Auditing Your Company’s Mission Statement

Although no two mission statements are alike (nor should they be), it’s important to regularly audit yours—perhaps when you do your annual policy review, overall—to determine whether or not the statement is still relevant and actually being put into practice. Here is a helpful checklist.

  • Is your mission statement still relevant? If not, why not? What needs changed?
    • Is your purpose still the same?
    • What about your core values?
    • Do you offer different products and/or services, ones that have caused your mission statement to need to evolve?
    • What makes your business unique? Is that clearly indicated?
  • Can your entire team recite your mission statement?
  • When you ask each member of the team (or, if at a large company, a sample of them) what the mission statement means, how consistent are the answers?
    • How closely do they match what key staff believe the statement to mean?
    • If there are gaps, where do they exist? How significant are they?
    • In your policy manual, have you included concrete examples of how the mission statement could be put into practice? If not, would that be helpful?
  • How do you explicitly communicate your mission statement to your customers or clients?
    • Through signs that state it?
    • In your website and printed materials?
    • In your advertising?
  • In company meetings, how often do you discuss the mission statement?
  • When your company faces challenges and/or difficult choices, do you consult your mission statement when reviewing possible solutions? How is it your benchmark?
  • When you create new policies, do you ensure that they mesh with your mission?
  • How often do you review your policy manual to make sure that what’s included dovetails with your mission? As just one gut-check example, how well does your disciplinary policy match your mission statement?
  • You can also review the following for matches and mismatches:
    • Your organizational chart
    • Job descriptions
    • Forms
    • Any other employee handbooks or manuals
  • Take a look at how you reward employees. Are you rewarding them for phrases contained in your mission statement? If, for example, your statement includes “providing compassionate care,” do you actually reward and promote based on that value, or are your rewards based on how well a person increases revenues or reduces expenses?
  • What processes do you have in place for employees to report when they feel that procedures conflict with the mission statement? How are those reports handled?
  • What procedures do you have in place to update the mission statement, when needed?
  • As you read through this checklist, what items would be important to add or edit to match your business’s unique needs? Who will spearhead that initiative? What is the deadline?

Rules of Engagement: The Leading Role of Women

To be successful in the workforce today, and throughout your life, you must successfully engage with people from the beginning to the end of each day. Often, it’s with people whose viewpoints don’t always match your own. And when viewpoints don’t match but you need to resolve the differences, it’s crucial to be able to effectively negotiate with the other parties to create a mutually-agreeable solution.

Quality negotiation skills are vital in situations such as accepting a job offer, asking your boss for a raise or to boost your workplace benefits, or when an organization to which you belong is making decisions that will impact people’s lives.

Traditionally, women have been more reluctant to negotiate than men, which means they have disproportionately suffered from the costs associated with not negotiating. Even today, there is a frequently-noted “confidence gap” between the genders, with one study showing that only 7 percent of women attempted to negotiate their salaries, whereas 57 percent of the men did.

Women are as competent as men in the workforce, with global studies by Goldman Sachs and Columbia University demonstrating that companies employing women actually outperform their competitors on every measure of profitability. So, the issue is confidence, not competency – but, because confidence is a critical component of success, this article will share information about how women can successfully engage and negotiate with others to receive what they deserve.

First, here is a definition of negotiation and why it’s necessary.

Nuts and Bolts of Negotiations

A negotiation is a process in which two or more parties attempt to resolve differing needs and interests through a series of communications. An employer, for example, may want to offer someone higher wages, but needs to consider the overall profitability of a company. Meanwhile, an employee may understand and support the need for a thriving business, but also needs to earn a certain wage to support his or her family.

Employers and employees negotiate because they each have what the other one needs, and they believe they can obtain a better outcome through the process than if they simply accept what the other party is offering. Sometimes, negotiations occur because the status quo is no longer acceptable for one or both parties. Negotiations take finesse because, besides dealing with specific tangible points (wages, insurance benefits and perks, as just three workplace examples), emotions play a part and ongoing relationships are involved. The parties are choosing to try to resolve their different positions through discussions, rather than arguing, or ending the relationship, having one person dominate the relationship or taking the dispute to another party with more authority.

So, here are helpful tips to help you to effectively negotiate for what you deserve.

Six Negotiating Tips for Women

Tip #1 Be Prepared

First, you must clearly define the issues involved and prepare for the negotiations. Be crystal clear about what you want to accomplish, your opening offer, your resistance point (the point at which you would be willing to walk away from the bargaining), and what alternatives you have if the negotiations don’t culminate in a solution that is acceptable to you.

Also, as much as possible, know relevant information about the other party to the negotiation. What is he or she likely to want? Understanding where this person is coming from and what he or she wants to accomplish will help you to manage the negotiation process more effectively.

Tip #2 Be Aware of Fears and Address Them Appropriately

Common negotiating fears include:

  • that your position will not be solidly presented
  • looking incompetent
  • liking people and wanting to make them happy (but perhaps not being able to give them what they want!)/not wanting to affect someone else in a negative way
  • worrying about failure
  • feeling uncomfortable about talking about money
  • aversion to conflict, overall

Sometimes simply recognizing your fears can be enough to put them into context and allow you to move forward. Other times, they point out weaknesses in your preparation – and, in that case, your fears can help you to solidify your research and negotiation approach. Overall, it can help to reframe your wants, focusing on the value they will bring to the other party, and to be prepared to share how your approach can solve the underlying problem of the other party.

