The Veterinary Survival Show
The Veterinary Survival Show
What Your CPA Isn’t Telling You What You Actually Need to Hear
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This episode dives into the financial blind spots in veterinary practices, the importance of choosing the right CPA, and strategic planning for practice success. Mark McGaunn and Jenni George share insights on optimizing practice finances, building strong advisor relationships, and long-term growth strategies.
- Financial blind spots in veterinary practices
- Choosing the right CPA and financial advisor
- Strategic planning and practice valuation
- Cost management and price increases
- Long-term exit and sale strategies
We know that running a veterinary business can sometimes feel like you're fighting your way through a jungle of financial insecurity, HR nightmares, and overall business confusion. Our goal is to give you the ideas and tools you need to not just survive in this jungle, but to thrive in the veterinary industry. By combining over 50 years of knowledge and experience with differing opinions and a little humor, we will help you get the information you need to make the best decisions for you and your veterinary business. Welcome to the Veterinary Survival Show with veterinary CPA and certified financial planner Mark McGon and Certified Veterinary Practice Manager and Practice Owner Jenny George.
SPEAKER_00Hello, everyone, and welcome to the latest episode of the Veterinary Survival Podcast. I'm Chris. I'm here with our two co-hosts, Mark McGon and Jenny George. How are you both doing today?
SPEAKER_01I'm probably a lot better than Mark is.
SPEAKER_00Mark, you feeling the tax season uh recovery?
SPEAKER_02Five days off and I'm still sleeping a lot, but then I'm good to go.
SPEAKER_01Yeah, you should be rested.
SPEAKER_02Should be. It was easier in my 40s and 30s.
SPEAKER_01Everything. Everything was easier. Everything was easier. Everything. Getting up, putting your shoes on. Yeah. Everything was easier.
SPEAKER_00Youth is wasted on the youth. Mark, so I know that you just went through tax season, but guess what? This topic is all about that. So our to our topic today for listeners is what your CPA and why your CPA isn't telling you what you actually need to hear. So with that, we're gonna dive in. So, Mark, what are the most or what are some financial blind spots you see in veterinary practices that own owners don't even know to ask about? So these are maybe they're getting a compliance tax work one, but they're not knowing what to even look for.
SPEAKER_02I know there's a huge misconception about taking out the lowest possible salary from your corporation as an S-corporation and paying yourself in the form of just profit distributions and trying to evade or avoid paying payroll taxes.
SPEAKER_01Let's not say evidence evade.
SPEAKER_02If you look at the S-corp acceptance letter the IRS sends out, the minute you become an accepted as an S-corporation, it says, Oh, by the way, don't think that you can avoid paying a below market salary to avoid paying FICA and Medicare taxes and just take distributions. We've seen new clients, and we look at their tax returns, and there's zero for officer compensation on their tax return. Like, oh my God, what happened? Did they put it on the wrong line? And some people said, Yeah, I was told that I didn't have to. I'm like, oh, please don't tell me that. Everybody wants to pay as low as they can. Really, you're only saving if you're at the top FICA limit, 2.9 to 3.8% in tax. I'm not saying only, but at the risk of in this age of AI, the IRS actually going out and creating a program that scrapes tax returns to find out those people that are paying themselves below market wages for officer wages for a veterinary hospital. I mean, they they they're pretty sophisticated. They have audit programs for vet hospitals, auto repair shops, hair salons, pizza shops. I mean, they've taken it that far. In the next five years, you're gonna see a lot more interest in particular industries. And I'm sure with all the the news about veterin, veterinary medicine is gonna be hit as well as dentistry. What you should do is have a conversation with your CPA on reasonable compensation, what you should be paid. In our state of the world, valuation models, et cetera, 21% of a doctor's own production is kind of a benchmark. So if you're making a million dollars in production, say your high producer, you should be paying yourself $210,000 in salary. If you're the only owner and there are no other owners, do you have to pay yourself a management salary? That's kind of up to you. In a multi-member model where there's co-shareholders and somebody is doing more management, some people are doing less management. You can devise your own salary, but this is actually layered on top of that reasonable compensation. So now you're paying trying to pay what is a reasonable compensation for your management role in your organization. You have to look at this. Some people just don't even want to talk about it. You know, at the end of the year, you shouldn't say, ah, should I pay myself a salary? If you've taken any distributions, according to some of the newer court cases, if you've taken any distributions out of the corporation and don't pay yourself a salary, that's a huge red flag. You need to pay yourself really a measurable amount of salary commensurate with what your role and activities are in the corporation, seeing patients, scheduling, mentoring, training, hiring, firing, etc.
SPEAKER_00Awesome. Jenny, when you were starting out, I'm gonna take you back in time. So when you were starting out, I mean ownership, uh, veterinary practice and everything, what do you wish I'm an advisor told you that nobody did?
SPEAKER_01You mean what do I wish I had listened to?
SPEAKER_00Yeah.
