Illustration by Gail Armstrong.
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So, you're not sure you're ready to give up your freewheeling days as a carefree associate. Or maybe you're an owner wondering
whether to leave behind your paid-off clinic and build a new and better one on credit. Don't worry; you're not alone. This
is a perennial question that every new generation of veterinarians faces: Will you find the perfect space to lease—or will
you buy land and build a brand-new hospital?
There are situations where a leased facility is ideal and others where it's best to build. As you weigh the stakes, ask yourself
these three main questions. Your answers will help you figure out whether a leasehold or a new freestanding facility is best
for you, and you'll feel more confident in your choice—plus the numbers will help back up your decision.
1. Where will I put my practice?
Location, location, location. It's important. You want maximum visibility—a well-trafficked street, intersection, or commercial
area. If the only place to build a brand-new hospital is an out-of-the-way industrial park that sends clients driving in circles
looking for you, you'll want to lease. The more visible your hospital, the less you'll need to spend on marketing. Your best
advertisements will be word-of-mouth and "Hey, look, there's a veterinary hospital nearby."
You might also consider leasing if you're relocating your practice and need to move somewhere close to your current facility.
Many of your clients won't travel long distances to follow you, especially if they'll pass three other veterinary hospitals
on the way. You also need land or a building that's zoned for veterinary use.
Whether you lease or build is also contingent on your practice's revenue base and its potential for growth. Conduct a demographic
study to find out whether the client population in the area you're considering will bring in enough revenue to support your
new facility's cost of occupancy. Occupancy cost in the form of rent or ownership costs is usually 5 percent to 8 percent
of hospital revenue. If your revenue doesn't support the occupancy cost, your new facility will be unaffordable and it's time
to look elsewhere. (See "Can You Afford Your New Practice?") It's usually easier to look for a new location than to desperately
hunt for more revenue in your business plan.
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