Why are we building a veterinary services company?
Like a lot of things in life, the answers are complicated, and in some respects depend on who is doing the asking, but there are some common themes:
Do good by doing well. Veterinary medicine is a mission-driven profession. Most of the veterinarians I’ve had the opportunity to meet do what they do, primarily, because they love helping animals. Mission driven. Some people say it’s a calling. Either way, the goal is the same: do good, while doing well. This is important to us because it’s the same approach we’ve taken in our business careers. For me, this theme came to life while working at CMS Companies, and particularly when working with one of the firm’s founding partners, Paul Silberberg. CMS pushed me to put my money where my mouths was when it came to giving back to the community. This wasn’t optional stuff — the deal at CMS was that cash was set aside every pay period. Some of that cash was used for personal charitable contributions, and some for the firm’s projects. Better yet, Paul made sure that we had the time in our schedule to participate in the projects that we were involved with. Spending work hours on this was not only ok, but encouraged. The interesting outcome was that by forcing us to invest in our community, Paul created a way of life that I’ve continued to follow even after leaving his company.
Do what you do best. Our experience has shown us that the best way to succeed in business is to do the things that you do best. As we have looked back on our careers, one thing has stood out: our ability to help small companies run their businesses better. We aren’t engineers. We aren’t particularly good at redesigning manufacturing plants. But we do love looking at the nuances of customer care and how services are performed. We’ve found that our personalities tend to meld well with owners of small businesses — and that we can have a positive impact on the way their companies perform. In the veterinary services industry, this means that we believe we can help our partners do the things they don’t want to do: buy supplies and pharmaceuticals more efficiently, create fair and equitable employee policies and benefits plans, and identify areas for improvement in services based on analysis of data — to name just a few areas. We’re putting many of these ideas to work at our first investment, and the early results are great.
Partner with smart, driven people. One of the perks of working with veterinarians and all of the other professionals who work in this field is that hands down, these are some of the smartest, most driven people we’ve had the chance to spend time with. Unlike human medicine where docs are focused on one thing (cardiology, for example.) most veterinarians do it all (wellness care, surgery, rehabilitation, etc) while working with multiple species (dogs, cats, rabbits, horses, cows, etc.). Mix in the fact that these patients can’t talk — that veterinarians have to infer diagnosis from physical exams, lab results and commentary from owners — and it’s no surprise, with all of this going on, that although the veterinarians that we’ve met have plenty smarts to run their practices well, they don’t have the time, training or passion to focus on the business issues. Luckily, we do have the time, training and passion, and that’s why we choose to truly partner with our veterinarians. Instead of buying practices, we invest in practices. This means that the owners who sell part of their practices to us remain as owners. They sit at the table with us and work as partners — and not employees — to talk through the business issues that all companies face. This is true partnership — each group bringing different skills and experiences to the conversation. It’s not easy — telling an employee what to do is easier than coming to a consensus with a business partner — but it’s a win for us, because it means that we can focus on the business side, and let our smarter, more talented partners focus on providing great medicine.
Great dynamics for the future. In a world where is seems like almost every industry is either contracting or being outsourced to China, veterinary services stands out for its determined and consistent growth. If you look back to the early 1970s, this industry has never shrunk, and since the 90s has grown at around 6 percent per year. There are other great trends as well. Americans are having fewer children and buying more pets. Approximately 50 percent of U.S. households have at least one companion animal today, as compared to an estimated 46 percent in 1994. In addition, better medicine is leading to increased life spans for pets. What’s driving all this? We believe the human-animal bond is stronger than ever and only getting more so. We get it — we’re all animal people, with dogs and other assorted creatures living with us in our homes. Sometimes our animal friends get better treatment than the human beings in our lives. If that’s true for us, then we believe it bodes well for the future of the profession and the industry.
Changing demographics. We’re not the first to write about this topic. It’s the increasing role of women in the profession. Since 2002, women have made up 77 percent of vet school graduating classes, up from just 5 percent 50 years ago. And as of the end of 2008, women represented 48 percent of veterinarians in private clinical practice (up from 32 percent in 2002), and 54 percent of those in companion-animal exclusive practices (up from 47 percent). Just a few months ago, the AVMA announced that women now make up a majority of its members. Like growing numbers of professional women today, many female veterinarians seek flexibility and part-time employment to help them balance personal and professional obligations. What does this mean for the profession? Well if you believe Harvard’s Claudia Goldin, then it means that the industry is about to enter a period of consolidation. Today, less than 6 percent of the small animal hospitals in the United States are owned by corporations. Goldin believes that women generally are less interested in owning their own practices and that this will mean there will be fewer “traditional” buyers of existing practices. We think the vast numbers of women entering the veterinary profession will drive changes to the profession. Some of those changes — industry consolidation and flexible schedules — are already evident.
Good return on our investment. For the long run. It’s no secret that we think that there is an opportunity to make a good return on our (and our investors’) money. But this is more than just an “investment” to us. This is our company, our lives. It’s a long-term investment of time and energy that we expect to be a part of for many years to come. One of the main reasons we started MDM Equity Partners was so that we could get intimately involved in the businesses in which we invested. In our past lives, we were forced to play more advisory roles — we sat on boards, and only got involved in operations when there were problems or substantial opportunities to analyze. We played these roles — even though our personalities cried out for more hands-on interactions — because we were investing in multiple businesses at the same time. We didn’t have the time to go deep in any industry, and that really bothered us. With Community Veterinary Partners, we are building something substantial — for the long run. And that feels great.