Advice from those who have set up in practice

Re: Advice from those who have set up in practice

Bob Russell — Thu, 07 Jun 2012 09:46:44 GMT

[quote user="Michael Woodhouse"]

[quote user="Bob Russell"]Bad news! The banks are lending but at insane rates.[/quote]

We found the bank great. They lent us a six figure sum with no security because we have 4 years of accounts turning a decent profit. If the business is sound then they will lend. Vets are a 'preferred lending group' for the HSBC. They couldn't have been more helpful.

[/quote]

I have not really tried that hard so have made assumptions about rates in our case. If we go ahead with big investment it is probably time to shop around for banks!

Re: Advice from those who have set up in practice

Bob Russell — Thu, 07 Jun 2012 09:45:11 GMT

[quote user="Gillian Mostyn"]

[quote user="Bob Russell"]Keep it small and cheap and if it fails (hopefully not) you can walk away from it a wiser person! Limit the risk as much as you can. [/quote]

While I do agree that costs should be kept as low as possible, be wary of 'doing it on the cheap' if that gives a poor impression of the practice. Afterall, with a new set-up, appearances really matter. Having a tatty premises or a phone that rings out due to poor staffing is not going to draw more clients.....

[/quote]

We are talking equine here with mostly visits so premises are not likely to be that visible. There is no need to pay for expensive premises so capital expenditure does not have to be that great. SA practice is a very different kettle of fish!

Re: Advice from those who have set up in practice

Michael Woodhouse — Wed, 06 Jun 2012 19:18:05 GMT

[quote user="Bob Russell"]Bad news! The banks are lending but at insane rates.[/quote]

Re: Advice from those who have set up in practice

Gillian Mostyn — Wed, 06 Jun 2012 14:33:47 GMT

[quote user="Bob Russell"]Keep it small and cheap and if it fails (hopefully not) you can walk away from it a wiser person! Limit the risk as much as you can. [/quote]

Re: Advice from those who have set up in practice

Bob Russell — Wed, 06 Jun 2012 13:47:25 GMT

[quote user="Hannah Wynne Richards"]

Bad news Banks aren't lending at the moment

Good news I wouldn't in this case bother with paying for goodwill, as I would imagine the vast majority of clients will follow you, as the horse clients will regard you not the practice as their veterinary surgeon. No need for moral qualms either as you not the practioce owners have built upthe goodwill

I would say it sounds a viable idea as you already have the trust of the owners, so go for it, and good luck

Wynne

[/quote]

Bad news! The banks are lending but at insane rates. We are starved of funds, not because they won't lend but because they will only lend if we roll existing borrowing into a new loan at a much higher rate.

There are some new business start up borrowing schemes but I suspect these will be reserved for those with sufficient security that the banks are not really taking much risk!

Equine work does tend to follow the specific vet but it is still a big risk.

Keep it small and cheap and if it fails (hopefully not) you can walk away from it a wiser person! Limit the risk as much as you can.

Re: Advice from those who have set up in practice

Julie Innes — Sun, 03 Jun 2012 19:36:13 GMT

[quote user="An On MRCVS"]

- are banks lending to small businesses at the moment? I'm guessing that the goodwill for even the declining equine part of the business will come to a considerable amount and the amount of hard cash I have to put in will not be enormous.

- of those who have set up their plate - how did you cope with the jump from secure employment, especially financially? I guess my idea at least has a ready-made client base so there should be income from day 1.

- how did you cope with 24/7 on-call? We get relatively few horse calls out of hours (more on weekends) and I had considered asking a local equine hospital whether they'd consider covering some of the OOH, but would like to get up and running first. I refer a lot of cases to them and have (currently!) a good working relationship with them. We cover roughly the same geographic areas and my client list would be a drop in the ocean in addition to theirs.

There are lots more but I'd just like some general feedback as to the concept at the moment. As you can imagine I'm pretty stuck with anonymous help as I can't go asking people locally!

[/quote]

I took the plunge last year, and it has been a real rollercoaster!!

I found the terms the banks were prepared to lend on were too demanding- they were charging a fortune, lots of restrictions, and they wanted my house as collateral. I found it was cheaper to remortgage the house (we were lucky enough to have quite a bit of equity in it). We did all the refurbishment of the premises etc ourselves, and as well as saving me money it is something I feel proud of. Clients like to read the story of the refurb on our website too, it seems, and they love that it was all our own work!

Before I set up on my own, I had been working part time, and my husband was (is!) the main wage earner, so the financial drop wasn't too bad, although initially it did rankle slightly to be working 6 days a week and taking slightly less than I earned for working a day and a half a week previously, but I've just accepted that now!