SPEAKER_01No, I think my my biggest struggle, we knew to pay ourselves. I mean, it definitely was a lower wage at the beginning because we didn't have we just didn't have the money, right? I mean, you know, we used my parents who were free. We had a technician that we paid $20,000 a year, but she lived with us. I mean, it was bare bones, but we did take a salary, both of us, um, because we knew we needed to. I I think the biggest thing that I wish I had known and having talked to other veterinary owners is finding the right CPA and financial advisors very early on. I think we went through a couple that just didn't mesh with us, that didn't that didn't, you know, meet our needs and just didn't have the personality that we needed. And we really didn't, they really weren't out for our best interests, I think was the big thing. And like I was just talking to a friend of mine who owns a practice in Pennsylvania, and she said this is her first year with a new veterinary specific, you know, CPA financial advisor. And she's like, I can't believe the difference in the taxes, you know, and so I really feel like don't settle. You know, make sure that you're finding someone. It's better if you're in the veterinary industry to find somebody that knows veterinary stuff. You know, talk to Mark. Talk there are there are what's the group? Veterinary that you're a member of Mark.
SPEAKER_02Vet partners.
SPEAKER_01Yes, vet partners has lawyers, has CPAs, has you know, people to help with management, all of these things. And so I think it's worth it to spend the time and just pick somebody with intent instead of picking somebody that maybe came recommended to you. Because I will tell you, since being with Mark, and then he, you know, introduced us to Andrew, who and and like compensation planning, who does all of our 401k, like it just kind of grew. And so now we have this whole team that helps us with the stuff that Simon and I don't know about. You know, I don't have a degree in financial anything, you know, and so I think it's very important to just be a little bit more have just a little more intent when you're picking your team because you do need financial planners, you do need CPAs, you probably are gonna need a lawyer at some point. And so just doing it with a little bit more intent instead of just here's a friend who said they could do it or trying to do it yourself, because if you try and do it yourself, you're gonna TurboTax is not made for business owners. Let's just put it that way. So don't, don't, just don't try and do it yourself.
SPEAKER_00Yeah, what you just said that rings really true. I I saw a quote on LinkedIn this week that really uh reminded me that if you settle for convenience when picking your advisors, it's a long-term cost. Um, like just the first one you find. Mark, back to you. So Kenny was talking about those first few relationships that don't work. Um there wasn't a lot of advisor. Why do a lot of practices don't really push into those harder conversations with veterinary owners? Is it the training, fear of overstepping, or just they think the clients just want the compliance?
SPEAKER_02I'm not sure. Some people listen to their classmates, some people listen online and want a six-second answer. There's there's a lot of, you know, talk out there. I look at it on Facebook. I scroll through financial advice all the time for practice owners, and some of it is just meant to grab your attention and it's not of real substance. You really need a deeper conversation of what is more meaningful to clients, but you also need to maybe hammer that a little because some people have unreasonable expectations. We had a client that came to us with a very profitable practice, and in his mind, he shouldn't have to pay tax on his profit because he earned that. And and he was okay with paying tax on his wages, but tax on his profit that was that was that was tax-free. And I I I wish. First of all, I wish. Second of all, it was the hardest conversation because I just didn't know what to say. I couldn't I didn't have anything to counter it other than what I used to tell my kids because that's the way it is.
SPEAKER_01Because I said so. Well, I do because I said so. Right. Owners, veterinary professionals don't know what they don't know, right? Like when you go into a business, you know, Peter Weinstein talks about this with the emyth, right? I'm gonna be an entrepreneur, I'm gonna own my own business. And you think that that means you're just gonna be a vet and do what you want. And there's so much more to owning a business. And I think that most veterinary professionals just don't know what to ask. And that's why I said, you know, pick your financial team with intent, because Mark was able to say, Hey, have you ever thought about this? And I'm like, no, I didn't even know that was a thing, you know? And so, same as you don't want somebody to come to your veterinary practice and be like, I watched a video on YouTube and it told me how to neuter my cat. So I just need the drugs to do it, right? Like that's that's not not real. And you're right on your kitchen table. Like that's not what we would expect a client to come to us with. And I'm saying that because like people do that now. You know, I mean, there somebody just got in trouble down in Florida because they were cropping dogs' ears in their kitchen and they were getting their drugs from India. And now she's in jail. I mean, it you know, this is the scary thing. So if you think about the fact that as a veterinary professional, you don't want clients to do that to you. Well, you also don't know Jack about financial stuff. Maybe you do to a certain extent, but not to the extent that you need, which is where your planners, your professionals come into place because you don't know what you don't know.
SPEAKER_02Well, some people say, How hard can it be? No. I mean, you you can manage your own investments. You can. Are you doing a good job? You might be. It may not be working out for you and you don't even know it. We have clients all the time that set up 401k plans and then pick their own custodian and pick a crappy TPA to manage the plant, and then won't listen when I say, you know, we that's really not a good thing because in May they're gonna say that they're working on bigger clients and they won't be able to get to you till June or July, and it happens, and they're like, Man, how did how could this happen? I said, I told you two months ago this was gonna happen. Right. So usually we've had a whole number of bad stories that we can relate to clients, and usually they don't believe us until it actually happens to them, and they're like, okay, fine, I'll change.
SPEAKER_01They become the bad story that now you use to tell other people. Other people don't be that story. Make bit and make better choices.
SPEAKER_02Usually most people will tell us, look, I don't know anything about this. Can you help me? Great. The other end of the spectrum is I've got that covered. I'm I'm an engineer, I'm running my wife's practice, and we like so not another one.
SPEAKER_01And look at all the marsh gray hairs, and that's why.
SPEAKER_02Yeah.
SPEAKER_00I look like Jenny before and look at me now. So one thing I want to circle back to that Jenny said that uh we hear all the time is we don't know what we don't know. But Mark, if you had to pick a question that every vet practice owner should be asking their CPA and they're they might not be doing that, what would that question be? Any standout?