Some women must also work on silencing their inner critic, a critic that might be saying how only “bitchy” women negotiate or that you somehow don’t deserve the full benefits of your hard work. Again, you can use these fears to identify places you need to bolster up your attitude and solidify your approach.

Tip #3 Recognize and Optimize Your Negotiation Style

Multiple negotiation styles exist, each on the spectrum of assertiveness and cooperativeness. Here are summaries of common styles:

  • Competing (high in assertiveness, low in cooperativeness): these negotiators are self-confident and assertive, focusing on results and the bottom line; they tend to impose their views on others
  • Avoiding (low in assertiveness and cooperativeness): these negotiators are passive and avoid conflict whenever possible; they try to remove themselves from negotiations or pass the responsibility to someone else without an honest attempt to resolve the situation
  • Collaborating (high in assertiveness and cooperativeness): these negotiators use open and honest communication, searching for creative solutions that work well for both parties, even if the solution is new; this negotiator often offers multiple recommendations for the other party to consider
  • Accommodating (low in assertiveness, high in cooperativeness): these negotiators focus on downplaying conflicts and smoothing over differences to maintain relationships; they are most concerned with satisfying the other party
  • Compromising (moderate in assertiveness and cooperativeness): these negotiators search for common ground and are willing to meet the other party in the middle; they are usually willing to give and take and find moderate satisfaction acceptable

Simply by recognizing your style, you can highlight your strengths and know where to work on weaknesses. This isn’t to suggest that the process will be quick and easy, but it can be a vital step of the process in helping you get what you deserve on an ongoing basis.

Tip #4 Practice!

Becoming effective at negotiating seldom occurs overnight and it can be helpful to first practice your negotiation skills in areas where the process may not feel as intimidating. These can include negotiations:

  • for resources, whether it’s asking for more equipment or to hire more people
  • about how to use resources; with a common purpose, solutions can be reverse engineered fairly easily
  • where you have expertise
  • with big companies where nothing is personal
  • where you have evidence to support your position, including facts, data and logical reasoning

Consider practicing what you’ll say in front of a trustworthy friend or colleague, or practice in the mirror. Imagine different scenarios for the upcoming negotiation and prepare how you might answer, doing so by answering out loud (which is quite different from simply running ideas through your head).

As you become more experienced with the process and as you experience some successes, even relatively small ones, this will help you to gain confidence and become better at negotiating, overall. This will then help to prepare you for more challenging or complex bargaining processes.

Tip #5 Fairness is Important

As long as both parties are committed to the relationship and believe there is value in coming to an agreement, negotiations can typically proceed. If one or both parties, though, are unreasonable, uninformed or stubborn – or listening to advisors with those characteristics – negotiations can fall through.

Or, if one party doesn’t necessarily need the deal and/or isn’t in a hurry – or knows that the other party is without other options and/or in a time crunch – then negotiations may not end up being fair in the long run.

You can’t change how fair the other party will be, but you can determine if your own position truly is fair. Don’t use the “gender card” to get your way, as just one example, because fairness and equality should be at the heart of every negotiation. Conversely, don’t accept an unfair agreement just because, for example, you’re tired of negotiating or you don’t think the situation can ultimately be fairly resolved.

Tip #6 Calmly Ask for What You Want

Be calm, be professional. Unfair as it may be, women who are negotiating can be watched especially closely to see if they show signs of emotion, whether anger or excitement. Ask for what you want, be willing to pause to let the other party consider what you said (rather than quickly filling in the silence) and then respond appropriately.

Always keep your pre-established resistance point front of mind. But, having said that, if a granted concession is unexpectedly greater in one area of more complex negotiations, consider if and how you might be willing to adjust your resistance point in another area as part of the overall negotiations.

Understanding Negotiation Terminology

Another way to close the confidence gap is to ensure you understand what negotiation terms mean and can use them – confidently. We’ll use the example of an employer-employee wage negotiation as our example.

Each person will have a target point, which are the wages he or she would like the other party to agree to. The difference between what an employee wants to be paid and the employer wants to pay is the bargaining range. Meanwhile, the resistance point is where a party would walk away from negotiations; if too low of a wage or raise is proposed, an employee may begin job searching or a job candidate may decline an offer; the employer also has a point at which he or she will reject a wage request and end negotiations.

When the buyer (employer) has a resistance point that’s above the seller’s (employee), this situation has a positive bargaining range. The employer, in this case, is willing to pay more than the employee’s minimum requirements, so this situation has a good chance of being satisfactorily resolved. With a negative bargaining range, though, one or both of the parties must change their resistance point(s) for there to be a possibility of resolution.

In a wage negotiation scenario, either the employer will offer a starting wage or raise, or an employee or job candidate will request a certain dollar amount; the first person to name a dollar amount is making the opening offer. If at least one of the parties has a BATNA – best alternative to negotiation agreements – then he or she will probably approach the discussions with more confidence, having another alternative. So, if an employer offers someone a job, but has another excellent candidate waiting in the wings, the employer has another alternative and can set a higher and/or firmer resistance point. Conversely, if an employee or job candidate has a unique set of skills that are especially needed today, that person probably has more options in the job market – perhaps even other pending offers. The quality of a negotiator’s alternatives drives his or her value by providing the power to walk away and/or set a higher and/or firmer resistance point.

Bargaining Styles

Plus, there is more than one type of bargaining style. One way to differentiate them is to divide them into distributive bargaining and integrative bargaining.

