How much does it cost to set up a veterinary practice?
Starting a new vet practice can be daunting because you are also setting up a business. You want to provide quality care and to make enough money to run the business and achieve a reasonable lifestyle.
You can’t do one without the other.
Like any other business, setting up a veterinary practice will require funding - but how much will you need?
Costs depend on location
Choosing the location for your business is one of the most important decisions you’ll make. You might want it in your local area, but if there is already a lot of competition for clients, you might want to look at setting up elsewhere.
It wouldn’t be out of place to think that you will be serving an area with a 10-mile radius - but this could be less in an urban centre. You need to look at the demographics of the area. Is it likely to be made up of affluent pet owners?
If the answer is yes, you could start looking around for a suitable property. Renting might be the sensible choice initially if you are starting up. But don’t forget that you will ideally need parking and public transport nearby.
How much space do you need? Consider about 1,000 sq ft to 1,500 sq ft per full-time vet in your practice - you will need a consulting room each, a waiting area and a reception, and this isn’t even taking into account whether you will need a theatre, prep, lab space and kennels. A branch surgery may well get away with offering consultations only, but if this is your main practice site, clients will expect both medical and surgical provisions.
Obviously, renting costs vary up and down the country, but you could expect to pay £25,000 to £30,000 a year as a minimum, and more for a large practice in a prosperous town centre.
The veterinary equipment you need
Your basic equipment needs are likely to include a microscope, dental machine and everything from autoclaves to x-ray. Nowadays most veterinary clinics have in-house blood analyzers, and most clients, in reality, expect to get all of their services in one place.
Your veterinary practice will need business equipment too - computers and related IT - as well as access to a vehicle for home visits, especially in rural areas when you’re servicing farm animals and equines. Asset Finance covers a range of funding solutions designed to let you spread the cost of equipment - whatever equipment that may be!
That being said, you will probably need a minimum of £80,000 worth of equipment to equip a basic surgery, and more if you decide that you need a full range of surgical or specialist equipment. And don’t forget practice management software. This can offer much more than scheduling and billing - the latest software will allow you to integrate inventory, boarding, pharmacy, digital imaging and every other activity in your practice, cutting the costs of admin and making you more efficient - but at a cost that could be around £8,000 in your first year alone.
Getting up and running
When you are starting up, you might be tempted to think that you can do it all yourself. This is probably not a sound foundation for your business, because you can’t answer the phone while you are handling a diagnosis, or make a booking while you taking care of the paperwork. You’ll already be aware that most vet practices can’t run without receptionists, nurses and a vet, unless it’s a branch surgery where you may get away with one vet and a nurse to cover reception too. You’ll need help and, as the business grows, you’ll need more people - especially if you want to provide a “full-service” provision or even a 24-hour emergency callout. Plan for a practice size to support your plans - or make sure you have access to alternative after-hours provision from another practice.
Experts reckon that the employment costs of a vet practice will be around 40% of revenue. Your practice will stand or fall by the quality of the veterinary care you deliver - but you cannot deliver it without the support of a team taking care of customer services, nursing and administration.
How will you bring in clients?
The UK is well supplied with vets - you will have to find clients, rather than expect them to find you.
These days traditional marketing, such as telephone directories, radio, local flyers or newspaper advertising, may not be very effective - although you should still consider it for launching your practice.
These days, a great website, social media and, perhaps, even a regular e-newsletter or blog, or hosting an open house, may be more effective for bringing in (and keeping) new clients.
Expect to pay a minimum of £5,000 for your website, and some expert social marketing.
Your start-up practice should be able to generate positive cash flow, ideally within the first year to 18 months. This means you have money left over after you’ve taken out your expenses, salaries, and loan repayments.
But it will not happen immediately - you simply will not have enough clients coming in at first to supply you with your patients - which means you will need to fund your start-up period.
To see how much money you will need, look at all your costs. Break down expenses by major area. The best way is to allocate percentages of revenue for drugs and consumables (20%), staff (40%) premises (a minimum of 10%). Allow for the costs of admin and finance and, remember, you will need to pay yourself enough to cover your personal expenses.
£100,000 might be necessary to cover all the costs for yourself, your practice and your staff. Working Capital Finance can provide you with additional working capital and cash to pay staff and suppliers during the early weeks and months of opening a practice. It is designed to be repaid in the short- to medium-term - so after the first year, you should enjoy a positive cash flow. This will let you pay back the funding you needed to get your practice established and growing.
Where will the money come from?
You will need financial projections for your new practice before you start looking for the funding you want. These will show you what to expect and help you plan accurately - and lending institutions will want to see them before they approve a loan.
Will your first-year revenue cover the rent you’re going to pay, the staff you need to hire, the loan payments you’re about to commit to and the salary you’re going to want to take care of yourself?
Traditional lenders are really only interested in lending to established businesses with years of audited accounts, trading history and VAT returns. But there are ways to raise the funding you need, and lenders who can be sympathetic. At Rangewell, we can show you all the options, with specialised funding for start-ups.
We know that your new practice will take time to establish itself, build a list of clients and bring in the income you need to pay the bills.
At Rangewell our business finance expert team includes specialists in the veterinary sector. We work with over 350 lenders to offer you an overview of more than 23,000 business finance products. So if you’re looking for a way to support your plans for setting up your own veterinary practice, or need veterinary practice refurbishment finance when taking over an existing practice, get some expert support to find the funding solutions you need.