Career Paths & Accounting for Veterinary Practices with an Accounting Partner

Brendan Magee, CPA, CA joins us for a different kind of episode. We chat about what his career path looked like (spoiler alert: it didn't start in Accounting), and how he made the transition into being an expert in the veterinary practice management space.

For the veterinarians out there, we also chat about how W&U developed specialized reports to help practice owners understand how their practice was performing, as well as trends in the buy/sell space.

Make sure to like this episode and hit that follow button to be kept up to date on all our new episode releases. If this episode raised some questions for you, we would love to chat. Give us a call or send us an email any time - links are on our website here.

Transcript

00:00:00:07 - 00:00:25:22
Speaker 1
Hello and welcome to Integrating for Success a Ward and Uptigrove podcast. My name is Amy Noonan and I will be your host. Today, we're going to do things a little bit differently. We have accounting partner Brendan Magee with us, and I'm excited to chat with him today about trends in the veterinary practice management space, but also his career path and how it's developed into something pretty special and specialized.

00:00:26:05 - 00:00:32:11
Speaker 1
So welcome to the podcast, Brendan. Thanks for joining us.

00:00:32:11 - 00:00:34:02
Speaker 2
Hi, Amy. Thanks for having me.

00:00:35:02 - 00:01:03:12
Speaker 1
So Brendan, I feel like many accountants knew pretty early on that they wanted to be accountants. They enter business programs in college and university, specialized in accounting to co-op positions, kind of like how Wharton up to Grove offers them. But you and I have chatted a bit in the past and it sounds like your path looked a little bit different, so maybe you could tell us a little bit of how you found your way into accounting and were enough to grow.

00:01:04:22 - 00:01:09:03
Speaker 2
Sure I did at an early age, have interest in accounting.

00:01:09:07 - 00:01:09:15
Speaker 1
Okay.

00:01:09:21 - 00:01:32:07
Speaker 2
I remember one of my my dad's best friends and his previous accountant was an accountant. And I always thought he had a good lifestyle when I was a kid. Yeah, I did. Like, I took grade, I think it was green 11. You take accounting? I enjoyed it. By the time I got through high school, I had kind of thought maybe I would do a different path.

00:01:32:07 - 00:02:04:21
Speaker 2
I was a I was heavy into golf as a young person and I wanted to be a club pro. So I went to the University of Guelph and I did Hotel and Food Administration. I figured that was the best right degree for me to get to that industry. After university, I moved out West. I worked at Resorts, the Canadian Rockies as a supervisor and a snowmaker and various positions, which I really enjoyed.

00:02:05:13 - 00:02:32:19
Speaker 2
Didn't make a lot of money, worked a lot of weekend. Came back home from out West and not really sure what I was going to do next. Decided to go continue on the golf route, got a graduate certificate from Humber in Pro Golf Management. While I was there, met a lot of people, talked to them, realized that that industry was, you know, you would you would end up continuing to work a lot of weekends.

00:02:33:18 - 00:02:55:17
Speaker 2
Pay wasn't the greatest. I think he did that job really more for you know just the love of in that case would have been the love of golf, which I still do love. But I interviewed for a couple jobs or a job to manage a golf course, didn't get it, kind of went back to the drawing board, wasn't sure what to do next.

00:02:56:22 - 00:03:26:22
Speaker 2
A friend of mine who is a partner here now, Ryan Deyell, I had known him since I was three. I went to public school, high school with him. He mentioned that that Ward and Uptigrove rove was hiring entry level accountants, that you didn't have to be designated. I'd always assumed that to work at an accounting firm you started as a designated accountant, quickly learned that that was not the case, that, as you say, most people will article at a at a firm and go through co-op terms.

00:03:27:15 - 00:03:55:17 
Speaker 2
So I applied. Paul Haak interviewed me, who is now my mentor. I did get one of the things I found intriguing a before and after of was that they they were very interested in investing in my future so they had indicated that they would allow me to go to university, get what I needed to become a designated accountant, and get into this.

00:03:55:17 - 00:04:05:03
Speaker 2
Back then, what was referred to as the chartered accountant program. Right? So that really intrigued me and was a big driver in my decision to come to work and up to growth.

00:04:05:10 - 00:04:06:04
Speaker 1
Hmm. Okay.

00:04:07:05 - 00:04:34:20
Speaker 2
So that's kind of how I got in the door. Once I got here, I found that I really did like it. And accounting was something it really did interest me. I liked the flexibility of the business working 9 to 5. I had I had I had had recently been married and we had talked about having kids. So I knew that weekends and nights were probably not the best time to be away.

