The days of veterinarians owning the majority of veterinary practices seem to be permanently behind us. Does this mean that practice ownership by veterinary healthcare providers is coming to an end? Economist Dr. Matthew Salois joins the podcast to discuss the future of ownership and equity in veterinary medicine.
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LINKS
Veterinary Study Groups: https://www.veterinarystudygroups.com/
Uncharted Veterinary Conference: https://unchartedvet.com/upcoming-events/
Dr. Andy Roark Exam Room Communication Tool Box Course: https://drandyroark.com/on-demand-staff-training/
Dr. Andy Roark Swag: drandyroark.com/shop
All Links: linktr.ee/DrAndyRoark
ABOUT OUR GUEST
Matthew Salois, PhD is currently the President of the Veterinary Study Groups, Inc. (VSG), where he is responsible for enhancing the economic and cultural success of more than 1,800 veterinary member practices.
Most recently, Matt was the chief economist and head of the veterinary economics division at the AVMA between 2018 and 2022, where he applied his skills in economics, business, and communication to support the daily lives of veterinarians.
From 2014 to 2018, he served as director of global scientific affairs and policy at Elanco Animal Health, supervising a team of scientists in veterinary medicine, human medicine, animal welfare, economics and sustainability. His group devised and executed scientific engagement strategy, and built collaborative partnerships with universities, non-profit associations and scientific societies.
Matt is also an adjunct professor of applied economics at the University of Florida, where he previously taught and advised graduate and undergraduate students. He earned his Ph.D. in Applied Economics from the University of Florida and holds an M.A. in Economics and a B.S. in Health Services Administration from the University of Central Florida.
EPISODE TRANSCRIPT
This podcast transcript is made possible thanks to a generous gift from Banfield Pet Hospital, which is striving to increase accessibility and inclusivity across the veterinary profession. Click here to learn more about Equity, Inclusion & Diversity at Banfield.
Dr. Andy Roark:
Welcome everybody to the Cone of Shame Veterinary Podcast. I am your host, Dr. Andy Roark. Guys, I am back with my friend the economist, Matt Salois. We are talking about practice ownership. We are talking about equity for veterinarians and vet professionals. What is possible in this modern world of corporatization where there’s private equity groups buying up practices, we have corporate practices, we have a wide variety of opportunities for ownership. What do we need to know? How does this work? How does it look in the future? Is the old style of practice ownership dead and gone? Is private equity going to stick around the way that it has or is that a passing phase? Guys, we unpack all this stuff. Let’s get into this episode.
Kelsey Beth Carpenter:
(singing) This is your show. We’re glad you’re here. We want to help you in your veterinary career. Welcome to The Cone of Shame with Dr. Andy Roark.
Dr. Andy Roark:
Welcome to the podcast, Dr. Matt Salois. Thanks for being here again.
Dr. Matthew Salois:
Hey, great to be here. Thank you.
Dr. Andy Roark:
I always appreciate your time. So you’ve been on the podcast a number of times. For those who don’t know, you are a PhD economist, you are the president of the Veterinary Study Groups. You work with the VMG Groups, the Vet Management Groups quite a bit. And you have been a guest on this podcast at least three times now.
Dr. Matthew Salois:
Awesome.
Dr. Andy Roark:
Best you believe it. I don’t know how big an accolade that is.
Dr. Matthew Salois:
No, it’s a big one.
Dr. Andy Roark:
Probably gets pretty low on the CV, but-
Dr. Matthew Salois:
No, really great to be here. Weird conversations.
Dr. Andy Roark:
Oh, I always do. There’s just a number of things I’ve been really interested in recently and you’re sort of in a position to help me look at it outside the box and to see what’s possible. And so, one of the things to you, I’ve always been interested in practice ownership. One of the things that really attracted me to vet medicine was this idea that you could captain your own ship. I think it was really, my father was a physician, but he had his own little surgery center that was just him and two nurses and just small town in North Carolina and that’s what he did. And I think there’s something beautiful about that. And so that type of autonomy I think has always been really interesting and really, I don’t know, I had a romantic view of it I guess.