I knew I would have a breakdown if I did my own on-call as well- I've always found on-call really stressful. Luckily most of the practices around here use OOH providers so clients were used to it, and my friend runs an OOH service and did me a great deal in my first year

I started up in my hometown, as a completely new practice, with NO clients whatsoever! The advantage of being local, though, is that I knew lots of people, many (most!) of whom are now clients. I've worked really hard, and concentrated on getting good "word of mouth". We now have 800-850 clients, and we are still getting 2 or 3 new clients almost every day, its been slow and steady.

It has been a huge learning curve for me in terms of managing staff, dealing with the bloody local council, but now most days I'm glad I did it (there have been a fair few days when I wasn't so sure at all!) I would say, on balance, do it! And I would advise that you don't focus on the money initially- concentrate on giving a great service, and the rest falls into place (I hope!) The longterm is more important. There is a real pride in having a practice you built yourself, and hearing you've been recommended to new clients. Many of my clients are also very zealous on my behalf, insisting on taking leaflets to deliver etc, which is also very touching. Good luck!

Re: Advice from those who have set up in practice

Anthony Todd — Sun, 03 Jun 2012 10:46:48 GMT

Sorry for repeating myself......

Re: Advice from those who have set up in practice

Anthony Todd — Sun, 03 Jun 2012 10:05:05 GMT

[quote user="Julian Earl"]If they don't want to do the horse work and you do, then what's the problem?[/quote]

If so, perfect, provided there's mutual trust, they'll refer the horses to you and you won't touch a small animal and refer them to your old boss.

Tell him before you do it; he may be delighted and even offer to support you administratively and with telephones and drugs [you could just be a branch, in effect] for a period in return for a fee which you can call goodwill or whatever. Remember he started off too and may be totally sympathetic,

It will also be tax deductible?? His goodwill payment from you won't [but check it with a savvy streetwise accountant and not an expensive book-keeper, there is a big difference]

And you could therefore have a sort of time payment plan.

Re: Advice from those who have set up in practice

Anthony Todd — Sun, 03 Jun 2012 09:57:12 GMT

[quote user="Michael Woodhouse"]There are 3 ways of valuing the goodwill[/quote]

Yes, that's what those with a vested interest say but actually there is only one, as there is for any item for sale: what someone is prepared to pay for it.

The only way you'll find out is the offer to buy or offer to sell.

One case produced a 19 page document with everything assessed to the penny with the final figure multiplied by a factor of "between 0.5 and 1.5".

The sale price was twice 1.5!!

Re: Advice from those who have set up in practice

Anthony Todd — Sun, 03 Jun 2012 09:49:45 GMT

Can't get rid of my duplication!

Re: Advice from those who have set up in practice

Colin Thomson — Sun, 03 Jun 2012 00:07:08 GMT

The starting point for calculating goodwill is the profit the practice is making after deducting a salary for the work any owner vet is doing as a vet in the practice. If an owner was running the practice entirely with staff, how much money would they make? Could be anything from a negative figure to a large positive one. Talking to folks involved in this the value of goodwill varies from under 3 times this figure, to over 6 times. AFAIK around 4 is the typical multiplier that practices have actually been selling for over the last few years.

There's usually some alteration required to the practices accounts to get to the correct base figure. Many practices accounts include items which although allowed are there more for partners tax reasons than as true business expenses. Practices with freehold buildings owned outright need to add an amount for a building rent equivalent.

Big well run practices with growing client lists and poor competition will be valued at a higher multiplier than small poorly run practices with lots of keen neighbours. But its ultimately how much someone is prepared to pay, and at what price someone is willing to sell.

[quote user="An On MRCVS"]I have heard that some professions are moving away from the practice of paying goodwill[/quote]

Whilst its true that for some practices the goodwill value will be small or nil, the number of people still prepared to pay good money for goodwill in veterinary practice is increasing, I'd say. Its not going to disappear any time soon.

Colin

Re: Advice from those who have set up in practice

Michael Woodhouse — Sat, 02 Jun 2012 23:23:43 GMT

[quote user="An On MRCVS"]In which circumstances would one pay for goodwill when buying a practice? How is it calculated?[/quote]

Basically the 'goodwill' value of a practice is any value it has above the value of its assets. Imagine a trading vet practice, clients are used to going there, if you bought the business you will have income from day one. Imagine that you set up down the road and equip your practice exactly the same as the one that has been trading for 30 years - which is worth more? You are paying for what the owner has built up. If you do a good job and charge fairly then even if someone sets up in direct competition you should still be ok.

