By Elissa Lippiatt, Director and Chartered Accountant
Our practice speaks with hundreds of veterinary professionals every year, and advice about starting and building your own practice still remains one of the most common things we talk about. Practice ownership still holds a great amount of appeal. However, what the last twelve months have demonstrated is that life can be uncertain – taking on the stress and overhead of a brand-new business isn’t something that you should do without a lot of thought and planning.
If starting a practice is something you are thinking of in 2021, below are our top six essential things you’ll need to put into place first.
1. Define Your Core Proposition
The most successful business owners have a strong understanding of their brand and offering. You can’t run a successful business being all things to all people. Once you have defined your core proposition, values and service offering, this will help to guide your decision making on all other areas of the business; including location, fit-out, advertising and social media strategy.
2. Quantify your Start-up Costs
If you’ve ever watched a renovation show on television, you’ll know that any building project ended up costing more than you were hoping it would. This is why it is so important to build a comprehensive list of ALL of the items required for the surgery as part of the planning process. The best way to do this is do a mental walk through of each area the practice and list everything you will need – equipment, stock and consumables. You can then use this list as the basis to gather quotes and for your funding applications with the lenders.
3. Build your Business Plan
Having a business plan in place will help you to document and formalise your plans for the different areas of your practice and should address the following areas as a minimum (in addition to your budget and cash-flow outlined in more detail below):
|Practice Marketing, Branding and Advertising||Strategies for:
|Risk Mitigation and Insurance||
4. Plan for your Cashflow
Whilst it may seem the most daunting part of the process, this step is critical as the majority of start-ups are not profitable in their first year of operation. Your lender will also want to review this as part of the funding process.
Your budget should span the first 12-24 months of your business operations and project on a monthly basis your expected income and budgeted expenditure. This budget should be as comprehensive as possible to ensure it incorporates all costs for the business so as to avoid any unexpected surprises. The major line items you should consider are:
|Income||This includes vet fees, sale of products, income from other services (e.g. animal boarding etc.)
If you have other sources of income (e.g. work in another vet practice or lecturing/tutoring income) you should also include this in here.
|Expenses||Operating expenses for the business such as consumables, stock purchases, advertising, premises costs, insurance and staffing.|
|Funding Costs||Repayments on lease and chattel mortgages|
Given that start-up practices are normally loss making for the first 6-12 months you will also need to consider how to fund the deficit. This can be through additional cash reserves or by supplementing your income working in another practice (although check you aren’t in breach of your restraint of trade).
We normally encourage our clients to build three cashflow models:
- A “shoot the lights out” best case scenario – to give you a target to aim for.
- A “realistic budget” that runs a middle course – this is the one you provide to the lender.
- A “worst case” scenario – to ensure you can fund the practice through the start-up phase.
5. Determine your Legal Structure
There are a number of different legal structures through which a business can operate – however there are restrictions on ownership and structure for veterinary practices so it is important that you get appropriate advice to ensure your structure is compliant. The ideal structure will depend on your personal circumstances and your future goals for the practice but will balance the following:
- Compliance with necessary ownership and control guidelines of the relevant state legislation
- Provide the owners with as much legal protection as possible
- Ensure you are not paying more tax than you need to – both in the years that the business is trading and in the event of a future sale.
It’s important to do research and get advice on your structure up-front as once you have locked this in it can be difficult and expensive to change.
6. Engage your Support Team
Being a small business owner means you are constantly wearing multiple hats. You’ll need a support team that can help smooth the process for you. This would generally include the following
- HR Advisors
- Insurance Brokers
- IT Advisers
- Marketing and Website Design
Take time to research and interview your potential support team (asking others for recommendations where relevant). Make sure they understand your industry and challenges specific to you.
Setting up your own practice is not a small undertaking; however, it is important to realise that you are not alone in the process! Time that you spend planning, talking to industry professionals and those who have already successfully undertaken the same process will set you up for the best chance at success. The end result to the planning process is rewarding: a vibrant and profitable practice that you have built from the ground up.