And then the other part of it is when we talk about, I look a lot at student debt for veterinarians and the whole time that I was coming up, student debt was getting larger. A lot of people were going, “Oh, well there’s an easy way out of this and it’s practice ownership.” And I always thought that was a little bit of mischaracterization of the truth, but I got the concept of it.
And so now I’m looking at increased corporatization in vet medicine. What I wanted to do was talk to you a little bit about how that changes this independent business owner landscape and is practice purchase or practice ownership in going forward, how viable is that going to be? Is it going to be widespread? I’m starting to hear a lot more about different models where there is equity inside of corporate practices, things like that. Those are the conversations I want to have today is I kind of want to understand the landscape for owning equity in a vet practice going forward. And so if you could start off, can you start us at a 10,000-foot level and say, tell me the story of practice ownership, Matt, just get me started on where we’ve been and where we’re going.
Dr. Matthew Salois:
Yeah, really happy to. I’m really excited we get to have this conversation. It’s a deep passion for me, practice ownership in large part why I’m with VMG today. It’s such a tremendous opportunity to, I think, enhance the wellbeing of yourself as a practice owner and more importantly to be put into a position where you can influence so much that happens within the practice. So much of our conversations talks about veterinarian wellbeing and I don’t know if you’ve ever been in this position, Andy, around, oh, I wish the boss would do this. I wish the boss would do that.
Dr. Andy Roark:
Oh yeah.
Dr. Matthew Salois:
You’re in that position. You can make those changes that you so desperately crave.
Dr. Andy Roark:
I will turn it back around, too, and say it’s funny. Later in life I learned that when you’re the boss, you say things like, “Ah, I wish the staff would do this. I wish the doctors would…” It never ends. I always thought when I’m the boss, it’ll be easy. It’s like, no, it’s not easy.
Dr. Matthew Salois:
No, it’s harder, but at least you’ve got autonomy there or more or less, you’re always coupled to somebody.
Dr. Andy Roark:
That’s true.
Dr. Matthew Salois:
In consolidation, corporatization, it’s definitely changing the landscape. And I will say that I think there’s plenty of room for every type of practice, for every size, every aspect of how you define ownership in this profession. The number of veterinary practices continues to grow. Yes, the number of practices that are corporate continue to grow too, but so does the total number of practices that are here parallel with population increases of pets and demand for veterinary care. It’s still such a tremendous runway of opportunity for someone aspiring to be a practice owner.
And I think we need to do a better job as a profession building those aspirations. And I think building transparency and awareness around what it really means to be a practice owner, what it takes, what it involves, as well as the benefits that it imparts. I mean, you said it, your father was the captain of his ship. And I don’t know if this was your father’s story. I don’t know if you had these experiences with him before he owned his own practice and life after he owned his own practice. If you could share if there was a big change in his overall wellbeing and happiness or not. But I see it in veterinarians that become practice owners. It’s amazing.
Dr. Andy Roark:
Okay, so let’s unpack that a little bit because there’s… Okay, so first of all, I still love the idea of being a business owner. One of the greatest things that I aspire to in my life is to create a wonderful workplace for other people. That just means a lot to me. I really want to create a great place for others to work in. And I think it’s a responsibility, but it’s also a passion project and it’s a worthy challenge. And then also, I like the autonomy of making this into the image that I want it to be. Business ownership has been a wonderful challenge that I’ve been very glad that I took on.
At the same time, it is a challenge. I had a guest on a while back and then I had another guest on who argued with the first guest. And the reason was, and I’m trying to remember where the original statistic came from, but basically we were going over some data on burnout and the data that was presented said that the practice owners were less likely to burn out than other professionals. And so, one of my later guests said, “I heard that on the podcast and I thought, that can’t be true.” So he contacted the first guest and what was told was the way that burnout is calculated is your plan is planning to leave the job. So practice owners didn’t burn out, because they didn’t plan to leave the job because the barriers to exit were much higher. And so anyway, I think that that’s an interesting sort of way to talk about does practice ownership make people happier? Are there these psychological benefits? What’s baked into those numbers?
