations may reduce the risk of disease and death. Having a smart business plan inoculates against failure. As an equine practice entrepreneur, consider these five core areas when creating a business plan: teamwork, concept, customers, cash, and purchasing.

1. Teamwork

You are a skilled professional, but you can't be all things to your business. You need a team of advisors to help you set realistic, calculated goals. Advisory teams consist of a banker, lawyer, accountant, and insurance agent. Because finding team members with knowledge of veterinary practices can be difficult, peers are another reliable source for advice and mentorship. Their insight, hands-on experience, and business strengths can balance out your weaknesses.

2. Concept

Create a concept that includes where you want your practice to be in 10 to 20 years. Your concept should consider your business entity, organizational structure, management style, and services offered. Competitive analysis is another key element to success. It defines who the competition is, how you stack up, and how you differ.

3. Customers

The customer section of your business plan should cover who your clients will be, how many will clients exist, and how many clients you will need. Start by asking yourself who you're going to serve. Will you be working with amateur owners, trainers, breeders, or riding facilities? The needs and sensitivities of these market segments, current spending patterns, and clients' current service providers will vary, but the more you know about your clients in the beginning, the better you can market yourself to them and build a practical pricing structure.

Have your advisory team critique your strategy for recruiting clients. Not doing so may lead to unforeseen problems. For example, many practitioners will open a clinic in a location close to their home. This lack of strategy can result in too many practices offering the same services in the same area—and that means there aren't enough clients to go around.

4. Cash

The cash section covers the amount you'll need to get started and how much you'll need as your business grows. Preparing pro-forma balance sheets, income statements, and cash flow statements for a three-year period will help you identify how to maintain cash flow and liquidity, how much working capital you need, and what kind of budget to follow. Break-even, sensitivity, and ratio analyses are also important tools because they show when you can expect to make a profit, what alternative scenarios exist if your projections are off, and how efficiently and effectively your practice operates.

5. Purchasing

The purchasing section of your plan helps monitor your business for performance, legal and regulatory adherence, record keeping systems, inventory management, and marketing reviews. If you don't pause to see what is and isn't working, you can't make the necessary improvements. For example, if you don't consider start-up costs when creating your business plan, it can result in overspending. If there's a miscalculation and you buy more drugs or equipment than you need, it will leave you with a lot of product—and a lot of debt. Bear in mind that there will be a slow season, so buy based on your projected annual sales. With honest evaluations from yourself and your advising team, you can keep your practice in the champion circle.