SPEAKER_02The one recently I've been seeing is not doing enough CE or not paying for enough CE for practice employees. And I think some people maybe it's a badge of honor that they're paying such a low amount. Maybe they're getting it free. But we have some practices, I'll look and they're spending 1% of their gross on training. You know, $2 million practice, they're spending $10, $20,000 just on training. We have others that spend $195 and they're a three million dollar practice. Like there's no rhyme or reason, but you know, the most highly trained employees are probably your best employees. And they're probably not going to go anywhere else if they're highly trained and they're being utilized. And we talk about this all the time: delegation, delegation, delegation. But that's kind of the thing I wish I could hammer into people more. Train, train, train, train, send people away for training. You know, people all the time say, Oh, I'm gonna send somebody to acupuncture training. You can, but anesthesia training, boy, send them out all day long. You know, take your whole team out. Those things pay huge dividends. And it's it's 20 grand, but that 20 grand in, you know, venture capital speak, you can tax that almost immediately.
SPEAKER_01Well, say if you say you want to train somebody in something like, say, acupuncture or physical therapy or chiropractic or something like that, you need to have a plan in place ahead of time. How are we gonna make this? How much time is it gonna take? What does the training actually look like, you know? And how what are we gonna look at? How are we gonna have to change our appointment schedule? Because acupuncture, take it for example, it's an hour-long appointment. So if you're normally running 20-minute long appointments and you're a GP and maybe you have some same day or urgent care appointments in there, that's gonna change your workflow. How are you gonna charge appropriately for it? You know, like all of these things need to be thought of ahead of time before you just say, it's like buying the new, shiny, brand new piece of equipment, right? How is that actually gonna fit in? And does it fit in with your values, with your mission, with your culture? Because if you're just trying to be everything to everyone, that might not be the best fit for you. So to me, if you want to do that kind of training, and you know I'm big on training, I think it's huge. When they used to do an anesthesia boot camp, Dr. Gaynor out in Colorado, he was actually my husband's anesthesia professor at CSU. And he used to do this anesthesia boot camp. And I sent my CVTs out for the longest time to do it, it was like a three-day-long intensive anesthesia boot camp pain management. Because I'm like, you guys are the ones running anesthesia. I want you to know how to do it on geriatric patients, patients with heart murmurs, you know, patients who are compromised or in a, you know, really like yesterday, we had a really bad bloat come in. So that patient is already compromised before we even put it on the table. So it's like, I want you to be ready and able to do these things. And so we sent out, I want to say five or six. I paid for them to go out, fly out. I paid for them to stay someplace. Some of them had never flown before, so I paid for their parents to go with them. One of them, I sent her dad with them. And he's like, this is great. He rented a Harley Davidson, drove all over, you know, Colorado Springs and Denver and all that. But it can be an experience, it can help with longevity. But if you're gonna train in a way of something maybe new as opposed to anesthesia that's used every day, just have a plan in place for that.
SPEAKER_00Awesome. Um, Mark, so just go in. When you take on an eventary client, what's the first thing you usually find that surprises you when you're looking over those financials or uh reviewing things? And what's the first real conversation look like? What I mean, real, cutting through the pleasantries.
SPEAKER_01He smacks you across the face and says, You're an idiot, you need to charge more. Oh, wait, that was just me.
SPEAKER_02That was you. No, it's a lot of people. But no, normally we're just take time to learn more about them. Sometimes we want to learn their manager's role. Sometimes the manager does everything, and the owners are clueless. They they don't know what's going on, they don't know they have a cash flow problem, they don't know that they can't afford to pay their payroll because they've stripped out all the cash from the company. I mean, there's a lot of things that we learn and some over time. Usually it's most people will say, look, I haven't had a veterinary-specific CPA before. This is my first time, you know, looking to you for guidance. Just tell me what to do. And we kind of have to come up with a game plan for where they are. I mean, we took on just took on a new client recently where their CPA still hasn't done their 2024 taxes. And we're in a holding pattern. We don't we don't know what to do. We've, you know, filed extensions for 2025. You know, we're now we're into 2026, so 2024 is a long way back. So we're trying to find out more information, but if we can't.
SPEAKER_00Um and then Jenny, when you're having conversations with Mark, and again, uh you you mentioned this earlier about training, investing in that. But if you have to make a big financial decision for your practice, uh and your gut and the numbers are telling you different things, how do you reconcile that? Do you call Mark or do you just go with what you think's right for the practice?
SPEAKER_01You want me to ask Mark his butt? No, I'm just kidding. No, I think when we have that conversation, I mean, I'm lucky because I have my husband, right? So we are kind of on the same page. But like I said, I bring it back to what are our goals? What are our long-term goals? And this goes to strategic planning, which is something that we don't do enough of. You know, I is and I this is I am, you know, the pot calling the kettle black right here because my husband and I have owned this practice for 19 years and we just kept saying, when it slows down, when it slows down, we'll talk about this. When it slows down, we'll make a plan. When it slows down, we're gonna sit down and say, where are we gonna be in five years? We just now, this year, have made it a priority to sit down and talk about what do we want to do, where do we want to go, what are our goals, what's keeping us from getting there, right? What do we need to work on ourselves? What do we need to work on as a team and all of that? So I think when you take the time, and nobody wants to do that. We don't have time, right? If only I had another hour in the day. If you had another hour in the day, you'd see more appointments. Like, let's be real. You're not gonna take that time to sit down with your leadership team or your partner or however and really plan out where you want to. So I think it's important when you have things like that opportunities arise, or, you know, the new piece of equipment or the new something that you want to do. Yes, you have to look at your finances and also does it fit with what we're trying to do here? Because if it's just shiny and new, you know, Dr. My husband right now is on this kick that he wants a portable MRI machine that can do horses and dogs. And I'm like, that doesn't, it doesn't exist. Mark, it doesn't exist. He wishes it and he's like, well, in 10 years it will.