Dr. Matthew Salois:
Well, it can and it can also make your life miserable as can any decision that you embark on in life. But I don’t know, I have to go back to that podcast episode. I can speak to data at the AVMA, because I helped collect and analyze that data years ago when I was with the AVMA around wellbeing metrics for associates versus practice owners. And it was very clear that wellbeing in terms of lower burnout, higher levels of compassion satisfaction, it was clear in practice owners and it wasn’t about whether or not they were wanting to leave the profession. We compiled those metrics based on the professional quality of life, surveyed the pro qual…
And so lots goes into that, a number of different variables and indicators there. And what we always saw, and the AVMA still continues to see over time, is that practice owners have lower burnout and higher overall levels of wellbeing. I kind of chalk it up again to this captain of your ship and in control of your own destiny kind of thing. Now it doesn’t mean that’s always going to be the case, right?
Dr. Andy Roark:
Sure.
Dr. Matthew Salois:
You could be in a very difficult situation as a practice owner and be very miserable and maybe want completely out of it. I think like all things, it depends on the actions that you take, the people that you work with and the culture that you create within your business. I think it revolves around how that looks.
Dr. Andy Roark:
It’s funny. I think that sort of tracks with my experience. Definitely there’s a lot more stress on your shoulders of making payroll and you carry a lot of responsibility. I guess I can definitely buy into the idea that autonomy and the ability to impact your surroundings at a much greater level than other people who work in the practice are. I can definitely see that being something that would keep people in business ownership and that could increase overall satisfaction.
I heard a story not long ago and it was heartbreaking. So one of my friends was going to buy the veterinary practice that she worked in and she’s an associate vet and she saved up for three years to be able to get the down payment that she needed to buy this practice. You can probably see where this is going. So then it was time to do the evaluation on the practice, and they did, and her numbers worked out, but there were corporate buyers who were also interested in the practice and it sort of came at around the same time that she was going to try to make this purchase. And they came through and offered multiples well above what she was able to pay. It was something like, let’s say the practice was valued at $2 million and they came in, they were like, “We’ll give you 3 million.” And the owner said to my friend, “Can you match that?” And my friend was like, “No, I can’t. The bank won’t loan me that much money.”
And so the practice was sold to this other group and there’s not a villain in this story. I really don’t, I don’t think any of us can look at a veterinarian trying to retire and say, “Well, you should have left a million dollars on the table.” I would’ve been heartbroken just like my friend was. And I don’t think that she was wrong, and I don’t blame her if she feels resentful. But I hear these types of stories. So, Matt, can you comment on some of the challenges of purchasing a practice today, of coming into practice ownership in the modern era?
Dr. Matthew Salois:
Yeah. I mean, and you name probably the biggest one there, which are what seem to be absurdly large multipliers that no individual average human being can compete with, especially when you’re looking at private equity groups with deep pockets that have seemingly endless cash flow to pour into veterinary medicine. I think that definitely creates some frictions and difficulties. I think our current environment around inflation and whether or not we are in or will soon be in a recession may soften what we’re seeing there in terms of consolidation and multipliers.
But it pains me to hear stories like that, and yet it shouldn’t be a deterrent either. It didn’t work out in that instance. So try smaller, try buying into a different practice, something that doesn’t have quite the multipliers on it. And you’re right, you mentioned she was saving up for a few years. I mean, it’s definitely a long-run plan. This isn’t something you can think about wanting to do, and then two years later you do it. And this is why I think we need to talk more about it and instill this in the schools, in the program, so that you can be on, at a minimum, a five-year plan post graduation so that you can start preparing the saving, looking at loan options. The opportunities are out there.
Dr. Andy Roark:
Yeah. So I want to step back here for a second. Can you define the term private equity? I know we throw that term around a lot. I don’t know how many people know exactly what that means when we say, “Oh, private equity has deep pockets.” Translate that for me if you don’t mind.
Dr. Matthew Salois:
Loosely, private equity being a collection of investors, pulling their money together and then investing in different areas where they’ll buy up assets, they’ll potentially restructure those assets, invest in those assets, build efficiencies, create more profit from them, and then sell those assets at a gain. I mean, that’s basically what private equity is trying to do. They’re not generally in the long run. They’re here to come in, make an investment, and generate a return within a three to 10-year time horizon and even 10 years might be pushing it. And that’s basically it.