In distributive bargaining, parties’ needs and desires are in direct conflict with one another’s, with each party wanting a bigger piece of a fixed tangible such as money or time, so these negotiations are typically competitive. Parties are not concerned with a future relationship with the other person. A slang term for this type of negotiation is “playing hardball” or “one upping” someone. Strategies often include making extreme offers, such as an employer offering a very low wage or a job candidate asking for an exceptionally high one. Tactics include trying to persuade the other party to reconsider his or her resistance point because of the value being offered – in this example, the job candidate might say that a high salary was required because of his or her abilities or an employer could say that lower wages would be compensated by a great work environment.

With integrative bargaining, though, the goal is win-win collaborations that will provide a good opportunity for both parties. The employer would acknowledge the employee’s value and need for a decent wage, and negotiate accordingly, while the employee or job candidate would recognize the value of working at a particular company as well as the fact that the employer has numerous other financial commitments to fulfill. They recognize that they need one another to maximize their respective opportunities and negotiate from a place of trust and integrity, with a positive outlook that recognizes and validates the other party’s interest in the transaction.

Here’s an interesting psychological truth. Negotiators are more satisfied with final outcomes if there is a series of concessions rather than if their first offer is accepted, because they feel they could have done better.

Salary and Benefits Negotiation Tips

When negotiating at a workplace, don’t focus solely on wage or salary. Also discuss benefits offered and workplace perks – meaning the entire package. This can include, but is not limited to, health care coverage, life insurance, retirement programs, vacation time and flextime. If you’re job hunting, investigate what companies are offering. Where do you think the place you’re interviewing falls on that spectrum? What is the minimum pay level that you’re willing to accept? What is your preferred wage? What benefits are important to you?

If you want to work at a particular company, but the pay rate isn’t quite what you want, ask if you can have a salary review in, say, six months. This doesn’t mean accepting a salary that is clearly sub-par, nor does it mean that you should try to put more pressure on a potential employer who is already offering you a good deal. It is simply something to consider in relevant circumstances.

What workplace perks might be desired? Would a company cell phone help you? Better equipment or software? If so, you could consider accepting somewhat lower pay if you get more tools to do your job.

Or, if you have children, you could negotiate coming in half an hour later so that you can take them to school or schedule a lunch break that coincides with when you need to pick them up. If you bring crucial skills to the negotiating table, you’re more likely to get these concessions than if you are entry-level.

If relevant, ask about company policy if you become pregnant. How acceptable is the policy to you? How important of a negotiating point is this for you? What about if you are injured in the workplace? Educate yourself on your workplace rights before negotiations occur, as well as company policy. If you are valuable to the business, perhaps you can negotiate some additional flexibility.

Who should be the first to make an offer? Some experts believe that, if you allow the other party to provide a starting dollar figure, he or she has shown his or her hand. But, research indicates that final figures tend to be closer to the original number stated than what the other party had originally hoped.

What NOT to Do

Beware of “between”! It probably feels reasonable to ask for a certain salary range – or range for a raise. But if you do that with a current or prospective employer, you have basically tipped your hand as far as how low you would go. Using the word “between” is actually a concession!

Another risky term: “I think we’re close.” A savvy negotiator will recognize “deal fatigue” on your end and perhaps stall in the hopes you’ll concede, just to complete the deal.

For Best Results

People tend to feel more confident when negotiations focus on an area of their expertise and/or where solid evidence exists to back them up. Overall, success is achieved when you first:

  • Determine the interests of the other party
  • Embrace compromise
  • Observe the Golden Rule, treating others as you would like to be treated: fairly and reasonably, without defensiveness
  • Be prepared, both in factual information and in strategy

Keeping these suggestions in mind will help you to achieve success in all areas of life.

Managing Social Media Behavior at Your Veterinary Practice

Originally Published by Today’s Veterinary Business, December 2018

Use of the internet, particularly social media, can be a double-edged sword, especially in the workplace. On the plus side, it can be a wonderful vehicle for marketing your practice and otherwise connecting with clients and potential clients. On the darker side, what happens when an employee posts content that can have a negative impact on the practice? Should you respond? If so, how should you respond? If a post is offensive, do you have the option of disciplining, even firing, that employee?

Because people in general are so openly sharing thoughts and opinions on social media, it’s not surprising that many experts believe that terminations based on employees posting inappropriate content will continue to increase. Handling this type of issue at your practice can be challenging for your human resource team, given that this is a fairly new type of problem to tackle – but, finding the right approach is crucial, given that just one post has the potential to blow up into a public relations and human resource disaster.

So, how do you respond to, say, a sexist-sounding post on an employee’s page? Although you don’t want to over-react or react emotionally in the moment, and you don’t want to micro-manage your employees, here’s the crux of the situation, distilled into just one sentence. How much potential damage could a particular post have on your practice’s reputation?

What’s important is that you respond fairly, not allowing one person who, say, has a knack of being humorous in his or her posts more leeway for the same type of material that another employee posts in a more serious manner. And, if you choose not to respond, be aware that you’re still really responding – giving the message that you either are fine with the posts or you aren’t concerned with the messaging. And, although a non-response is sometimes the right choice, in today’s business environment, your practice could also be harmed by this more passive approach.

What You Can – and Cannot – Do

At a minimum, you should create a policy about your employees’ use of social media while at work. Be clear about what an employee can and cannot do, and then consistently adhere to that policy. You have the option of banning social media use entirely while on the job. If, of course, someone’s job includes posting for the practice, you’ll have to clearly delineate what is and isn’t permissible during work hours.