00:04:34:20 - 00:04:35:04
Speaker 1
Yeah.

00:04:36:00 - 00:05:05:04
Speaker 2
So that's kind of how I ended up at Ward & Uptigrove. Always kind of in the back of my mind was working my way up and becoming a partner. So I did take the long road. So definitely the road, the road less traveled as compared to most people. But to be honest, I wouldn't change anything I did. I think all my experiences were amazing and kind of helped, making me fairly well-rounded.

00:05:05:18 - 00:05:07:14
Speaker 2
Right, professional.

00:05:07:14 - 00:05:10:05
Speaker 1
So yeah, lots of life experience there, I'm sure.

00:05:11:01 - 00:05:12:19
Speaker 2
Definitely lots of life experience.

00:05:12:19 - 00:05:33:06
Speaker 1
Yeah. And now you're you're part of the vet group now, which is a it's a highly specialized group within Ward and Uptigrove. And in the past years, the sort of founder of that group, Dave Legault, who if you're a veterinarian listening, you probably know that name. He's retired as a partner and he's transitioned to his role as counsel.

00:05:33:22 - 00:06:03:00
Speaker 1
He's still quite has been quite active in the the buy sell flurry that went on. And, you know, from 2020 to 2022 and I think it's it's fair to say that he was and probably still is a mentor to the group, not just when it comes to best accounting practices for veterinarians, but practice management. And like so much more, maybe you can share a few tips or trends you've been seeing in that space.

00:06:03:00 - 00:06:27:24
Speaker 2
Yeah. So as you mentioned, Dave was and is a mentor to a lot of us that entered into the vet space that were enough to grow. Dave built the really built the practice. A few of the partners back when I started each had some vet clients. Dave focused very heavily on the vets at an early part in his career.

00:06:28:07 - 00:07:04:12
Speaker 2
I ended up working with Dave a lot as before I was designated and I kind of trained under him. I worked on a lot of his files. He started transitioning, Once I became a principal, he started transitioning some of the new clients that we were getting at Ward & Uptigrove in the vet space. To me, we did find at that point that a lot of vets were finding that they were being kind of underserved and they and they weren't overly happy with their with the services that they were provided by their accountants.

00:07:04:16 - 00:07:29:24
Speaker 2
And Dave was just such a wealth of knowledge for these for these owner operator DB teams that it was very easy to build the practice back then. We had a, you know, we just we had so many new clients coming in at once. So we also attended. We were fairly busy at the time. We used to go to the actually we still do.

00:07:29:24 - 00:07:58:01
Speaker 2
We, we went to the OVC Career Day, Industry Day met a lot of people there. We went to Dave and I went to the CVO conference in Niagara Falls. The CVO conference only comes to Ontario every so often. It was fairly interesting. The OVMA conference we continue to go to, it's much more lucrative, I guess, for us as we see a lot of our clients.

00:07:58:23 - 00:08:19:01
Speaker 2
We always turn into ten or 15 or more of our actual clients, and then we usually run into and the 15 other potential clients that you make conference. So we find that that's a real, a real good thing for us to attend. And even if we don't find any new clients, it's really nice to connect with our current clients and just see their faces.

00:08:19:01 - 00:08:56:11
Speaker 2
You know, we don't always get to see everybody. And in today's world of performance management, with the amount of that clients that we had as a firm, we were in a good position to create some benchmarking tools. So what we did years ago, we created along with the help of a software company, because we're not software people, we we developed a really useful benchmark tool that allows us to compare our clients by type of vet.

00:08:56:11 - 00:09:29:19
Speaker 2
So that would be a small, large, mixed equine practice. It allowed us to compare their by geography. If we wanted to buy urban versus rural sizing, all sorts of different parameters that we can kind of put in or keep out of of of a certain comparison. And what we end up doing is we end up giving that or providing a a look to the owner of how the clinic performed during the year.

00:09:30:00 - 00:10:19:03
Speaker 2
And we'll compare it to that clinic as well as similar clinics that we have in our base and also to the to the benchmarking parameters that all BMA post. So it's really we found that it's a very useful tool and most of our clients actually want to spend more time talking about that information as opposed to the financial statements which tend to be more backwards looking, the comparative tool that we have allows us to kind of drill down into certain areas that are performance management based and possibly identify areas where a clinic might be underperforming.