Dr. Andy Roark:
Hey, guys, I just want to hop in really quick and give a quick plug. The Uncharted Veterinary Conference is coming in April. Guys, I founded the Uncharted Veterinary Conference in 2017. It is a one-of-a-kind conference. It is all about business. It is about internal communications working effectively inside your practice. If you’re a leader, that means you can be a medical director. It means you can be an associate vet who really wants to work well with your technicians. It means you can be a head technician, a head CSR, you can be a practice owner, a practice manager, multi-site manager, multi-site medical director. We work with a lot of those people. It’s just all about building systems, setting expectations to work effectively with your people.
Guys, Uncharted is a pure mentorship conference. That means that we come together and there is a lot of discussion. We create a significant percentage of the schedule, the agenda at the event, which means we’re going to talk about the things that you are interested in. It is always, as I said, business communication focused, but lots of freedom inside that to make sure that you get to talk about what you want to talk about. We really prioritize people being able to have one-on-one conversations to pick people’s brains, to get advice from people who have wrestled with the problems that they are currently wrestled with. We make all that stuff happen. If you want to come to a conference where you do not sit and get lectured at, but you work on your own practice, your own challenges, your own growth and development, that’s what Uncharted is. Take a chance, give us a look. Come and check it out. It is in April. I’ll put a link in the show notes for registration. Ask anybody who’s been, it’s something special. All right, let’s get back into this episode.
What do you see as the role in private equity going forward? So we saw private equity coming in and spending a lot of money in the last couple of years. Is that going to continue as you look into your crystal ball? Are we going to continue to see this type of investment? Is this sort of a short-term play? Does this create opportunities for practice ownership among veterinary professionals in interesting ways later on?
Dr. Matthew Salois:
Yeah. I think veterinary medicine will always be, and has been for quite a while, a very attractive place for private investors, equity groups to invest in, particularly because, one, there’s stable growth. We continue to see the number of pets grow and demand for veterinary care grow. It’s also very recession resilient, not recession proof. I don’t think any market or industry really is, but certainly resilient. And so in periods of economic downturn, sluggishness, it’s a good place to invest in because you can maintain steady cash flows or at least mitigate losses that you would’ve in other industries and other areas like travel, tourism, entertainment, those things really take a nose dive during those types of economic environments.
But I think we will see some slowing down here in large part just tied to what’s happening in our economy. The realm of cheap money is done, negative and zero interest rates, those days are over and the money’s more expensive now because of inflation and what we’re seeing happening there. And so it’s becoming more expensive to invest. So I think that’s going to naturally slow things down a bit. I also think eventually, whether it’s next year or a few years from now, we’re going to see some slowing down because the top oil has been mined here. So there’s definitely a sweet spot that a lot of private investors are looking for medium-sized practices that have at least two to three doctors that they can grow into something more and then sell at a profit, at a gain there. That’s been happening for years. And so it’s getting more difficult to find those practices. Still plenty of them out there, but obviously more of them have come under some type of private equity umbrella over the last few years.
Dr. Andy Roark:
Is there opportunities with private equity umbrellas? If the idea is to turn these over for profit, does that create opportunities for independent practice purchase later on, or are those practices… I know the idea is obviously to increase revenue, so they may be very well priced outside of an independent professional’s purchasing price forever, but talk to me a little bit about that.
Dr. Matthew Salois:
Yeah, absolutely. I’ll add here, when we look at what we call corporate practices, which I never really liked that phrase because it’s just very misleading. I mean, really the only true corporate practices out there are the Mars practices. They’re the only company that’s truly incorporated under the eyes of business law. The others are under private equity umbrellas, and they operate very differently than an incorporated business because they’re managed by investors there.
And here, touching on what you just asked, opportunities to hold equity into that company are becoming more and more common. And it’s changing, I think the nature of what we think of as ownership. Yes, it is still and always will be 100% independently-owned business. That’s still very much a part of veterinary medicine. And now we have this new landscape of ownership where you can maintain equity ownership into the practice or more increasingly into the parent company that’s invested in that practice. And that’s important to recognize, because it’s still under the umbrella of ownership and what happens in the future is, yes… So inevitably most of these investors will be looking to sell. So there may be opportunities to buy those practices back. Some of these may incorporate and just become incorporated in true companies there selling to an outside agency that’s interested in that. The landscape’s going to continue to change. That’s clear.
