The ownership crisis in veterinary medicine - are you being left behind?
Part 1
As new ownership models continue to proliferate across various industries, it can be perplexing to observe how little has changed in veterinary medicine. It seems a single owner, either a corporation or single veterinarian, continues to be the norm, with very little ownership extended to the rest of the veterinary team that delivers care and service on a daily basis.
Apart from enabling employees to share in the monetary gains from their labor, companies that take a more inclusive approach to their teams through ownership plans, have been shown to outperform on employee engagement, satisfaction and retention. Southwest Airlines’s highly publicized profit sharing plan and Starbucks ‘bean stock’ program are two examples of companies that are applauded for their progressive and transparent cultures that benefit both employee and employers alike.
So why are there so few shared ownership opportunities in veterinary medicine? Given the high degree of commitment, collaboration, and communication required to operate a successful practice, could a more distributive ownership model better unify and reward a team that goes above and beyond on a daily basis? In an industry with high rates of burnout, depression, and even suicide, could ownership be the key difference between empowerment and despair? Where women make up 90% of today’s graduates, but remain sparser than ever at the ownership level, could more flexibility around the ‘how, when, how much’ of ownership opportunities available re-engage a growing part of the workforce that has been largely overlooked?
“At any given time, 13 to 15 percent of Southwest's stock is owned by its employees through a profit-sharing plan with the option to purchase additional stock. "Employees feel like owners because they are owners," says Colleen [former president]. "Ownership is one of the things our employees are most proud of. How can you expect people to have passion and excitement for what they do if they're not owners? We've had flight attendants and mechanics leave Southwest as millionaires."
In order to address the ownership dilemma, we must first look at the modern veterinary professional, understand how their needs have changed, and how we can adapt a decades-old model to better suit them.
The modern veterinary professional is a veterinarian or technician in her late 30s to early 40s. She feels burdened by student debt, and maybe a mortgage, both of which are far more costly than those of her predecessors. She has young children, parents, and a spouse that she cares for. She lives in a city where home prices, as well as the cost of starting a practice, have dramatically increased. She is hard working, high achieving, and as we affectionately call ourselves, ‘a perfectionist introvert’. Her options for ownership are limited - work at a practice for ten or more years, and buy in when the existing owner retires, or buy / start her own practice, requiring a substantial investment of capital and time she may not have. No wonder we see fewer and fewer independently owned practices nowadays. But what if there was a better way to transition ownership from generation to generation?
There are a plethora of shared ownership models in other industries that make ownership more flexible, more equitable, and less scary. We won’t go into all of them (here are a few) but the main ideas that can be applied to our profession are as follows:
Stock option plans for startups or public companies typically compensate employees with a combination of cash pay and equity on an annual basis (for example $100K salary + $20K in shares or options), so that ownership can be earned over time, as the value in the business is created. Good for dedicated employees that want to feel appreciated and rewarded for going above and beyond.
✔ It requires no upfront investment or debt,
✔ it’s easy and flexible to implement,
✔ you start building ownership the day you join,
✔ you benefit from the value you create.
✘ However, it may take a long time to build a meaningful stake in the company
✘ it might be hard to feel tangible value for the equity if you cannot easily sell it
Leveraged equity plans are typically used for a more substantive transfer of ownership. You may approach the current owner of your practice with an offer to invest $100K in the practice, that he would then match with $400K of debt. This allows you to own $500K of shares, and benefit from a larger percent of the upside sooner. The debt would only be secured by the shares in the practice, so it is far less risky. Good for a veterinarian or technician that may someday want to own the practice outright.
✔ You start building ownership the day you join,
✔ you benefit from the value you create,
✔ you receive a far more meaningful stake in the practice,
✔ it aligns your incentives with the other owner(s),
✔ it provides the owner(s) with a plan for eventual transition when they retire.
✘ It is hard to invest a meaningful stake in someone else’s business without a high degree of comfort in your relationship,
✘ they may still have a majority vote in important decision making.
Profit sharing plans, which we see most often in dental practices, are a less ‘invasive’ way to share in the value created over a period of time (typically a year), without complicated shareholder agreements or adding more cooks in the kitchen. Similar to how pro-sal compensates veterinarians for a percent of the revenues they bring in, profit share would compensate a member of the team for a percent of the profits that the practice as a whole generates. For example, if my practice is doing $100K in profit per annum and I am adding a new associate, I may offer them 20% of the profits that are generated above the $100K. Good for a practice owner that wants to share in the growth, but would rather maintain complete control over the business decisions.
✔ You could benefit from the value you create from day 1,
✔ you are not tied to the practice and not liable for any business problems that may arise,
✔ aligns your incentives with the other owner(s).
✘ Profits are sometimes out of your control (a bad decision on software or renovations),
✘ you may never get a larger say in the operations of the practice.
“Starbucks' stock program is unusual in the range of employee levels it covers; it grants Bean Stock to 83,000 workers from your local part-time barista up to directors” - Forbes
Check out part 2 where we discuss the key considerations in partnering with your boss!
If you are thinking about ownership, Vesta would love to help! It is never too early to start thinking and understanding about what the ownership path can look like.
Whether you are looking to buy into the practice you work at, acquire an existing practice, or open a new one, our door (or zoom line!) is always open to help you make that decision. And if you’re just curious about ownership, come join one of our existing practices and we can teach you all about the rewards of an equitable, transparent and inclusive ownership model with a front-row seat!
