When you're looking to buy a practice, you need to know more than "This seems like a nice area and there aren't too many practices
nearby." Reality has a way of jumping up and biting you in the butt unless you really, really do your homework. In business
the term for this is "due diligence."
Due diligence answers a lot of questions, the most important of which is, "How much revenue will a practice developed on this
site bring in annually at maturity (usually after five years)?" Other vital questions include:
> What is the community income within a five- to 10-mile effective drawing area?
> Is this area growing or shrinking in population?
> How much total community income could be spent on veterinary medicine?
> Are the residents in this area seekers of high-quality veterinary medicine or just basic necessities?
> How much would an average client transaction be in this location five years in the future?
> What would be my practice's market share? How many full-time-equivalent veterinarians would I need to share this income
> Is there room within five to seven miles for other practices to open in the future?
> If practices moved in, how would they affect future earnings?
> How much will 2015 dollars buy in terms of 2011 dollars? What will be the break-even point in 2015? Will $500,000 or $1
million in revenue be enough, or will overhead be so oppressive that more than that will be needed just to stay afloat?
> Can I take home enough to maintain my desired lifestyle while practicing high-quality medicine?
The answers to these questions constitute a feasibility study. Most of the answers—if you pay enough to the right demographics
research company—are available today before you sink your first dollar into building or leasing.
Associates vs. practice owners
The most difficult question in the list is, "How many full-time-equivalent veterinarians would I need to share this income
Well, let's look at an example. If a community has a total income of, say, $2.3 billion, along with the per capita pet spending
set to produce $7.7 million in veterinary spending, and there are 10 practices within eight miles of your location, does that
not mean $770,000 in gross revenue for each veterinarian?
No. That estimate ignores these historical observations:
> Practice owners work 55 hours per week.
> Associates average 45 hours per week.
> Practice owners take an average of 10 vacation days per year.
> Associates take an average of 20 vacation days each year.
> Relief veterinarians average 3.5 workdays per week.
What then is a full-time-equivalent veterinarian? How many full-time-equivalent veterinarians will share the $7.7 million
in that area?