Dr. Andy Roark:
Can you give me some examples of what these types of equity programs would look like? So when we talk about having equity inside of a larger corporation, everything from, you said equity in an individual practice to the larger companies. Give me kind of a menu, if you will, of what these different options look like?
Dr. Matthew Salois:
Yeah, I mean, it’s almost like the sky is the limit here. I’ve seen many different types of structures in terms of how they’re designed, and I think it continues to evolve and that’s going to continue unravel. I mean, I think sort of the meat and potatoes of it, the 101 version of this is the owner sells to a private equity group, and that person maintains anywhere from a five to maybe 15% equity stake into that company, into that organization. And so based on earnings, at the end of every year, they receive equity value based on that.
More and more what I’m seeing is that that’s not just singled out to the owner that sold. I’m seeing equity for professionals all across. And some are offering equity ownership into the whole staff, having a percentage stake in the earnings of the company as well. And I think we’ll probably see that become more common because it’s an important, obviously, income stream for people. It’s definitely an incentive to recruit and retain people that other businesses and practices may not be offering. So it’s going to help you compete for talent there. But it can be designed any number of different ways, but ultimately it’s based on the earnings of the company. And then based on that you receive either a check or shares that can be paid out once you’re vested, so to speak.
Dr. Andy Roark:
It totally makes sense. I’ve seen this a number of times with associate doctors. Because if you buy a practice and all the doctors leave, what have you bought in some ways? I’ve definitely seen that and it definitely makes sense to me for a retention standpoint. So when we’re talking about equity like this, the idea, like you said, is you would have ownership of either this individual practice or this larger entity, and then you would either get a check, like a disbursement of funds, or you would convert to more ownership. And so I guess the ultimate idea is this is your long-term investment and later on at some point you’ll be able to convert this as you sort of cash out your investment, correct?
Dr. Matthew Salois:
That’s right, yes.
Dr. Andy Roark:
Are there other upsides to these types of deals? Are there things that people really like about them?
Dr. Matthew Salois:
Well, I think it keeps them connected. So you think about an owner who’s selling and they’ve spent years building this practice, it could be hard to let go of that. And maybe some just want that, right? Like, “I’m done. I’m out.” Go buy a yacht and sail or whatever, and that’s fine. But for many, they want to stay connected. They’ve built something and they want to continue to see it grow and succeed and not necessarily leave the people that they’ve built this with behind.
So I think the biggest benefit to a structure like this is that it keeps them connected. And the investors gain from this too, because they don’t necessarily want a complete vacuum of institutional knowledge here. They’re not in the business of running practices, they’re in the businesses of helping them grow and then sell them for a profit. They’ll want the right people in place to help drive that mission forward. And oftentimes that involves keeping the people that have built this on the ground so that they can propel it to the next level.
Dr. Andy Roark:
That makes sense. Are there downfalls, pitfalls, downsides to these types of deals that you see? Is there any small print problems that surface later on?
Dr. Matthew Salois:
Yeah. I think some of the downsides to the investors can be when they find themselves suddenly having to manage a practice and they know nothing about that business. That can be challenging, particularly in a tepid economic climate like we’re in where maybe it’s just the growth and demand wasn’t what you thought it was. So you need to buckle down a little bit. But I think the downsides from the veterinarian who’s in this is decision-making, if that’s impacted. So obviously the investors are the majority here. Is everything top down?
And I think that’s where these practices run a very wide distribution. And why I say the corporate label is so unfair, because I think it creates this thought process of corporate telling the practice everything, medical or nonmedical. And I think that’s grossly unfair because there are so many that support and empower local level decision-making within their practices. They have their HR guidelines and they have their processes and procedures on a number of things, but they empower professionals, the veterinarian to make the medically best decisions to use what they feel is the best medicine. And so if there was a downside there for them, it’s the lack of that empowerment. But I’ll say there are so many out there that support that type of empowerment, which is encouraging.