However, you cannot ban employees from talking about work-related issues online when they aren’t at work, and they are legally permitted to discuss topics with one another on social media that fall within protected concerted guidelines. Employees can, for example, discuss their dissatisfaction about management style at the practice, how much they’re getting paid and so forth on Facebook or Twitter, as just two examples.

Employees are not protected and can be fired, though, when they discuss these issues online with someone outside of the practice, as this no longer falls into the category of co-worker dialogue about the workplace. They can also be terminated for sharing information that is deemed confidential, including but not limited to trade secrets.

Employees aren’t protected when talking about a workplace topic that isn’t related to employment terms. If someone calls a manager “lazy,” that communication may ultimately be protected. If the employee posts, though, that the manager is “fat,” then that may open the employee up for termination. Or if an employee posts that “my veterinary office is full of ugly people,” this is leaving the realm of employment-related discussions.

It can be difficult to discern when a post crosses the line, so your practice may need help with an attorney experienced in this type of law to determine legalities of particular posts. Note that laws can differ by state so, if your company has practices in more than one of them, you may not be able to make blanket social media policies. Employee protection is especially strong in California, Colorado, Louisiana, New York and North Dakota. Also, be aware that employee protection about social media postings applies to unionized as well as non-unionized employees.

Hate Speech and Protected Classes

You can fire employees who engage in hate speech. Sometimes a post clearly contains hate speech, while at other times, it is borderline. Hate speech is defined as communication that has no purpose or meaning other than expressing a feeling of hatred for a particular group, perhaps focused on race, ethnicity or gender, sexual orientation, national origin, religion and so forth.

When Creating a Social Media Policy for Your Practice

Your policy should contain clear guidelines about what is and isn’t permitted while at work, and also explicitly state that trade secrets and the like must remain confidential. The policy should ask employees to not use social media to post defamatory material that could create a hostile work environment. It is also reasonable to ask them to preface any social media remarks made about the practice online with a disclaimer that you don’t represent your employer’s point of view. It makes good sense to be proactive, too, and run your social media policy past your practice’s attorney.

As a creative solution, some companies are providing social media breaks for their employees throughout the day, perhaps 15 minutes in length, a couple of times per day. This can give everyone a chance to relax and refresh their minds. The goal isn’t to completely restrict your employees from ever using social media (which isn’t do-able, anyhow) but to encourage moderate use in appropriate ways. If you want to use this strategy, outline specifics in your social media policy.

Sharing Your Social Media Policy with Employees

How you share the news about your social media policy can go a long way in determining how well it is received. For example, you could pick a day to get some pizzas for your employees, and use that as an occasion to have a discussion on your social media policy. Explain why having the policy is so important in today’s times, and educate them on the problems that can arise when this form of communication isn’t appropriately used.

As you share the role that social media and its messaging plays in your practice’s culture and values, using a helpful approach is more likely to be successful than leaving the impression that you don’t trust your employees and plan to monitor their every message. And sometimes, by simply educating employees on privacy setting options in social media, you can help to prevent an unpleasant situation.

Share examples of appropriate/acceptable posts and ones that cross the line, and be open to questions, concerns and employee feedback. Getting employees to buy into your policy is a big step forward.

Monitoring Social Media

In general, avoid monitoring a specific employee’s social media accounts to watch for inappropriate comments. If you’re aware of a controversial comment, let that employee know how you plan to investigate and then review the situation with him or her. Then do exactly that.

When you follow up with the employee, get his or her side of the story. In some cases, the comment is so inflammatory that termination may be the only response. Other times, what the employee has to say may provide context that allows for lesser forms of discipline. Remember to be consistent and to follow up appropriately with everyone involved at the practice. As needed, update your social media policy and share it with all of your employees.

To view article on Today’s Veterinary Business, click here.

 

Practice Entity-Which Organization Is Best For You and Why it Matters

Choosing the correct structure for your veterinary practice is an important decision with consequences reaching far into the future.  Selecting your practice structure is definitely not a “do it yourself” project.  Substantial tax, legal and accounting expertise is required.  Veterinarians nevertheless need to stay active in the process to ensure the experts’ narrow technical proposals get folded into a coherent plan that reflects your needs and goals.

  • It’s Mostly About Tax. Tax considerations are the primary drivers in choosing a legal structure for a veterinary practice.  The two key aspects are taxation of income/profits and taxation upon the sale or transformation of the practice.  Don’t paint yourself into a corner by choosing a business structure without establishing a succession or exit strategy.  Exit strategies should focus not only on your richly deserved retirement, but also on contingencies such as death or disability).  Since the transformation of an existing business structures in anticipation of a sale or the buy-in of a new partner usually triggers adverse tax consequences, it is usually better to choose an initial structure with the necessary flexibility to handle new arrivals, departures and divestitures at minimum fiscal cost.
  • Liability Shield. In some structures such as partnerships, the owners are personally liable on their individual assets for the debts of the business.  In others their personal assets generally are not at risk.  Business structures, however, do not insulate veterinarians from liability arising from malpractice claims.[1]  But the shield works for almost all other claims, which in our litigious society are increasingly frequent.  Unless you are an equine or food animal veterinarian, you generally have greater exposure to claims from your client’s “slipping and falling” in your hallway, than malpractice.
  • Flexibility and Formalities. Some structures allow more management flexibility and/or are less burdensome to administer than others.  Veterinarians generally tend to ignore formalities which is a serious mistake.  Courts regularly have looked past the liability shield and held owners personally liable when the owners have failed to observe the formalities separating their personal affairs from those of the practice entity.