SPEAKER_02I'm like, okay, okay, can we so you can rent you can get a human one during tractor trailers.
SPEAKER_01Mark, shh, I need you to no, we're not going there yet. But Dr. Dave Nickel said he calls those juicy mangoes and he puts them up on a tree and they're for later. Like, so whenever we come, he comes up with something, we say, okay, that's a juicy mango. We're not gonna maybe in 10 years we'll we'll come back to our portable MRI machine that does everything. But for now, that's not in our, it's not in our budget, it's not in our needs, it's not something that we have a space for. Like, let's slow down. But like when we wanted to add on our daycare for team members, you know, we really had to sit there and look and say, is this a long-term investment? What is it gonna do with us? Do we have the money to pay for it right now? Um, or do we have to take out another loan? Because I did not want to take out another loan. And we didn't. We paid for it all outright, which was great. But then, like, you know, you have all of the, we have to pay our teachers, you know, we have to, what happens if one of the teachers is sick? You know, it really took a lot of thought process. Now, it has been great. Where we're at, it has been great. You know, we've got three weddings this year, we got more babies on the way, right? So it's just gonna constantly be working. My team members can continue to work. So that has definitely been a long-term thing that has helped us with longevity of team. It's not a profit maker. And a portable MRI machine would definitely make us a profit. This is not necessarily a profit maker, right? Because yes, it keeps our team so we have less turnover, but we've talked about this before that longevity, you're gonna pay your team more. So, you know, but for me, it's 100% worth it. But we had to sit down and really look at what are our goals? And one of the foundations of what Simon and I started this practice on was we wanted it to be family friendly. We want people to be able to have kids and keep working. Because where we worked before, that really was not something that was, it was, it was not okay. So that was one of our founding missions and the daycare fit in with that. The MRI, maybe later.
SPEAKER_00Do the kids, uh, this is uh just my own personal curiosity, but do the kids ever get to like play with the ducks or anything or any animals that well yeah, they're hatching. Do they interact?
SPEAKER_01They're hatching, they're hatching chickens out right now. We had, and then once the chicks hatch out, we'll move them downstairs to the barn until they're big enough to go to like in our coop or someone else's coop. And the kids will go down and take care of them. I have chickens in my backyard that they go out and take their lunch scraps every day and go down to the chickens. But no, the kids, our daycare is actually attached to our practice. So every morning the little kids come. Marching through with their little backpacks and their little lunch boxes. And they come through and then they come back through. And, you know, at the end of the night, looking like a, you know, a kindergartner at the end of their hairs all, you know, they're dirty, they're wet, they're whatever they've been doing all day. And um, yeah, it's great. But they definitely all, you know, these are kids who on the weekends will go out on the road with their parents. Zoe and Riley are Zoe's one of our older kids, not my age, like all of our kids. My Dr. Robin and my kids are teenage age. But Zoe, she has helped us wake up puppies from C-sections. She's great at cleaning the surgery room. Like she goes right in, she knows where to how to fill the mop bucket and she's seven, you know, and she just goes right in and cleans. So these kids are really being raised at the practice, which is not for everybody, but it is definitely a cool, cool thing.
SPEAKER_00I like that. So, Mark, getting back to getting that proactive advice and everything, uh, what does it cost a practice owner in real dollars when they're not getting proactive advice or doing those hard conversations like Jenny just spoke about? And can you give any examples from the past without naming names?
SPEAKER_02I'll keep this anonymous. I mean, there are practices that wouldn't raise prices. They, besides Jenny. I mean, you don't have to keep it anonymous. There was a practice for seven years that wouldn't increase their exam fee because they didn't want to be the highest and they didn't even want to be average. They didn't want to upset their patient base. And I said, look, everything goes up. Chicken goes up, gas goes up, eggs go up. Every single thing, every professional service goes up, actually higher than the national CPI average. When they finally did, their profit went up $269,000 a year. And they could have had that for seven years. That was just the one-year increase, and that wasn't even a full increase.
SPEAKER_01And I bet their clients never complained.
SPEAKER_02Clients never complained, and they eventually sold, and their sale price was based on that new profit. If it had been based on the old profit, they would have got significantly less. You know, now they laugh about it, but we weren't laughing back then. I wasn't laughing back then. So there are some pro people that will do regular price increases. We have a practice that will increase the prices one and a quarter percent every quarter. They're maybe tailoring that back now with some economic, you know, downturn. You should still be increasing your prices. I mean, we've recently seen people put gas surcharges on because of gas increases. So, you know, clients that that are doing that 1.25% may be more moderate going forward, but you should still be raising prices because everything else is going up. Nobody else, no other veterinary vendor is, you know, dropping prices or holding them, you know, at the same level just because it may impact you. Their costs go up, yours are going to go up.
SPEAKER_01Another cost is if you get audited. Like I just what was the I got audited by the New Hampshire Employment Security. What are they looking for? They're looking for unemployment though, but that goes into how much you pay, right? Or does that have nothing to do with what we're talking about? And I'm way off base. I don't even know what I was just auditing for.
