Doctors Lauren Knobel, Ravi Tolwani, and Sandy Hazanow at Seven Hills Veterinary Hospital took a leap of faith to buy and save a struggling hospital. Drs. Tolwani and Hazanow shared with EVT why they bought it, how the purchase was financed, and how they turned a failing practice into a thriving success.
Why They Bought the Practice
After becoming established in the East Bay, Dr. Tolwani (who had already purchased another hospital in Albany, California) was interested in a new financial opportunity. When informed of a struggling San Francisco practice, with the benefits of being located in a busy shopping plaza with a dog park nearby and a strong community focus, he knew that with the right team he “could make a big difference by providing excellence in quality of care and improving the finances.”
The previous business had faced the challenge of high operating expenses resulting in insufficient profit. Cash flow was an issue; as Tolwani noted, “We were unable to get a detailed financial picture when we were doing our due diligence. Some of the record-keeping wasn’t stellar. We did learn, however, that some expenses were outliers and excessive such as renting of a satellite storage and office area. On top of everything else, the practice was carrying a large loan and had other debt commitments.”
Tolwani readily admitted the thought of being a sole owner on this particular venture was not as appealing and fun as being a co-owner with other partners. He spoke with Knobel and Hazanow, “…and they were in! That was enough for me.” Hazanow’s previous experience as a veterinarian in the San Francisco community, along with Knobel’s prior ownership of an Oakland veterinary hospital, helped them to believe that with this combination of strengths, success, success—even in this daunting venture-could be achieved. Dr. Tolwani brought the business acumen; Drs. Hazanow and Knobel emphasized the clinical side and previous practice experience.
With Hazanow’s strong interpersonal skills and fluency with staff training added to the mix, along with Knobel’s prior experience in practice ownership and interest in promotion and marketing, they knew the right team was assembled.
How the Purchase Was Financed
“With every loan you obtain, you do your due diligence, see what’s possible,” notes Tolwani. “All of that fell into place, as we had a very positive relationship with the bank and had faith and confidence in them to provide us with expertise and support. We modeled various financial scenarios and obtained sufficient working capital as part of the loan to get us to the stage of profitability.” Through Live Oak, the 3 partners went for a small business administration (SBA) loan.
They received an attractive loan package and negotiated an attractive practice purchase price. With the economic downturn at the time of the negotiations, the SBA provided incentives such as waiver of SBA loan fees which saved thousands of dollars. The process was assisted by escrow banking agents as part of a routine practice purchase, which helped keep the transactions proceeding on a timely and organized basis.
How the Struggle Turned into Success
To help make the newly purchased practice a thriving one, many of the previous staff who excelled at their positions from the previous business were rehired. Having practiced for many years in San Francisco, Hazanow was the “familiar face” that the community already knew, while Knobel provided a new face and perspective to help convey the change in ownership and practice direction.
The 3 new owners made sure that all the staff (previous and new) were able to offer their thoughts and underwent training together. The experience of the previous staff was given special consideration; over and over again, their opinions were asked and integrated into the new procedures and protocols. Hazanow stated, “They knew the clients the best, and already worked very well together. We made sure they knew we appreciated them.”
“As far as staff and doctor turnover, the clients had been frustrated with that before we took over,” she continued. “But we are here to stay and the veterinary professionals we rehired were very interested in learning and growing. When people love what they do, and you can foster that passion, they want to stay and do it better! We solved that challenge right away.” For Hazanow, it’s an honor to be included in clients’ lives, a sentiment likely shared by the clinic as a whole. “If you feel that, then everyone can feel it.”
Building Ties in the Community
Hazanow began with house calls for clients attempting to contact the hospital. As the hospital was closed for a time, her efforts were the first to communicate that the new owners cared about the community and the clinic’s patients, and were willing to go above and beyond the call of duty to help them.
In terms of online outreach, their website was designed as more of a social networking site with videos and appealing personal touches. They wanted people to feel like they were part of a new medical home and family, not just part of a big corporation
Marketing Their New Practice
The new management had previously established relationships with pet service providers (eg, trainers, dog walkers) and Hazanow made certain the providers had access to business cards and discounted exams. She visited pet stores and gave incentive cards to offer to clients. New signs went up in the shopping plaza the hospital was located in, aiding with its new public promotion. The client list from the previous hospital was used to send out postcard mailers to further announce the new opening.
Even when the doctors visited dog parks with their dogs, they chatted with potential clients, knowing the importance of “word of mouth” marketing. However, “We were there as pet owners in the community first, and as doctors and business owners second.” More marketing ideas are currently being developed, such as holding booths at street fairs and getting out among the community.
Their Financial Approach
Clinic management knew it was crucial to watch every dollar, but wisely: “We were frugal, not cheap!” laughed Hazanow. They launched into their innovative venture being cost-conscientious (ie, using film rather than digital at first) with an emphasis on superior medical care (eg, eventually purchasing a new digital dental machine that was top of the line). Their efforts paid off; since its purchase 2 years ago, practice revenue went from $0 to over $1 million with a profit margin of roughly 15% (before debt payment and taxes).
Drs. Hazanow, Knobel and Tolwani have some tried-and-tested advice on how to create similar successes in buying practices. It can be summed up in the following checklist:
• Assemble a team with complementary strengths.
• Get the practice priced right! Don’t overpay.
• Location, location, location—consider the opportunities of the practice.
• As owners, communicate frequently—whether on matters great or small.
• Stay true to your practice ethics and show everyone that you value the entire team.
To download a copy of this article, click here: Case Study: Seven Hills Veterinary Hospital