AN OVERVIEW

The accompanying table compares the more common business structures from a liability, management and formality perspective (in simplified form).  Following is a brief and much simplified overview of the tax characteristics of each entity.

  1. Sole Proprietorships.  Since sole proprietorships are not legally separate from the single owner, there is no separate tax return.  The practice’s profits are included in owner’s total income and are taxed at his ordinary income tax rate.  In addition to federal and (if applicable) state income tax, the owner must also pay self-employment tax equivalent to the payroll taxes due as if the owner were an employee of the practice.

Upon the sale of the sole proprietorship practice’s assets, the IRS will recapture all depreciation/amortization deductions taken by the owner/seller thereof and tax such amount at the seller’s ordinary income tax rates.  In the unlikely event that any gain remains on the assets (after adding back any depreciation/amortization to their respective “bases”[2]) they will be taxed at the lower 20% long term capital gains rate (assuming the relevant holding period is met).

The buyer receives a “step-up” (increase) in his basis in the assets proportional to the amount of (purchase price allocated thereto) allowing him to re-depreciate/amortize them.   Thus, asset sales usually are a better deal tax-wise for the buyer than for the seller, and all other things being equal, buyers will prefer to purchase assets rather than stock (in a C corp).

  1. Partnerships.  Partnerships are “pass-through” or “flow-through” entities for tax purposes, meaning that each partner includes in his own taxable income the profits (or losses) of the partnership, which are taxed as ordinary income at the partner’s individual rate (much like the owner of a sole proprietorship).  Note that each partner’s share of partnership income is taxable each year, whether such share was distributed to the partner or retained in the partnership.  If the latter, then the partner may not have the cash to pay the tax.

A consequence of the pass-through principle is that the sale of partnership interests are treated for tax purposes similarly to the sale of the underlying assets of the partnership (i.e., the assets are subject to depreciation recapture as in sole proprietorships).

  1. Corporations.  All corporations must file separate tax returns.
  • “S” Corporations. “S” corporations are corporations that elect to be taxed as a partnership. As “pass-through” entities, profits will be taxed in the hands of the shareholders whether distributed or not. An advantage of S corporations is that shareholders may take a portion of their profits as “S corporation profit,” free of payroll or self-employment tax (i.e., subject only to income tax).  Profit corresponding to what the veterinarian shareholder would have earned as an employee is subject to payroll taxes in addition to income tax.  (Sole proprietorships on the other hand must pay self-employment tax on all profits.)  S corps are popular with veterinarians for this reason.
  • “C” Corporations. “Plain vanilla” corporations (called “C” corporations to distinguish them from “S” corps) are not “pass-through” entities and are subject to corporate income tax, usually at the 35% rate for veterinary practices.[3]  Distributed profits (dividends) are taxed as ordinary income in the hands of the shareholders.  This “double taxation” discourages the distribution of C corporation profits.  On the plus side, C corp profits are not taxed until distributed, pension plan contributions are not subject to the S corp limits, and employee-shareholders’ health benefits are not taxed.  Veterinarians wishing to maximize their benefits will choose a C corp over an S corp.

If the holding period requirement has been met, the sale of C corporation stock is taxed at the favorable 20% long term capital gains rate.  The buyer does not receive a step-up in the basis of the underlying assets since he is buying the corporation stock. (The buyer can under certain circumstances elect to treat the transaction as an asset sale for tax purposes (a.k.a. a Section 338 election).)

  1. Limited Liability Companies.  Limited Liability Companies are very quite tax-wise.  Single member LLCs can elect to be taxed either as a C corp or a sole proprietorship.  Multi-member LLCs can elect to be taxed either as a C Corp or a partnership.  Unfortunately, not every state allows veterinarians for form LLC (ie, California).
  2. A Word Regarding Real Estate.  If the practice owns its own real estate it’s better placed in a separate entity held by the owner(s) or held individually by the practices owner(s).  This allows the owners to receive rent (which will be deductible from the practice’s income).  Moreover, placing the real estate and the practice in the same legal entity frequently leads to problems because the buyer can’t afford to buy the real estate in addition to the practice.

Choosing the correct business structure for your practice is important.  Don’t treat it lightly.

SIMPLIFIED PARTIAL COMPARISON OF DIFFERENT BUSINESS STRUCTURES

(Ex tax issues)

Structure or Entity Type\Issue Liability Formalities/Flexibility
Sole Proprietorship

No entity; business co-mingled with personal assets

No liability shield

 

None.  Just open your door and you’re in practice!
Corporations (“C” or “S” Corp)  A Professional Corporation (“PC”) is identical to a C Corp in all respects except that only members of the same profession (e.g., vets) can own its shares

 

Shareholder not liable for debts/liabilities of corporation (unless “corporate veil is pierced” because shareholders fail to separate their personal affairs from corporations (e.g. by ignoring formalities) Must file documents with state secretary of state.  Formalities are the most cumbersome of all entities. Less formal flexibility re management/profit sharing issues
Limited Liability Company (LLC)

(Created to provide more management flexibility than S Corp and “pass through” tax treatment )

Member not liable for debts/liabilities of LLC (subject to piercing corporate veil doctrine) Must file documents with state secretary of state; but management, profit sharing can be flexible.
General Partnership[4] Partners liable for debts/liabilities of Partnership; no liability shield Must file documents with state secretary of state, but management; profit sharing can be flexible.
[1] Salvation lies in adequate malpractice insurance.