SPEAKER_02That's a pay, that's a pay rep, that's more payroll tax.
SPEAKER_01But still, it's one of those things that you don't think about all the different ways that if you're underpaying yourself, if you're not paying like all these different little we had, I got audited by the Department of Labor, and I said, you know, which is kind of scary because that's a big one. And I luckily was doing everything right, but I was like, Did I get, did somebody complain about me? And she goes, I can't say that one way or another, but I can't tell you you're the seventh practice that we're looking at. What I found out was there was a practice out there, a large, either large or mixed animal, that wasn't paying overtime because they f thought they fell into like an agricultural thing. They had to go back and pay seven years of the overtime owed to every single team member that they didn't pay to. So there could be significant costs if you're making poor choices. I'll just say that. Right.
SPEAKER_00Then wow. That's right. That would be that bill.
SPEAKER_01Right.
SPEAKER_00I feel like, yeah, being a business owner, there's you don't know, you don't know, and those crazy things, like, hey, I'm just doing the best I can, and they this agency is coming. That's wild.
SPEAKER_01Yeah, they don't care if you're doing the best you can, and you don't get to say, well, I didn't know that. That's not an accurate, it doesn't save you in the long run.
SPEAKER_00What do they say that in court? Ignorance isn't a verifia verifiable defense. Right. But it should be. I'm just kidding. Yeah.
SPEAKER_01Who can we write to about that?
SPEAKER_00Mark, walk me through the difference between having a relationship with a client when you're uh, what's it called, you're helping them with tax strategies and you're helping them build wealth versus compliance. What does that relationship start out with and how do you develop that deeper relationship where you're not just getting the compliance done, but you want the practice owner to help build wealth and be successful? Wow, that was a I got a cut down on my question link. Sorry about that.
SPEAKER_01No, that was great.
SPEAKER_02That's good. I mean, normally our first conversation, I I tell people right off, I'm like, look, the only way this relationship is going to work best is if we talk and talk frequently and discuss things in depth, and you have to make time to do this. But if we're an afterthought and uh you're emailing us, you know, in March saying, what should I do? And why are my taxes so high? Usually we've done tax planning and told you why. Normally, we'd like to get things going in June before December starts, because once December is ended, you really can't do much. So talking about 4K planning, compensation, training, financial statements, accounting, bookkeeping, if all of this stuff just comes to a crescendo after you know December 31st, it's too late. You know, you can backtrack. So the best thing to do is to set aside time. I have a client that for three years we've said, hey, we need to have an I'll come, I'll come out to your practice. Just I'll come out and talk to you. But if you don't make the time to do this because you're always so busy, it's never gonna get done. So they don't have a 401k plan and they spend everything that they make, which is a crime because they strip the practice of cash to pay tax that they should have been paying throughout the course of the year. So it's kind of a snowball that just keeps going, and unless you stop that snowball, you're never gonna get off track.
SPEAKER_00Jenny, following up on that, what would you say to a practice owner that's listening to this and maybe they're starting their practice, they're feel they're too small or they're too busy, like you said, to make time to think about this strategically. What would your advice be to them?
SPEAKER_01I would say I regret not doing it earlier. I mean, it's that simple. We were there, you know, working out of our house from a card table, you know, and so I know what it is to be small and I know what it is to say, when it slows down, we'll do this, but it's so, so important, you know, to what Mark just said about that profit and the missing profit for the seven years before. I always wonder prior to meeting Mark, what we would have done differently, you know, because I did think that we were too small to have a 401k. I did think that we were too small to, you know, offer profit sharing, to offer health insurance. But, you know, Mark and his team were able to like help me figure out how to make that work and why it would work and how it would help with how much I pay in taxes and you know, all of these things that you don't even know. So I think that even though you're busy and even though you're small and you know, everything, and I know everything seems so overwhelming. You're just trying to keep your feet underneath you. But these are the things focusing Peter Weinstein says it all the time, focus on your business, not business, not just working in it, right? And I think as veterinary professionals, we're just go, go, go, go, go. We want to take care of the next patient. We want to see one more patient, we want to help one more, you know, and and you have to slow down. And if you as a practice owner don't have a time, you better make sure you have a good practice manager, not just somebody that you hired or moved up because they've been there the longest, but somebody who actually cares and wants to work on the business and look at these things. Because I'll tell you, Simon doesn't meet with Mark very often, actually ever. So, like Mark would come up here to visit, and Simon would walk by on his way to the bathroom and be like, hey, Mark, that was it. But he knows that if I die, the first person he calls is Mark because Mark knows everybody in our little circle. But, you know, I think it's just so important to have somebody, if it's not going to be you, somebody that you trust implicitly to do this and stay involved. The first practice that I ever worked at, their practice manager got in over her head, didn't pay taxes for I don't know how many years. She asked, she gave her notice, got her sick time, got her vacation time, and within two weeks, she was living in Belize. And then the next thing you know, the IRS came and knocking. And, you know, we were had back taxes for, I don't even know. And of course, then I was only like 21. So I didn't really understand what was happening. But that was the opposite of that, right? Where you have a practice owner that just, well, Mark, you said it, just they don't know anything, right? And you have a practice manager that maybe you haven't been training or, you know, doesn't really care because it's not their practice. So you need to have a good balance of it. If you're not going to be interested, find somebody who is, but then work with them, whether you like it or not. You have to work with them and you have to continue to learn. You know, when you go to conferences, don't just go to all of the new surgical techniques and all that. If you're an owner, you need to go to these talks that are on finances, that are on law and ethics, or have somebody in your team that does that and then meets with you so that you're always up to date on the best strategies. Awesome.