Dr. Andy Roark:
Matt, if you had a young veterinarian who came to you and he or she expressed interest in practice ownership and they said, “This is something I’ve always look forward to. I like the autonomy. I like the idea of creating a culture and really having my hands in it and I want to work on something that I feel tied to or feel that I’m really able to put myself into.” How would you advise that person if they said, “I don’t know how to get started, I don’t even know what my options are.” Can you lay out a basic advisement strategy you’d give?
Dr. Matthew Salois:
Yeah, and here’s where we’re talking to a financial advisor would be wonderful, I think first and foremost, and having those conversations. And if you haven’t had one on your podcast, that would probably be a awesome next one to do. I’d say great, start now. You can always save for something without knowing exactly what you’re saving for. Just start saving, that’s important. And then be transparent, talk to the owner, let them know that this is what you’re thinking of and try to find out if the owner’s even interested in selling to you or to any veterinarian for that matter. And you can get hopefully the cards out on the table now. Is there a future? I mean, there could always be that situation like you started with the young veterinarian friend that you mentioned where you think you’re going to, but the sale doesn’t work out.
But either way, you can identify with your current owner if they’re interested in that, and then you maybe can work towards a plan to do that in the next several years. And if not, you can start looking for other opportunities to buy into practices. And you don’t necessarily have to buy 100% outright. So look for those opportunities where you could co-buy into a practice with another doctor or a number of other doctors there where you’re co-owning that practice together. Certainly in some ways that’s more complicated, but it softens the blow in terms of what you need in order to buy into that practice.
And then talk to owners, understand their history and their journey, what it’s taken, what they find as the biggest challenges, what they find most worthwhile and rewarding about it, and trying to get into that position of understanding the business more and more of veterinary medicine. I think that’s the important thing and very limited is given in the schools. This is really something that you learn along the way, right or wrong. And so taking those opportunities to the extent that you can with your current owner and others to build that up, build that skillset up over time.
Dr. Andy Roark:
Yeah. Are there any specific resources that you really like for people to look out to, didactically if they said, “What should I read?” Do you have favorite resources?
Dr. Matthew Salois:
Well, I think being a student of leadership never hurts anybody. I think learning more around leading people, and I think that’s the biggest challenge for any and every owner, they will tell you. People are delightfully complicated and getting people to work together in a way that brings together engagement and a positive work, you’ve got to cultivate that. That doesn’t usually happen on its own. And so I think learning leadership is important. You can read books and you can attend webinars and things, but I think there’s no better study for that than working under a great leader. If you look at your leadership and you’re just not happy, well, maybe you need to find another place where you can really learn what good leadership looks like.
And then understanding practical business, how to manage a profit and loss statement, a P&L, I mean that’s definitely a skillset. And understand the nature of strategy is really important around, if you want to grow, what are the steps taken to support that growth, and then how do you execute on that? That’s a learning skill. And you can get a degree and you can get an MBA, but that doesn’t mean you’re going to be good at strategy and execution. And so looking at opportunities to reinforce that will be an important avenue of opportunity.
Dr. Andy Roark:
Yeah, that totally makes sense. Matt, thank you so much for being here. Where can people learn more about Veterinary Study Groups? Where can they find you online?
Dr. Matthew Salois:
Yeah, at our website, veterinarystudygroups.com. Learn more about our mission and vision and how we support practice owners in the profession. And you can find me on LinkedIn where I occasionally post about data and the economy and sometimes I’m funny with a dad joke here and there.
Dr. Andy Roark:
Awesome. I’ll put links into the show notes. Guys, take care of yourselves. Be well everybody. Thanks for tuning in.
Dr. Matthew Salois:
Thanks so much.
Dr. Andy Roark:
And that is our show, guys. That’s what I got for you. I hope you enjoy it. I hope you took something away from it. I hope it was interesting. As always, I’d love it if you’d leave me an honest review on iTunes or wherever you get your podcasts. It lets other people know about the show so they can find it and check us out. Anyway, gang, take care of yourselves. Be well. I’ll talk to you later. Bye.