[2] The basis of an asset is it’s original cost to the owner, as adjusted pursuant to IRS rules.

[3] Because veterinary practices usually are personal service corporations.

[4] Limited partnerships are different from general partnerships.  An LLP generally is formed among several limited partners who are normally passive financial investors and one general partner responsible for managing the enterprise. Limited partners normally are not liable for the debts/liabilities of the LLP, whereas the general partner is.  Contrary to the motion picture business, real estate or oil and gas exploration, LLPs may not be appropriate for a veterinary practice where all the members are actively engaged in the enterprise.

Road Map to Starting a Mobile Practice: Unique Benefits and Challenges

Have you ever looked out your clinic window on a nice day and wished you could smuggle yourself outside for just an hour? Does it sometimes feel like moving a mountain to organize an hour to go to a doctor’s appointment? Who doesn’t want more time away from the office or crowded hospital? Who wouldn’t prefer having more ability to make their own decisions when it comes to work schedules and how your practice conducts its business? Flexibility and getting away from the office are just two reasons why a growing number of veterinarians are making the jump to mobile practice, in some cases leaving the traditional brick-and-mortar practice behind entirely. Perhaps the rise of corporate consolidation, compassion fatigue and the need for greater work-life balance are additional factors driving a sub-set of the profession to consider a different way.

Hitting the road as a mobile practitioner can have a number of benefits but, like everything else, there are also downsides to consider: gas prices, lower revenues, longer days and, of course, traffic! Still, the practice model continues to expand, with a growing number of small animal veterinarians making the switch to a model previously dominated by large animal practitioners. This article will explore some of the complex issues and logistics – along with advantages and disadvantages – that come with this practice model. That’s because, when considering whether mobile practice is the right next step in your career, or if it’s a viable service to add to your existing practice, it’s important to delve beyond the obvious. Now that you’re daydreaming of hitting the road, let’s examine things on a deeper level.

Making the Finances Work

The decision to go mobile must make financial sense. Indeed, this is the barrier most veterinarians see as a road block. Mobile practice, however, is not unlike any other business where viability and profitability come down to expense and revenue. To see if your vision can become a reality, first create a detailed business plan.

Expenses

A recent article in Veterinary Practice News found the cost of starting a stationary small animal clinic to be approximately $1,000,000 (including most standard equipment). However, a mobile clinic startup cost was estimated to be roughly $250,000, a quarter of the price. Obviously, the equipment you choose, real estate pricing and the scope of your practice all have a significant bearing on the initial startup costs, but there is no denying mobile has a much smaller buy-in. Today’s vet school graduates are likely to have upwards of $135,000 of debt associated with their education, according to recent AVMA data, making investing in a mobile practice seem a more practical choice. As a mobile practitioner, your investment is not subject to all the forces that affect a real estate holding. With brick and mortar, if the neighborhood takes a turn for the worse or you have a dispute with a neighbor, you’re locked in for the long haul. As a mobile clinic, though, you are at the whim of gas prices. Currently gas prices are $2.09/gallon, a significant expense in a vehicle likely to get poor mileage per gallon – and fluctuations in gas prices will also include upward ones, adding to the expense.

Will you be a small, large or mixed animal practice? What are the needs of your intended service area? Understanding your market and where your revenue streams are likely to come from will determine what set up is best for you. Many would argue that having a 26-foot vehicle may not make sense if you only intend to see mostly horses. However, if you are a small animal practitioner and plan to provide a standard of care that is similar to stationary practices, bigger may be better. You may wish buy a larger vehicle to accommodate a dental unit, x-ray equipment and surgical suite. Several companies offer ranges of options for veterinarians from built-ins for trucks and SUVs to vehicles with more square footage than your apartment in vet school. Keep in mind that, as a small animal practitioner, what you gain in fuel efficiency (cost) with an SUV versus 26-footer, you may lose in revenue, having to refer to local practices for anesthetic procedures, radiographs and so forth.

The average monthly expenses as reported in a survey conducted by LaBoit, Inc., a mobile unit manufacturer, were estimated at $6,050 to include vehicle payments, service of vehicle, fuel costs, insurance, supplies, cell line, advertising, pharmacy and professional services. That’s a yearly cost of roughly $72,600. However, this estimated cost does not factor in the most significant expense of any hospital budget: staff salary (including yourself) and benefits. Most mobile practitioners choose to have an assistant to help answer calls, schedule appointments, maintain the vehicle, and various other tasks that work to increase practice efficiency and decrease veterinary exhaustion. As a start, consider two salaries: a veterinarian (you) and a technician. The national median salary for a veterinarian is $87,590 and, for a technician, the average salary is $31,070. To more closely approximate actual cost per employee, it is recommended to multiply salaries by a factor of 1.5 to include benefits and other employer costs. Then there are practice insurance policies, marketing, taxes, accountant fees and possibly fees for a payroll service.

On the upside, mobile practices have the added perks of no property taxes and no rent! Purchase of larger veterinary mobile units comes with the benefit of free marketing as you are essentially driving a billboard around all day. If the schedule is open, strategic parking can result in high visibility and real bang-for-the-buck marketing.

