Stepping up

A student at mississippi state university recently asked me, "Why would I want to be a practice owner?" My answer: If you own the practice, you can determine its future course and direction, decide your hours, employ the team members of your choice, and determine the services you perform. You'll also be well compensated as an owner and have something to sell in the future. More than 80 percent of veterinary clinic owners would choose ownership again, according to a 2001 survey. It might be the best decision you could make in your career. But is this student ready? Are you ready?

Mark Opperman, CVPM

Ship without a captain

To illustrate this problem, I'm going to share my experiences with practices I've worked with. For example, I conducted an on-site consultation at a large practice in the Northeast not long ago. About a year ago, the owner decided to sell to three of his associate doctors. The new owners were equals; each owned one-third of the practice. The previous owner was kept on as an associate veterinarian.

The problem: The new owners had little knowledge of how the practice was run or how they wanted to run it. The previous owner didn't want to interfere and had little or nothing to do with the management of the practice; he stood back with an "I told you so" attitude.

Unfortunately, I'm seeing more of this every day. Across the country, associate veterinarians are buying into their practices or, in some cases, buying the entire practice with little or no knowledge of how to manage the hospital. And some of these new owners tackle the job with unrealistic expectations. I call these doctors the new breed of practice owner.

I recently talked to a doctor who bought a practice with two other partners. She told me how frustrated she was that she was working 30 hours a week between seeing clients and managing the practice. She felt as if the "inmates were running the prison." She had little control over what was going on in the practice and was frustrated.

She also told me she was unwilling to stay later than 5 p.m. during the week and missed most doctor and team meetings because she wouldn't come in when she wasn't scheduled to work. Mission control, we have a problem!

New graduates seeking employment know they have a lot to learn, so many seek practices with doctors who'll mentor them. Associates buying into a practice must also understand the importance of mentoring. You need to learn about practice finances, inventory control, personnel management, and basic marketing. You need to know how to run the practice before you buy it, so you don't run the business into the ground.

In many cases, if this mentoring and training doesn't occur, the seller is in jeopardy, too. Many veterinarians sell to their associates and, as part of the purchase agreement, take back a portion of the note. If the practice doesn't perform well and the money isn't available to pay that note, the purchaser may have no recourse other than to default.

If this occurs, the practice normally reverts back to the original seller—which is probably the last thing the seller wants. So it behooves both the buyer and the seller to safeguard the profitability of the practice.

To address this issue, I suggest practices create "directorships" to give new partners a chance to build their management skills in different areas. For example, the ownership team could appoint a director of finance, a director of marketing, a director of operations, and a director of facilities. (For the jobs assigned to each director, see "Division of Management Duties".) Responsibilities would rotate every six months or yearly among the partners.

Division of management duties

With this approach, partners or future partners can learn about the various areas of management without feeling overwhelmed. And keep in mind, the director doesn't necessarily have to do the work in a given area; he or she may oversee the practice manager or delegate the task to a technician and supervise. But taking responsibility for this area gives the director a better working knowledge of the practice and prepares him or her for ownership.

Face the realities of leadership

So, the first step is to make sure you have a realistic understanding of what you're getting into. It's a lot of work to own a business. If a water pipe bursts, if the snow removal company fails to show up, or if your receptionist calls in sick, it's your problem. You may have a practice manager who can handle trouble, but what happens if the manager quits or doesn't do his or her job? The burden falls back onto your shoulders. Owners don't get to work an 8-to-5 job.

Next, you must learn how to structure the business so that work gets done and information gets shared effectively. With a basic hierarchy, you've got the practice owner or owners at the top of the heap, possibly associate veterinarians under the practice owner, and a practice manager reporting to the owner. The rest of the team reports to the practice manager.

As the practice grows, so must the management structure. To adapt to changing needs, you might need to hire an office manager, a head technician, a kennel manager, or a grooming manager. Team members' duties should be spelled out from the start in their job descriptions.

Find the right partner

If you're entering into a partnership, you also need to understand how this relationship will work—and make sure the partnership situation you're considering is the right one for you. I recently consulted at a practice with four associates who had purchased the practice. All four new partners worked a part-time schedule averaging about 20 hours each. When I showed up, the partnership was already in serious danger of breaking up. The previous friendship had turned into a battleground.

One partner seemed to find fault with anything and everything, rarely contributed to resolving problems at the clinic, and almost always punched holes in others' ideas. Another partner was passive-aggressive. She seemed to go along with the others when a decision needed to be made, but she was the first to undermine that decision among team members and the first to fail to follow any new policy or procedure.

Next, we had a peacemaker. She was always trying to make everyone get along and work together. She spent a lot of time and effort trying to make things work, but she had been so besieged by the other partners that she had become extremely angry and frustrated.

The fourth partner was apathetic. He rarely attended meetings and seemed more interested in his own activities and personal time off than the practice. He came to work late, refused to follow hospital policies, and acted more like an associate than a partner. He was also vocal about all the problems he believed he saw, but he didn't make it his responsibility to deal with them.

This is a classic example of a doomed partnership. The partners had given little thought to what owning and managing a veterinary hospital would be like. One of the partners even told me, "I had no idea how much work it would be to manage this hospital."

Look at your future partner as the business version of a spouse. You wouldn't marry somebody without learning about him or her first and figuring out how well you get along. Put that same effort into your future partnership as you step up to take the reins of a practice.

So, are you ready to be your own boss?

The key is to go in with your eyes open, knowing the responsibilities that go with the job. And then get an education in the management of your practice (or any practice), either on the job or by obtaining some formal education in veterinary practice management—both is best. Finally, be careful about the partnerships you form. I'm being honest; this is not an easy transition. But your efforts will be well rewarded.

4 keys to ownership success

Develop these four critical skill sets to become a strong, successful practice owner. Keep in mind, hardly anyone is born a business leader. Business and communication skills come from training and practice—just like medical skills.

1. Money management. Understand the financial aspects of the practice. What are the expenses and how much money do you need to break even? How many active clients does the practice have? What's the average per-client transaction and individual doctors' per-client transaction? How many new clients come into the practice every month? Know how to read monthly or quarterly reports.

2. Team management and leadership. Know the healthcare team and its capabilities. Who are the leaders? Every practice has a few people others look up to or follow. Does the team respect the owners? What's morale like? What are the personnel policies and how are they enforced? As the leader in the practice, managing people is a big part of the job. You may need to do some CE on management, communication, motivation, and delegation.

3. Business operations. Get familiar with such practice operations as inventory control, appointment reminders, controlled drugs, OSHA regulations, internal controls, accounts receivable, your veterinary software, and so on. You don't need to manage all these things yourself, but you need to know how they work. If an employee leaves your practice, you'll need to be able to show someone else what needs to be done.

4. Business team development. Surround yourself with individuals who have the skills you lack. For example, on your business team you may include a management consultant, an accountant, a personal financial planner, and a lawyer. You're not expected to know everything, but you are expected to be smart enough to surround yourself with people who can help you and your practice to succeed.

Veterinary Economics Hospital Management Editor Mark Opperman, CVPM, is owner of VMC Inc., a veterinary consulting firm based in Evergreen, Colo. Catch his talks Sunday, April 29, at CVC East in Baltimore on improving clinic finances and saving money with internal controls. Send comments or questions to ve@advanstar.com