Strengths
Similar to any other type of health care business, veterinary practices are able to remain profitable in any economic climate. Over the past 50 years, household pets have become far more ingratiated with human lifestyles especially within highly developed countries such as the United States. These practices are able to produce substantial streams of high margin revenue by rendering a wide range of diagnostic and surgical services specific for the needs of animals. Additionally, these businesses are able to provide services for the needs of farms that are located within a 10-to-15-mile radius of the practice’s location.
An additional strength for these businesses is that there is a very high barrier to entry given the amount of education and licensure that is required to practice as a veterinarian. In most states, only individuals that have completed veterinary medical school and maintain a valid license are allowed to own these types of businesses.
For veterinary practices, access to capital is relatively straightforward. As this is a healthcare focus enterprise, many financial institutions are willing to provide ongoing capital support for these businesses given their substantial contribution margins and the fact that they’re able to produce significant incomes in any economic climate.
As it relates to startup costs, these can vary substantially based on the location of the veterinary practice and the scope of services that will be rendered on site. For a full-scale animal hospital, these startup costs can range anywhere from $500,000 all the way through $2,000,000. These types of locations typically have a number of surgical suites as well as diagnostic equipment to render the full range of services that are provided by a veterinarian. Smaller scale practices can be started for $100,000 to $250,000 depending on the amount of surgical equipment and diagnostic equipment that will be purchased. For smaller scale markets, usually veterinary clinics operate in a more modest capacity given market demand.
Weaknesses
As it relates to weaknesses, veterinary practices do have very high payroll costs. Beyond providing a salary for the practicing veterinarian, a number of veterinary technicians as well as administrative staff are required to ensure that the practice runs smoothly on a day-to-day basis. This is principally the only weakness that is faced by a veterinary practice.
Opportunities
For opportunities, these businesses can rapidly expand their operations by hiring staff veterinarians to boost the year-on-year revenue. These businesses can also expand the scope of their marketing operations to on board additional clients on a yearly basis as well.
An additional avenue of growth is the development of new locations outside of the effective market radius of the initial veterinary practice location. Beyond these methodologies, there is also the ability to acquire existing practices that could be integrated into the veterinary practice ecosystem. Similar to receiving startup capital from a financial institution, banks are almost always willing to provide the necessary capital to complete an acquisition of an existing veterinary practice given their relatively low risk.
Threats
For threats, the primary issue that is faced by these businesses is ongoing competition within any given market. However, there is currently a shortage of veterinarians within the United States. As such, the establishment of a new veterinary practice typically faces minimal competitive issues as they establish operations. As it relates to economic risks, only in severe and sustained economic recessions there may be some downward revenue pressure as patients do not opt for highly expensive surgeries when needed. However, many people view their household pets as members of the family, and they are willing to pay a premium for exceptional service in order to ensure the health of their dogs, cats, birds, and other common household pets.