SPEAKER_00And speaking about your journey from when you said you were smaller in your card table, when you finally had that financial conversation uh with an advisor that was honest and direct, what changed for you and how did it feel?
SPEAKER_01I mean, I used to want to send Mark like whine after he talked to me because I was always like, I don't understand why you want me to do that. And I didn't want to pay, I didn't want to pay taxes on my profit either. And I still don't. But just because we don't want to doesn't mean that we can't. But no, I think I now have a much better understanding of why we do the things we do, how to implement those things. And it just is more of a financial knowledge that I never really had. You know, I'm a people person, I'm not a spreadsheet person. I really don't like finances, even though I'm somehow now the treasurer at my church and for my my like I keep being a treasurer every time or a bookkeeper every time I'm in an organization or a volunteer. But I think I have that knowledge now that a lot of people don't. And it's not just business owners, it's people in general who don't know how to spend within their means, who don't know how to balance and reconcile and make sure that, you know, they're planning ahead saving. And so I think in having those conversations with Mark, it really helped me look forward and it definitely put us in a much better financial place for eventually if we do want to sell, which, you know, we're not even talking about. And, you know, they say when you get into business, you should already start thinking about your exit strategy. But you don't really want to do that because you love what you do. But the reality is you do need to have that kind of in the back of your head of if we were evaluated today, how would we look? And so I feel I feel so much more confident. I felt confident. I mean, I didn't love it when COVID hit. And that was a total, well, shit show. I mean, it was we were all just running around like chickens with our heads cut off. Nobody knew what you were doing. Every single day was something new. But we were financially stable enough that I had team members that wanted to stay home. I could still pay them. I had, you know, we were still able to make it through everything. I didn't have to borrow any money from the government because you well, Mark, you and I talked about it and you said, look, be real careful because eventually they're gonna ask for it back, right? Like they're not handing stuff out for free here. And so I was able to make really smart decisions and be prepared for something like that, which hopefully never happens again. But are you prepared? And I think, you know, to what Mark was saying about if you're just spending every little penny that comes in, that's great for today, but it's not helping you for tomorrow and down the future. And what do you really want? You know, this practice is our legacy. This is what we have. And I want to make sure that I set it up for success and not just what I want right now. So those are the conversations that help tremendously with that and make it 100% worth it.
SPEAKER_00Awesome. And speaking of those strategies, financial strategies, Mark, are there any financial or tax strategies specific to the veterinary world that often get overlooked? And uh these are legal and available ones, not ones uh under the table. Evasion. Yeah. But nobody's talking about, or like you constantly see that the people you're speaking with are surprised about.
SPEAKER_02I mean, really, you have to just do the good basics. You know, have a retirement plan, health insurance for employees. There's no magic. I think the magic maybe AI will generate. It I think it is helping now on on the CSR end and reception end and scheduling and booking appointments and charting, but is it going to do this magic turnaround for practices that aren't financially viable and all of a sudden make them super attractive? Probably not. Um, I think you have to have the good basics. And as far as tax strategies, some people want to go whole hog to say, in you know, looking for more esoteric strategies. I don't think you have to unless you're at that point where you've exhausted everything else, like cash balance plan, retirement plans, and stuff like that. I think that most people want that magic bullet. There is no magic bullet. I think it's hard work and strategic planning, like Jenny said, which, you know, that conversation hopefully is sooner than later. And we're happy to help too. We always talk to clients about strategic planning. It's really taking that time to set aside what you want to do and maybe have that end goal in mind when you want to sell. Is it 10 years? Is it 15 years? Who knows? Some people, you know, dentists get into dentistry and they know the exact date they want to sell. Narian's not so much.
SPEAKER_01Mark, you didn't mention um helping to pay back student loans.
SPEAKER_02We've had so many people tell us that their loans were forgiven and they had been on income repayment loans or income-based repayment loans. You know, after 20, 25 years, they're like, hey, my student loans are all forgiven. I'm like, you know, great, you had to pay those for 25 years. Why can't you make more money or devote more money to pay them off sooner and pay less interest over that, you know, intervening time period? Practice ownership and managing your practice correctly to generate more profit can help you pay off those student loans. And you can also help, I think under the old tax law, you can still help for one more year, I think. You can still help um employees pay their student loans up to $5,252. $5,250. But I think practice owners can end up paying their student loans off way faster than the schedule. And we do see that where we look at what people are paying for student loans and all of a sudden their interest drops to zero. And we're like, what happened? And they said, I finally paid off my student loan. I'm like, wow, that was quick. So practice ownership and running your practice right can produce that the ability to have a great life and to pay off your student loans if you're focusing on that.
SPEAKER_00Awesome. And is there a rule of thumb with one how far out you should do to sell your practice? I know um from just working with our business advisory guys at our firm, they say five at minimum is for that's any type of business, but for veterinary, is there any rule of thumb there?