00:10:20:16 - 00:10:50:07
Speaker 2
So one big one, the three areas that we typically look at the most are production. And production is is your revenue. So what we would really like to see is when clients have broken out their revenue by providers. So that would be, you know, revenue based on each DBMR or VTI or whoever is providing the services in the clinic by species that might be large animal or small animal equine and then also by product mix.

00:10:51:00 - 00:11:23:07
Speaker 2
So product mix would be the or say drugs versus service versus pet food and stuff like that. So when the information that that the manager has has entered into the system is broken out like that, it allows us to break it down a little further and compare it across the board to what we're seeing in the industry. We also use a big part of production is obviously fees.

00:11:24:03 - 00:11:52:24
Speaker 2
Most clinics use the over a fee guide and they will use the fee guide to a point. Obviously geography and competition and all sorts of other factors go into their pricing, but the fee guide is kind of a base that allows that the clinic owners to to set their fees right. Another big part of performance management that kind of links with production is gross margin.

00:11:53:08 - 00:12:24:22
Speaker 2
So we have expectations where we would want to see or expect to see a clinic's gross margin come in. And if that margin is low, then that indicates that maybe there's a pricing issue or potentially a opportunity for costs analysis. The final part of performance management that we look at quite heavily is wages. Wages after after cost of goods sold.

00:12:25:05 - 00:12:57:13
Speaker 2
Wages tend to be the largest expense for our our veterinary clients. So we look it's it's really nice. So what we do is we break our not all firms do this, we break our our wages owed on the financial statements between VMs, which are the real producers, the support staff, and then also the owners. That gives us to sets of information that we like to be able to provide for our clients.

00:12:57:13 - 00:13:33:09
Speaker 2
That allows us to compare, you know, what your clinic is spending on support staff versus, you know, other clinics that are similar sizes. What it also allows us to do is prepare a valuation that we can give our our DVM clients that basically gives them the number that a potential buyer might look at. And we can say when we're in our meetings, you know, your your clinic is, is, is, is creating EBITDA earnings before income tax depreciation and amortization.

00:13:33:18 - 00:14:00:09
Speaker 2
We we look at that before owner's compensation or actually we look at it now we look at it before DVM compensation because what a lot of buyers will do is they will take that number and they will figure out how many VMs they they think that they need to maintain the production of the clinic. They'll use their own kind of cost model to figure out what the what their DVM costs might be.

00:14:00:15 - 00:14:19:13
Speaker 2
And then they can get to a they can get to a number that they consider as maintainable for the future. And then they will use is usually industry standard capitalization multiples to come up with what the goodwill value is for that clinic.

00:14:19:20 - 00:14:21:21
Speaker 1
Right. Wow.

00:14:21:21 - 00:14:31:15
Speaker 2
Yeah. So we, we do spend a lot of time on, on the vet comp when we in what we do when we do meet with our clients and they do find it to be very useful.

00:14:32:02 - 00:14:55:21
Speaker 1
No kidding. I mean, I feel like you you've touched on so many points that I want to go back to and I hope I can remember them all. But like for me, I think when people think, you know, accounting, they probably are thinking that it's all backwards looking at stuff. But obviously, you know, the vet group, it's not you're looking at how, you know, maybe what you've done in the past, but how you can improve in the future, which is really what you need to know.

00:14:57:14 - 00:15:29:24
Speaker 1
And then I think that's amazing that the vet comp is constantly giving you this valuation. It's not you already kind of know what you're dealing with, which, you know, with the buy sell flurry frenzy of the past would have been quite valuable, I'm sure. So that kind of gets me into my next question. You know, I was with you guys at the last OBM conference and like things have certainly slowed down, but we were still getting a lot of questions from individuals who are interested in purchasing veterinary clinics.

00:15:29:24 - 00:15:35:04
Speaker 1
So what are you seeing in the market now?

00:15:35:04 - 00:15:58:11
Speaker 2
Yes. So as you mentioned a few years ago and everybody in the world also knows a few years ago there was there was quite a frenzy of clinics being sold for prices that we certainly never expected to see or thought possible. There was many clients that I had that said, you know, we have no interest in selling to to a corporate buyer.

00:15:58:11 - 00:16:31:03
Speaker 2
And then they got a number put in front of them that was frankly just too good to be true. Right. But this is the frenzy actually created the demand for Dave's time. They've were very, very into the the transactional services is what we call it, and it's the need and need in the industry that was there to be almost like an intermediary and assist our clients.