Revenue

Territory

How wide of an area will you cover? This is paramount when establishing your business plan. If you plan to cover a large swath of a county, you’d better have either a fuel efficient vehicle and/or a higher than average client transaction to counter the simple fact that a larger area means more transit time. Maybe you can serve a large area but only visit the northern part of the county on Mondays and Wednesdays, and book the southern part on Tuesdays and Thursdays. Not unlike your traditional stationary clinic, there must be sufficient population to not only support but to grow the practice over time. The beauty of mobile practice, though, is that you can go where the clients are and you have the freedom to refine your territory for maximum efficiency.

House-call Fees

According to an informal survey of mobile practitioners who purchased units from LaBoit, Inc., the average house call fee was $50. It should be noted that this fee is assessed to clients for your driving to them and the convenience that provides. Some practitioners develop a stratified house call fee schedule based on the amount of miles a call would be from a central location on a map.

House call fees may highlight another difference between large animal and small animal mobile clientele. A large animal client may view you driving to them as a necessity, not a convenience, making a $50 to $60 fee unpalatable to some. If you are planning to offer small animal service, understand that the cost of the practice model must be shifted to the clients, so be sure the market you serve would tolerate the $50-$60 more per transaction that is necessary to offset the cost of keeping gas in the tank.

Let’s do some math:

Days of operation X average transactions X number of clients per day X weeks in a year = average gross revenue

If we fill in numbers reported in the LaBoit survey, we get:

5 days/week X $250 average transaction X 5 clients/day X 50 weeks/year = $312,000

While this number may be underwhelming when you look at revenue from a multi-doctor stationary practice, the key is of course to consider the other factor in determining profit: cost.

$312,000 revenue – 250,590 cost = $61,410 profit

You must also have a realistic financial project that accounts for building a client base from zero. If your projections are accurate and the business is able to stick to the budget in your business plan, you should have some profit left to reinvest in your practice. Maybe you purchase a new piece of equipment, invest in marketing or reinvest in staff.

Form a Business Entity

The rules and tax benefits that govern what type of business entity you may wish to form varies from state to state. In some states – California, for example – veterinarians are not allowed to operate as a limited liability company (LLC) or a limited liability partnership (LLP). As such, California veterinarians form entities such as a sole proprietorship, partnership or corporation, under which they conduct business. Forming a corporation can protect its owner(s) or shareholders from being personally liable for any corporation obligations, liabilities and/or debts. The two main flavors of corporations are “C” and “S” corporations. With an “S” corporation, in the event of practice sale, there is only one tax levied upon the sale, whereas with a “C” corporation the sale is double taxed.  For these reasons, the great majority of veterinarians choose to form “S” rather than “C” corporations. It is imperative to seek out the advice of a knowledgeable corporate accountant on which business entity is best for you.

Financing the Operation

Veterinarians often need to seek out loans to finance this operation. This is when a well laid out business plan can really help, as it provides the critical information lenders need to assess the viability of your business and your ability to pay them back. If you have less than 20% of the total cost in your own funds to contribute, you’ll likely need an SBA lender. Depending on your personal financial profile, credit history and business experience, the amounts, rates and terms will vary. In addition to financing through veterinary lenders, (Live Oak, B of A, Wells Fargo), many of the companies that manufacture mobile veterinary vehicles have financing programs in place. You can also investigate local lenders and private investors. It’s important to shop around for the best interest rates and terms for your loan to help bolster the short and long term financial projections. LaBoit, Inc., Dodgen, Bowie, Magnum and Faber are the major players serving the mobile vet market with custom built vehicles.

Other Startup Costs

Initial supply orders can be a heavy upfront cost in any startup, but luckily many vendors offer discounts and payment plans that help with cash flow early on. Regardless of the size and scope of your mobile practice, your initial order will be a fraction of that expected in most stationary clinics. A survey of mobile veterinarians published in DVM360 listed the equipment considered essential to mobile veterinarians, which included: digital scale, portable x-ray machine, portable ultrasound machine, centrifuge and dental equipment. Some of these may come with your custom built unit and be included in the price, while others will need to be separately financed. As a rule of thumb, a startup practice should be able to generate a positive cash flow by about the sixth month.

Insurance, Permits and Paperwork

The AVMA PLIT website has a list of insurance policies packaged for mobile practitioners. For the most part, policies such as workers compensation and employment practices liability are similar to those recommended in stationary practice. Having business/commercial auto insurance is essential in protecting your investments and allowing company employees to drive the vehicle. A general business owner (BOP) policy will protect personal business property in your home, vehicle and temporary off-premise sites like client’s homes. A BOP policy will also cover general liabilities not covered in auto, malpractice or employer coverage.

A business license, DEA license, current state veterinary license and, in some states, controlled drug license are required for mobile practices. A veterinary premise permit may be required, depending upon the state you intend on practicing in: for example, California, Florida and Arizona, among others. The laws governing DEA licensing and veterinary medicine are often a bit gray. Some hospitals will have one DEA license under which associates prescribe drugs within the practice. In the case of mobile practice, you will either be a solo practitioner or likely to not always be present when an associate prescribes/uses drugs, making it a necessity for each DVM to have a DEA license.

Taxes can be a significant drain on a small startup business. If you use your vet-mobile for a combination of personal and business use, then your mileage can be tax deductible. If you use the vehicle for business uses only, then you would not claim mileage but, rather, depreciation. Certain other expenses associated with mobile practice may be deductible, as well, such as gas and maintenance. Understanding tax benefits can be challenging and many veterinary practice owners rely on advice from their tax accountants.

