Photo courtesy of Dr. Alan Hans
Dr. Alan Hans, shown with a dog named Clancy, fears that he may have to close his solo practice in upstate New York due to a dearth of prospective buyers.
More than 50 years since Woodstock, many folks again are making a pilgrimage to upstate New York, though not to see some of the world's greatest musical acts.
The work-from-home craze triggered by the pandemic has offered city dwellers the promise of a more relaxed lifestyle away from the urban bustle — expanding the fan base of local veterinarians such as Dr. Alan Hans, who's now turning over more than $1 million a year.
At the same time, the recent boom in business at the Woodstock Animal Hospital is causing Hans a headache. The septuagenarian solo practitioner and aspiring retiree can't find a buyer, even for a hit practice like his.
"We're in a hole here," Hans said in an interview. "We're not quite big enough to interest the corporates, and too big to sell to an individual."
Hans in December took to the message boards of the Veterinary Information Network, an online community for the profession and parent of the VIN News Service, to share his frustration and seek advice. His post has attracted 134 responses and counting, including from several other solo practitioners struggling to sell at a time when corporate consolidators supposedly are paying big bucks.
"I'm 74 and I need an exit plan," Hans lamented to VIN News. "I would hate to just put a sign up on the door that says 'Closed. Gone fishin'."
There once was a time when practitioners nearing retirement could rely on selling to another veterinarian, perhaps a trusty associate employed with succession in mind. That dynamic has changed over the past decade or two with the emergence of deep-pocketed corporate consolidators, which can offer higher sums for practices, pricing many aspiring independent buyers out of the market.
Corporate consolidators are attracted to larger practices for their economies of scale. They also tend to overlook farm and mixed animal practices in favor of companion animal practices in densely populated urban areas that are close to emergency and specialty care.
More recently, an apparent shortage of veterinarians caused by a pandemic pet boom, along with rising inflation, has driven up veterinarians' salaries. That's made solo practices even less appealing to consolidators because they'd have to find a replacement veterinarian in a drum-tight labor market.
"The corporate buyers are creating a business model for our profession that makes those unwanted few, mostly rural, practices so unappealing that prospective buyers won't even kick the tires," said Dr. Bryce Fleming, another solo practitioner who's struggling to sell.
At the other end of the scale, interest rates hiked to curb rampant inflation have made debt more expensive for veterinarians who might be considering taking the plunge and buying a practice.
Fleming recalls receiving an offer for his solo companion animal clinic in Powell River, British Columbia, from a consolidator about two years ago, but it came with conditions. He had to keep working for another two years, during which time he would have to clear earnings hurdles and find not one, but two replacement veterinarians and train them.
Having to find two practitioners willing to respond to emergencies on-call with no nearby specialist backup was a bridge too far, Fleming said. "Their offer of $1.6 million was actually nothing but a tasty carrot hung in front of the stupid old veterinarian, tempting me without any real hope of attainment."
Hans in Woodstock also can attest that it's not just aspiring sellers of large animal practices getting crickets.
The town of Woodstock originally was meant to host its namesake festival in 1969, but after the organizers couldn't find an appropriate venue, the historic event was moved to a farm in Bethel, some 40 miles away. (The festival created work for at least one veterinarian. Dr. Isidor Yasgur, the brother of the hosting farm owner, Max Yasgur, performed pregnancy checks on 50 cows the day before the show started. Isidor, reportedly more of a classical and jazz fan, returned home that same day).
Surrounded by the Catskill Mountains, Woodstock has retained a reputation as an artsy, hippie town that Hans said has attracted many a pet-owning uprooter from Manhattan.
Although he recalls being warned some time ago that selling a solo practice was getting trickier, he reckons he could have pulled it off a few years back, when the pandemic pet boom was in full swing. Rising inflation and interest rates have since spooked prospective buyers, Hans suspects. Smaller, independent buyers, he notes, are often saddled with heavy student debt loads, to boot.
As a case in point, he recalls being approached last year by a young couple, both veterinarians. They were keen to buy the Woodstock Animal Hospital and went to Bank of America seeking a loan. The bank would lend them only $300,000.
"Then, I was approached by a corporation that offered me $1.6 million, and that fell through because, again, being a solo practitioner, they worried that if I wasn't around the day after the sale, and there was no veterinarian to take over, the practice would probably die."
Beyond soloists' struggles, prices for practices across-the-board are falling, a consequence of rising interest rates, says Dr. John Tait, a veterinarian who now works as a consultant and clinic valuer. Takeover bids offered by consolidators, for instance, that once were as high as almost 20 times a target practice's annual operating earnings have since fallen to around the the 10- to 12-times range, Tait said.
Tait said demographic changes in the profession also could be shrinking the pool of veterinarians willing to buy a business — especially rural practices that perform frequent on-call work. "We have a lot of what I would call 'second-income earnings' being made by people who have a partner or children," he said, explaining that a preference for more flexible workplace arrangements could anchor couples to urban areas.