00:16:31:23 - 00:16:56:01
Speaker 2
And it wasn't just the vet clients in our firm. Dave did that for all sorts of different types of clients, but for him it was predominantly the at that time the vets that were that were selling. So Dave had a relationship with both our clients, also with some of the, the, the lawyers that were that we were seeing a lot of times in the deals.

00:16:56:19 - 00:17:32:24
Speaker 2
He also had built quite a relationship with some of the buyers and he got to know which ones were more attractive for different types of deals because they all were different. They all offered different structures. So it was it was a real it was a real helpful service that Dave was able to provide to to the clients that were actively looking to sell, but also to maybe some of our clients that were approached by some of these big corporations and really didn't know anything about it.

00:17:33:08 - 00:17:33:18
Speaker 1
Right.

00:17:34:05 - 00:18:07:01
Speaker 2
So so the bubble that was created by the corporate buyers, it created a competitive market. And along with the low interest rates at the time, it provided these these clinic owners with with either an out because they were struggling to find an associate to buy in right. So currently the market did cool as expected with those buyers really buying up a ton of clinics.

00:18:07:07 - 00:18:45:03
Speaker 2
They and it was a frenzy it was almost like a race they were trying to buy. Each company was trying to buy as many as they could so they what we saw was that maybe some of them didn't have the background infrastructure in place to properly service the clinics that they were buying and provide all the things that they that they wanted to provide these these owners and to keep those clinics running at a at a rate that that made sense to to the multiple that the valuation that was being used right.

00:18:45:03 - 00:19:06:15
Speaker 2
So once that did cool, which it did, it cooled kind of in late to 2022. We had conversations, Dave and I had a couple of conversations with some of the bigger players in the market, all of them kind of telling us the same thing, that they were kind of pausing, just making sure they had their feet underneath them and then they were going to likely reenter the market at some point.

00:19:08:04 - 00:19:41:22
Speaker 2
There are still a few that are in there right now. The two smaller corporate buyers are P three veterinary partners in that tier. They still have been not as aggressively looking for the clinics to buy, but they are still kind of in the market. Their structures are a little different maybe than than some of the others. So and there will be some new players, we believe, that come into the market that we didn't see before, such as vet corps.

00:19:42:10 - 00:20:08:07
Speaker 2
They came in in a late 20, 22. We don't expect the prices to ever get back to where they were. They were just raising their insane prices, the capitalization multiple that I mentioned before, which is kind of the number that you used to once you've once you figured out what your maintainable earnings is or your discretionary cash flow, whatever you want to call it.

00:20:08:10 - 00:20:40:22
Speaker 2
Right. That multiple we've we get we believe, will likely remain in the single digits where previously we saw it in the we that we saw it start in the high single digits and got upwards of mid twenties which was wild. Yeah. Then and previously the buyers were really they were, they were, they were a lot of them were just buying the clinics and weren't really looking to be partners with the old owners.

00:20:41:06 - 00:21:03:15
Speaker 2
A lot of the new deals and new buyers that we're seeing, we believe the main goal of the of these buyers are going to be to act more as partners and provide a management infrastructure. You know, that the DBM may be currently lacking, right. Which would freeze. It frees those PBMs up to be producers.

00:21:05:04 - 00:21:39:21
Speaker 1
That makes sense. It's just so interesting to watch a lesson, do it constantly change. It's just it it boggles my mind that the numbers got so high and it's just always changing. I think it's so interesting and I do remember the one point I wanted to bring up when you were talking about breaking out wages and how that factors into valuations as well, because we had a really interesting episode with Leah is our very first episode talking about DVM compensations and how kind of how maybe a smaller guy might be able to be competitive in attracting talent and retaining it.

00:21:39:21 - 00:22:11:15
Speaker 1
So rather than just just throwing a large number out there. So if anybody's listening and you haven't listened to that episode, I think that would be a valuable one to go listen to as well. Yeah. So yeah, I think that's all my questions for now Brendan, because it's a, it's a lot of information and I'm really hoping that our vet clients get some, some value out of that, whether they're thinking about buying, maybe thinking about selling in the future, things are constantly changing and we have a lot of resources that can help them.

00:22:11:15 - 00:22:12:01
Speaker 2
Definitely.

00:22:12:12 - 00:22:16:16
Speaker 1
Yeah. All right, thanks, Brendan. Thanks for joining.

00:22:16:16 - 00:22:19:13
Speaker 2
Okay. Thanks a lot, Amy. Thanks for having me. Thank.