SPEAKER_02People say five years, you know, you need a five-year window to start making changes at your practice. Well, really, if you need to start making changes at your practice, you should probably start them a lot earlier than five years. Don't wait for five years and then say, oh my God, I have to create some magic at my practice to make it saleable or increase the value. Start doing those on day one, like Jenny does, you know, get the great culture, you know, build a great facility, build a great referral network. You know, people travel to Jenny's practice from an hour and a half away just because. Create all of that first and get a good team in place and keep them. And that's the magic. And if you've done that, you don't have to wait, you know, for that five-year, you know, starting frame to begin, you know, getting your practice ready for sale. Hopefully you should be able to sell at any point in time and it won't matter. You're gonna get exactly what it's worth.
SPEAKER_01Mark, do you think a good place to start is to just have routine valuations? Like I think we think about, I always thought about evaluation as this is this step. No, I'm I'm gonna set. But I feel like it could also just be a way to look at, you know, you and I don't even know how many years that was. Like 13 years ago, we sat down and you said, hey, FYI, you're not doing really well. You know, but it was that valuation process that we kind of went through that we were able to say, we're not healthy. Okay, here are the changes we need to make. And so do you think that a valuation is just a good place to start and maybe do that, I don't know, every two, three years or something like that throughout the life of the practice?
SPEAKER_02It you could do that. So if you look listen to people that do veterinary practice valuations, you should have a valuation. Every time you have a financial change, there's a you know ownership change at your practice. You normally you're gonna have one before to see what the people should buy in at. Some people want to do them every c two to three years just to see if they're on track. It also depends who's doing it. I mean, you can have different people use different methods. In vet partners, there's the veterinary valuation council, which I'm a member of, that you know, there's a whole host of firms, whether they're brokers, they're attorneys, they're they're, you know, veterinary valuation analysts, they're going to provide a valuation. And hopefully they'd all be the same and use pretty much the same methodology. I've seen some variations on when brokers are doing valuations, but it's a starting point and it's a time to frame the conversation for okay, here's our valuation. What should we do to implement it? It's really just a boilerplate number. It's really not a strategy to move forward. So you need someone that can actually do a valuation and then interpret the results and tell you how to move forward to increase the value of your practice. If that's your goal, if you if you're happy with where it is and what it stands for, great. If you want to say, I want this valuation to be X, how do I get it there? And it's really based on profit. So the more profitable you are, the higher your valuation, the less profitable. And maybe you aren't able to increase it. Maybe you can't hire that extra doctor to generate more profit. You know, we have people in Pennsylvania that, you know, are near Penn that can't hire a doctor and they're not that far away from the hospital or from the school. So, you know, same in Boston. You know, it's hard to hire a doctor, you know, even though Tufts is right in Boston or Grafton, but the Boston area. So there's a lot of things you can do to increase your value if that's your goal. Should you have a valuation every two to three years? You could have one in year one and five years later, you're still working on what you, you know, thought was deficient from that valuation five years before. But if you talk to valuation, you know, veterinary valuation people, everybody says, oh, you should have a valuation every two to three years, or when a financial circumstance changes, is that in their best interest or my best interest? Could be, but it also gives you better information that you don't have yourself.
SPEAKER_01Well, that's what I was thinking was the data that I got from us sitting down really helped me to see here are the areas that we need to work on. And it was also that idea of profit isn't a bad word, right? Like because, you know, oh, we don't want to make all this profit, but also I want to give raises to my team. I want to be able to, you know, repair things when they break or open the daycare or whatever, offer these new benefits. And so in learning those things and then continuing to look at those, it really made a huge difference for me and how and how I interpret the numbers. And it is, you're right, it's data, right? It's just it's just information. And then you have to figure out what you're gonna do with that information and what your goals are.
SPEAKER_02But well, it it is an education process, and I think it's also shock value.
SPEAKER_01Yeah. In some cases, very much so.
SPEAKER_02If you if your perception was, oh my God, I thought this was gonna be a lot higher, that could create the impetus to do changes to your practice or hospital that makes you more profit. And people don't understand that profit fuels extra expenditures and it helps pay back debt. It's a starting point. You're taxed on profit that's used to pay back debt. The IRS doesn't care that you took on a loan to buy your practice. If you generate profit and, oh, by the way, you're paying back Bank of America or Live Oak Bank for the practice acquisition loan, they don't care. You're still being taxed on the profit used to pay back that debt.
SPEAKER_01Don't I know it?
SPEAKER_02Yeah.
SPEAKER_01I'm not bitter. That's fine.
SPEAKER_00You guys obviously have a very good advisor relationship um um here, but what does a truly great when you say CPA client relationship look like in veterinary medicine? And what does each side have to bring to make it work? So this is a question for both of you. I'll let uh Kenny, you want to start?
SPEAKER_01Sure, you know, I always want to talk. No, I think I think for the owners, like I needed to be very open and ready to hear what Mark had to say. I had to be and like my husband was not. He really was not, and he, you know, had in he still has in his mind. He doesn't want to talk about money. And that's fine. We've tried to remove him as far from it as possible. But he has me to trust. He has a team that he trusts. And we've built that up with our culture. But I think, you know, what I needed for Mark was someone who could be honest but gentle, you know, and and tell me what I needed to hear. And I needed to be open and ready to hear that. And then have continuing conversations. I know that when I have a question about something, all I have to do is pop Mark an email. And he knows me well enough. He knows my business well enough. He knows all of these things because he he has come up here. How many times? I mean, you came up here and sat at our table for I don't even know how many times. And it's, you know, the team, you know, was like, who's that guy with the with the bow tie? But when you I love the bow tie.
SPEAKER_02When I did.