There are 3 ways of valuing the goodwill and I don't know enough about them to explain in detail. There is an In Practice article on this. When we were looking at buying a practice both parties got a goodwill valuation done and a number was agreed. Two independent people valued the practice and came up with a value within 5%, that gave me a little faith in the system. When they start talking about 'correction factors' I was coming to the conclusion goodwill valuations had an element of witchcraft.

You can't begin to look at buying a practice before you have an idea of the goodwill's worth. Depending how personally rich you are it can massively affect your borrowings, and after the property it it likely to be the biggest expense when buying the practice.

Re: Advice from those who have set up in practice

An On MRCVS — Sat, 02 Jun 2012 22:08:53 GMT

Came across this thread and as it is in part relevant to my situation, I would like to jump in at this late stage... Please bear in mind that I am a novice when it comes to these matters and this is a learning curve and research for me.

In which circumstances would one pay for goodwill when buying a practice? How is it calculated?

I have heard that some professions are moving away from the practice of paying goodwill and certainly with all the different types of veterinary practices, I believe that clients are not always as loyal as we think they are. (As a locum at different practices in the same area, I have often bumped into clients from nearby practices.)

Re: Advice from those who have set up in practice

plantagenet — Wed, 14 Sep 2011 12:52:22 GMT

[quote user="Gerry Henry"]Finally a word of caution. You've really got to want to do this, really.[/quote]

Absolutely, and expect the first 3-4 years to be the worst.

The big jump for me was to have every buck stop with me, I am never without my phone and even on holiday will get phoned about something or another.

Expect it to be financially difficult for an initial period.

I felt like I was wading through a swamp full of leaches to start with - everyone else wanted me to provide them with the perfect job.

No one gives a stuff for the bosses health, finances or sanity but you are expected to treat employees like your roll in life is to nuture them from the cradle (you wait for your first maternity leave) to retirement - pensions, even tho' I'll be dead when they need them.

I have never been so professionally fulfilled but the small business aspect has been a steep and rocky learning curve.

Banks are slightly helpful, sometimes. Tax and VAT men are out to get you.

Get lots of local vets who will give you a bit of time off.

DON'T OVER INVEST.

You never know when you may need local practices, anyone can run out of a drug or have a family / health incident where you have to drop everything and run. I am very glad to get on with the local practices.

I did by a bit of goodwill and it has served me well.

Best of luck, I think your nuts, but then I know I am!

Re: Advice from those who have set up in practice

Gerry Henry — Wed, 14 Sep 2011 12:17:03 GMT

You sound like a nice chap, scruples about setting up next to your existing practice, wanting to stay on good terms etc etc. I think you need to ditch all that. Pick your spot and your market and go for it. Like the others above I think you'd be mad to pay for good-will; what if someone sets up next to you 12 months after you've put your plate up; all that money, glug glug. Re banks; they were never smart about lending to start up businesses even in the 'good old days', most of the decision makers are Gamma+/Beta- drones who couldn't spot a winner if it was wearing a rosette. My advice, sell the house and rent for a few years; use the equity either to spec up with every goodie you can use (market); the more kit you have (assuming you can use it) the more procedures you can do and the more fees you can generate, or to provide working/living capital and lease the kit, or a combination of the two. Re leasing, its not as easy as it used to be, if you're planning on going down this route get the agreements signed and in the filing cabinet before taking any irrevocable steps. Make sure you buy a wireless card processor, payment at the time every time, cash flow can be a killer. Discuss your project with no-one (particularly reps), its a small, garrulous trade is ours, word gets about.

Finally a word of caution. You've really got to want to do this, really.

Re: Advice from those who have set up in practice

Bob Russell — Wed, 14 Sep 2011 09:55:11 GMT

A vet (good equine vet) started in the New Forest last year and by all accounts is very busy. His website is:

http://www.celticequinevets.co.uk/

I have not spoken to Alan for a bit but it sounds as if you are considering doing much the same.

Perhaps a phone call would be an idea (I am sure this would be OK but I haven't checked!)

Re: Advice from those who have set up in practice

Wren — Wed, 14 Sep 2011 09:34:37 GMT

My attention was drawn to this thread by someone messaging me to ask whether I'd written it!

I seem to be in a very, very similar boat to you and have given the one-handed equine vet working out of a van a lot of thought. It's always the 24/7 OOH bit that puts me off though.

I wonder whether you could message me if you're interested (will respect your Anon identity!). We should put our heads together. If you're anywhere near me perhaps we should set up together!