Lifestyle

The appeal of being out of the hospital and owning your own practice is obvious and many mobile practitioners list one or both of these two lifestyle perks as being reasons to make the leap into mobile practice. However, there are several drawbacks to the mobile lifestyle you should consider. To serve enough clients per day to generate healthy revenue, it may be necessary to work long days or maybe six days per week. Ultimately this will depend on your fee schedule and the area you plan on servicing, but by the nature of having to drive to your clients, your efficiency will suffer.

Mobile practice can also be more physically and mentally demanding for some. Most stationary practices will offer 20- to 30-minute appointments, of which you may interact with the client for 10 to 20 minutes. In mobile practice, your appointments general run much longer (30 to 60 minutes), hence the appeal for many clients. This means you must be “on”: personable, engaged and social for up to an hour at a time with each client. If you find it difficult to make small talk and general conversation with clients, mobile practice is not for you. As a mobile practitioner, you may be called to place a catheter, draw blood, clean kennels and restrain patients for radiographs, whether or not you choose to have an assistant. Then there’s the traffic and the exhaustion of driving a huge vehicle around town, navigating narrow streets or deciding whether or not your truck will get stuck on that dirt road up ahead. Driving, jumping in and out of a truck, and carrying equipment are all part of the gig that can further contribute to an already physically demanding job, and result in exhaustion.

Having said all that, as a former mobile practitioner technician, I can tell you there is something that feels alluringly right about playing fetch with your patient for 10 minutes after catching them up on their vaccines or examining the cat from hell on the kitchen table without so much as a flick of the tail.

Market Outlook

According to recent Bureau of Labor Statistics data, the projected veterinarian employment growth rate is healthy, expecting to grow by 9% between 2014 and 20245. This rate is slightly above average expected growth for all occupations (7%), so this is the good news. The bad news is that, for young vets looking for opportunities to own a practice, inventory is limited and continues to decrease each year. With corporate consolidations up to about ten percent of the practices, the independent practitioner is forced to compete with juggernauts.

Mobile service, though, can offer clients a stark contrast to the corporate model and elevate service to a new level. Mobile care is a boutique offering with highly individualized personal care, provided by one or two faces. The mobile model may just be the antidote for corporate consolidation in some areas already dominated by giants and the best option for ownership for the next generation of entrepreneurs. The question remains: how is the market expected to grow for mobile service? A 2002 TIME magazine article noted a steadily growing number of veterinarians who are offering house calls or opening mobile services, with membership in the American Association of Housecall Veterinarians (AAHV) increasing 150% compared to the past decade. LaBoit, Inc., at that time, reported seeing sales increase 40% over each of the past five years. Unfortunately, there is little current published data specific to mobile practice, but that does not mean we can’t assess clients demand for this service.

In 2015, it became official: the millennials have taken over. That is, a Pew research poll indicates millennials are now the largest living generation. What does this have to do with mobile practice, you may ask? A recent study conducted by Trone Brand Energy published in DVM360 shows that 59% of millennials say their veterinarian takes the time to know them, compared with 64% of boomers. The study shows that millennials are less likely to think their veterinarians are very accessible (47%) compared to boomers (78%). Taken together, this suggests that this demographic is looking for accessibility and desires a more personal relationship with their veterinarian to develop a bond of trust.

Another Pew poll found that more than half (53%) of all working parents with children under 18 say it’s very difficult to balance job responsibility with responsibilities to the family. Mobile practice offers a solution. You can have your family pets’ health care needs met while you make dinner or when the new baby goes down for a nap. The client is waiting at home for their appointment and can work, do laundry or cook while they wait. Here, a choice no longer has to be made between the responsibilities to their pets’ health and life’s demands. Is it worth an extra $50 to a mother with three kids to get the two dogs and the cat a medical visit without having to load everyone up into the minivan? Many families would say: absolutely.

Furthermore, since the advent of the internet and the tremendous access to information, today’s client is often more knowledgeable. Clients feel empowered and seek more of a role in the partnership relationship they share with their veterinarians. Emphasis is on the word relationship. Clients seek transparency and active engagement in their pets’ health care. Mobile care offers more of an opportunity to build relationships with owners and to educate them. Mobile service is uniquely suited to provide transparency on both sides of the exam table. When clients can watch you work, they feel involved and can have a greater appreciation for the service you provide.

AVMA published the Bayer Veterinary Usage Study in 2011 that examined the industry’s declining revenues and number of visits (usage). The study cited what they called “feline resistance,” in which data indicated that because many cats hate being loaded into carriers for transport to the vet, 40% of them had not been to the veterinarian within the past year, as compared with 15% of dogs. Owners reported that their cats show signs of stress during veterinary visits, which lead to deferred trips. Many cat owners expressed a desire to avoid the difficulties and unpleasantness associated with bringing their cat to the veterinarian. Perhaps “feline resistance” explains why only 83% of cat owners who responded to the survey said their animal had a primary veterinary clinic, compared with 91% of dog owners. Mobile practice can help bridge this gap by alleviating the unpleasantness, providing health care to the family cat all while tapping into a sizable new revenue stream. The same concept likely also applies to fractious dogs or multi-pet households who under-utilize veterinary care simply due to stress involved with taking their pets in for an appointment.

Conclusion:

Getting into the mobile veterinary business is a creative opportunity that offers unique rewards, benefits and opportunities, along with challenges, to practice the profession you love in a whole new way. Mobile practice has a growing role to play in the profession and may represent the most viable path to ownership for the younger generation of veterinarians. Before you hit the open road, though, make sure you’ve got the right road map to guide you.