Large corporations, he added, due to their scale, might be able to offer better pay and benefits, too — helping them to outcompete small practices looking to hire potential successors.
Photo courtesy of Dr. Bryce Fleming
A corporate consolidator eyed this companion animal practice in Powell River, British Columbia, but wanted its current owner to stay on for a few more years and find two replacement veterinarians before it would do a deal.
So should solo practitioners just give up and reach for the 'Gone fishin' sign? Not necessarily, according to individuals contacted by VIN News, who've employed variety of sales strategies — some successfully, others not so much.
Hiring a veterinary practice broker seems like a logical plan, although the sellers who talked to VIN News said these companies might not want to play ball. Brokers, such as Simmons and Total Practice Solutions Group (TPSG), aren't necessarily interested in working with little practices because the sales commissions are smaller. Hans said Simmons never returned his calls, and that TPSG told him his chances of selling were "grim."
Alternatively, solo practitioners could take a leaf out of the consolidator playbook: Team up with one or more other solo practices to make themselves bigger and more attractive to investors.
The idea isn't news to Hans. About 18 months ago, a consolidator offered to buy him out, on the condition that he merge with another practice 5 miles away. "I was close to making a deal, but my ego got in the way," he said. "I didn't want to close the Woodstock Animal Hospital. It was my baby. And, egos aside, my staff hated the idea, of course, because they'd been our competitors for the last 30 years."
For those able to find a palatable merger arrangement, though, things might work out well.
Offering a real-life example, Tait said he worked last year with three separate equine practices that couldn't find a buyer by themselves and decided to join forces. "They got more efficient because they could get better deals on their cost of goods and staff benefits and so on," he said. A large consolidator bought the merged entity, with each of the three practices reaping nearly double the price they might have gotten if they sold independently.
Another option sellers might consider is lender finance, which involves the seller providing a loan to the buyer, who pays back the loan out of the practice's ongoing profits, with interest. As insurance, Tait said, financing agreements can be drawn up in inventive ways. A seller, for instance, might hold onto a 10% stake of the practice and collect a dividend, while continuing to work there for a few more years before selling that remaining 10%.
Time to phone a friend
Others prefer to do things the old-fashioned way: Ask friends to spread the word far and wide. That's how Dr. Katie True of Sacramento, California, managed to sell her solo practice in September last year.
One of True's friends, a drug distributor with a sales region from San Francisco to Reno, found an interested buyer within a few weeks of True asking for help. "He called me, and within three days, he was at my practice," True said of the buyer. "Handshake. Boom. We had a deal."
Still, the speedy response only came after years of trying other approaches. True had been looking for associates who might buy the practice from her in one to three years, figuring it would give them time to learn the ropes.
She couldn't find anyone and, making matters worse, lost two existing associates in quick succession due to illness and retirement, respectively. Suddenly, she was going solo.
True decided to sell "quietly," since she didn't want to scare her staff into quitting, or make her practice look less appealing to prospective employees. She shared her plans with only trusted friends and their leads, but even though the practice, established for nearly 60 years in a midsized city, was extremely profitable, the going was tough. "It was like bad online dating," True said.
Friends, though, could at least provide emotional support. "For two years, I felt like I was in a nightmare. I was trapped. I felt everything I had built for 20 years was collapsing around me, and I was helpless. You need vet friends to help encourage you, spread the word, give you hope."
Photo courtesy of Dr. Bryce Fleming
Dr. Bryce Fleming of Powell River, British Columbia, posits that buying a thriving business in a rural place is more affordable because of less competition from large corporate buyers.
True also recommends hunting for potential successors well ahead of retirement. "Trying to find an associate to buy and transition is not as easy as it once was," she said, adding that fewer veterinarians are attracted to this model of business than in the past.
All of the veterinarians who spoke to VIN News nevertheless agreed that practice ownership still can be a lucrative endeavor.
Fleming, the solo practice owner in Canada, ponders whether owners might consider signing over small portions of their clinic to a valued associate as part of their annual compensation package. The shares would be valuable only if the associate bought into the practice.
He also has a pitch for any veterinarians thinking about buying a practice like his. For one, targeting a thriving business in a rural location could make a lucrative investment opportunity more affordable, since the big corporations generally aren't looking there, he suggests.
"Get your accountant, a good accountant ... to go over the financials in detail. Then ... have the accountant pencil out a financial plan covering at least the first seven years. This is the plan you will take to your bankers. Shop that plan around to more than one bank."
For his part, Hans isn't giving up. While speaking to VIN News, he said he was exploring an approach by a group that had offered to buy 75% of his practice should he stay on another two years, after which it would buy the rest. Separately, he'd just received a call from a veterinarian who'd seen his posts on VIN and was preparing to come to Woodstock for an inspection.
"I would certainly stay on for a year or two. I'm still having fun," Hans said. "And I feel I owe it to my clients, my staff, my town. But I might just have to close. It's just a horrible feeling."