How ownership will set you [debt] free
We frequently speak with new vets who have significant student debt and see this as the major barrier preventing them from pursuing practice ownership. They often assume practice ownership is unattainable until their student debt is paid down - which may take in excess of 20 to 30 years. In reality, the opposite is true: practice ownership is completely feasible and will actually make paying off your debt easier! In this post, we'll walk through a practical example to show you how.
Meet Dr. Nicole. She graduated in 2017 with $300K of student debt. After 3 years of working as an associate in a practice, her student debt is still sitting at $300K. At an interest rate of 5%, she is only able to pay ~$15K a year towards her student debt, covering only the annual interest that accrues.
Looking for a change, she has two paths to now choose from:
A] Join a corporate practice at ~$100K salary + $30K starting bonus
OR
B] Buy a practice from a retiring owner for $500K
She loves the idea of owning her own practice - having it align with her vision, living her values, and reinvesting in her community, but she is concerned -- “do I have too much debt to own my own practice?” Perhaps it would be safer for Dr. Nicole to pay off her debt before embarking on practice ownership?
WRONG.
This is a common misconception - practice ownership is actually more likely to enable debt repayment by generating long term wealth for practice owners and higher annual earnings. Follow along below to learn why!
PATH A:
At ~$100K of salary, and a $30K signing bonus, Dr. Nicole is able to save ~$25K a year after expenses and uses this to pay down her student loans over a period of 12 years. (link to detailed calcs below)
- Her salary does not grow much during this time.
- Like renting a home, she is not benefiting from the growth in value of the practice she works at.
PATH B:
Dr. Nicole buys a practice for $500K using a bank loan at a 3% interest rate (yes, these are the rates!!). As she adds more vets to her team, her salary grows from an initial ~$110K per year (CVMA) to $190K per year by year 5, when she has 3 vets working with her (CVMA). By year 5, Dr. Nicole is almost debt free, and owns a substantial piece of a profitable vet practice.
- Her salary grows with every new vet (and customer) she adds to her practice.
- She has substantial write-off benefits as the owner of a business (benefits, car, home office, etc.)
- Like a home, she is building value in a practice that she will one day sell.
By the end of the 12th year, when PATH A would leave Dr. Nicole with no debt but no savings, PATH B on the other hand would leave her with $500K+ in savings and part of a practice worth in excess of $2M.
In addition to meaningful wealth creation, Dr. Nicole has built a wonderful practice she is proud of. She is able to surround herself with colleagues she respects, practice medicine at a level of quality she decides, and design the practice’s look and feel the way she likes. She invests in her community and provides special resources to the local shelters. Eventually, she has enough flexibility to decide when to work and how much she wants to work.
Owning your own practice is the best way to make the most of your veterinary degree and generate long term wealth. As a practice owner, you can invest in yourself. At Vesta, we are here to empower veterinarians to own practices. If you are ownership-curious but face barriers on your path to ownership, we want to hear from you and work out a solution to overcome them.
Don’t wait any longer - practice owners are retiring, interest rates are low, many practices are desperate for an infusion of ideas and energy to revive them. Reach out today to partner with us on making ownership a reality!