SPEAKER_01I miss the bow ties. But it was, it was huge. And now, like I have my financial advisor come up once a year. Everybody knows who Andrew and Colby are. And so it's kind of grown. But for me, I had to be really open and ready to make those changes. And I think instead of that whole idea of, I got this, you probably don't. And so to me, an owner needs to be available and open and ready to say, okay, I hear what you're saying. Does this fit again with our goals and our missions or not? Because Mark's idea of what my practice should be doing might not be the same as what my practice should be doing, but our ongoing conversations get us on the same page. And yeah. And so I just I needed Mark to be very honest and not make me cry. Which you didn't.
SPEAKER_00I might have made you cry, but uh Mark, I'm actually, I'm gonna jump ahead. I I have an inverse question on that. When does a breakdown in a relationship with a veterinary practice happen? Is it the CPA not offering? Is the owner not asking something, or is it something else entirely?
SPEAKER_02Normally, I like I said before, I think it's communication. We beg people to talk to us. I mean, like Chris, you set up my HubSpot link so somebody can book an appointment. I beg people to. And they're like, I I can't reach you. I'm like, here's a dedicated spot where you click on my signature block and you can book a time and it's your time and we'll talk about anything. But if you don't do that or you don't pick up the phone and call, which it's hard to reach people these days because everybody's busy. But if you book a spot in my calendar, that's your time to talk and we can talk about everything. But if you just want to talk during tax time and complain about how much tax you owe, how productive is that? I I want to talk to somebody in June. I don't want to talk to them in March. I'll talk to them in March, but will the conversation be more fruitful? And I've flown to Alaska to talk to people. So Alaska from Alaska to Anchor from Boston to Anchorage. So I do go to the ends of the earth. Well, that was almost the end of the year.
SPEAKER_01I keep trying to get Mark to take me with him because I haven't been to Alaska. So, you know, if you I'll fly out with Mark, you get the two of us. No, you just it would be great if you paid. No.
SPEAKER_00That'd be awesome. That's awesome. So if we had to wrap this up, what's one thing you think every veterinary practice in our listening today should walk away with or do differently when um speaking with their CPA or looking at their advisors?
SPEAKER_01Like I said, pick with intent and know that, you know, know that you're getting somebody not just because somebody else used them, but somebody who has your practice health and wellness in their in their mind. You know, they're not just looking for what can make me more money, they're looking for what can make you more money. And so to me, that is the biggest thing is just choosing your team. This is everything. Your team that you work with in the practice, outside of the practice, your consultants, everybody. Pick with intent who fits your personality and can and can you can work with, not against.
SPEAKER_00Awesome.
SPEAKER_02Mark, you I think people should pick those one or two things that they want to focus on, maybe three things that they want to focus on that they're not getting and boil it down, not like I don't know where I stand. That's very general, but help me with my vendors. You know, am I getting the most profitable response from my PL based on what I'm purchasing? Can I be doing things differently? I can't reduce your staff costs. I'd rather have you increase your staff costs, but also generate more profit from doing that. But I think if people focus on their financial statements and try and get three things out of it that are positive, that'll be a conversation starter for more profitable practice and more profitable operations and better strategy. And I think if they can just focus on those three things, everything will get better. And they'll talk more about what they want.
SPEAKER_01And it doesn't feel so overwhelming when you only have two or three things. Like you're not like, I have to fix it all right now.
SPEAKER_00Mark, I I always tell our younger staff when they're getting in out in their business development, like, oh, what do I do? I'm like, talk to two people, two meaningful conversations, and when you make it that small manageable thing, yeah, you said it doesn't become the scary abyss of the mountain anymore. It's two things that I can actually take care of. And action kills um anxiety, I always for at least for me.
SPEAKER_01Absolutely.
SPEAKER_00Um all right. Well, Mark, thank you. This is again, listeners, you may hear this in a week, but this is right after tax season. So I thought he might just say yes, no after all those hours to my questions. But thank you for the thoughtful discussion, Jenny and Mark. Uh, do you either you have any upcoming talks or anything that um listeners should know about?
SPEAKER_01Are you speaking anyplace, Mark?
SPEAKER_00I'm speaking in June for Scratch Pay. Nice. Is that online or in person?
SPEAKER_02It's online. All right.
SPEAKER_00So Details to follow. Details to follow. We'll promote that. Again, any listeners, if you ever want to just talk with Mark, uh, we have those Hudspot links. So just look up Mark and uh he's a scheduling page and have that conversation about uh where uh buying that new shiny equipment or something.
SPEAKER_01But uh the new, the new whatever I want to do. I am I'm speaking in July at AVMA in Anaheim. So if anybody wants to join me there, because you know, right across the street from Disney, I'm just and then I'm also speaking now, hopefully in North Carolina in August with Hive NAVC Hive East. I spoke at the NAVC Hive Midwest recently in Kentucky, and I hopefully I'm getting gonna get to go to the one in August. So see you there.
SPEAKER_00Awesome. All right, everybody. Until next time, there's another episode of the Veterinary Survival Podcast. So keep on surviving out there. Actually, let's not survive, let's thrive. Talk to your CPA and uh take that advice from Jenny on how to act sorry, uh work your practice. I gotta do some editing on this episode, but um until next time, uh have a great day, and we will see you next episode. Thank you for listening to the veterinal show. If you have any questions for Mark or want to learn more about how LGA supports veterinary practices, visit our website at lga.cpa. Again, that's lga.cpa.