Re: Advice from those who have set up in practice

Anthony Todd — Thu, 01 Sep 2011 19:56:13 GMT

[quote user="Julian Earl"]Solicitors' opinions can vary of course, just like ours.[/quote]

Oh boy, do they!

See if you can find a one-handed solicitor who, obviously, cannot say "But, on the other hand"

Re: Advice from those who have set up in practice

Anthony Todd — Thu, 01 Sep 2011 19:54:18 GMT

[quote user="Hannah Wynne Richards"]Bad news Banks aren't lending at the moment[/quote]

PM me; I have a banker who has common sense and if anyone can, he can!

Re: Advice from those who have set up in practice

Amanda Nicholls — Thu, 01 Sep 2011 19:29:57 GMT

[quote user="An On MRCVS"]

[/quote]

It is difficult to get money but not impossible, a good business plan is essential and leasing equipment is always an option.

Leaving employment to set up on your own is terrifying and even after 18 months I have 'why did I do this' moments but these are outnumbered many many times by all the good moments. Despite earning less than half (probably a third) of what I did as an assistant over the last 18 months, I am happier than I have ever been. The only way I could afford to set up was to live in the flat above the practice.

OOH - I did my own for the first year, not difficult as I had no money to go out and always had loads of office type work to do at weekends. Started using the local OOH service (independent vet hospital) 6 months ago but the service isn't great, it is quite expensive for a growing business and I've noticed a drop in income. The clients have on the whole been very understanding, the ones I have lost I don't miss but I do feel guilty at times when the service they get is poor compared to what they would get with me. I try to answer the phones when I'm around but am glad of a good nights sleep and sundays off!

Don't worry about losing clients when you go on holiday, you won't be able to afford one

Good luck and it sounds like you are ready for the challenge.

Re: Advice from those who have set up in practice

Richard Carter — Thu, 01 Sep 2011 19:04:02 GMT

How about 'leasing' or hire/purchase the equine side from your existing practice ie - you don't need a loan, they don't have to find your salary, the others who sound not be too keen on equine anyway will be thrilled, see if you can generate enough to make a full time seperation. Just thinking of a previous thread from Arlo who mentioned buying groups and pooling resources - your existing practice will already have favourable buying terms, already have phones and receptionists?

Re: Advice from those who have set up in practice

Julian Earl — Thu, 01 Sep 2011 18:43:22 GMT

[quote user="robloxley"]

[quote user="Julian Earl"]binding-out clauses are not enforceable against employees due to restriction of trade, but are enforceable against partners[/quote]

I'm not sure there is this distinction, but yes what is reasonable may differ for partners and employees.

[/quote]

It's what we were advised by solicitors a few years back. Solicitors' opinions can vary of course, just like ours.

Re: Advice from those who have set up in practice

Bob Russell — Thu, 01 Sep 2011 17:57:42 GMT

The banks will lend for business purchases but you need a good business model. 'Buying' out the work from the existing practice only makes sense if it is worth the money! It is true that the goodwill may not be worth much but you may be able to buy the equipment at a bargain price.

Keep your overheads low and it may work but if you have major existing financial commitments think very carefully.

If you are footloose and fancy free give it a go if you have confidence that the clients genuinely love you. If you have a mortgage perhaps think again!

Re: Advice from those who have set up in practice

Rob Loxley — Thu, 01 Sep 2011 17:33:01 GMT

[quote user="Julian Earl"]binding-out clauses are not enforceable against employees due to restriction of trade, but are enforceable against partners[/quote]

I'm not sure there is this distinction, but yes what is reasonable may differ for partners and employees.

Re: Advice from those who have set up in practice

Julian Earl — Thu, 01 Sep 2011 17:03:17 GMT

[quote user="An On MRCVS"]

Yes, most of the clients would follow me I think and I might get back some of the ones that the other members of the practice have lost!

So, are you suggesting I just resign and set up on my own? I don't think my boss would be overly pleased and I'd ideally like to make sure that they stopped doing equine work after I left. I have the standard '10 mile' bit in my contract but I've heard these aren't legally enforceable. I'd hate to test it though and would like to stay on good terms with the practice. If I didn't have to pay for the goodwill how could I have access to the details of our current equine clients? Things like vaccine reminder dates would be vital for the first year at least.

I guess he'd be paying one less salary even if he was losing the diminishing equine income.

[/quote]

If they don't want to do the horse work and you do, then what's the problem?

Also, binding-out clauses are not enforceable against employees due to restriction of trade, but are enforceable against partners as long as the terms are reasonable, whatever that means!