Acquisitions Anonymous - #1 for business buying, selling and operating - Two Veterinary Clinics for Sale - Dzmitry Miranovich - Co-Founder at Associated Veterinary Partners - e54

Episode Date: December 2, 2021

It's a vet clinic episode! Our guest this week is Dzmitry Miranovich. He is Co-Founder at Associated Veterinary Partners, which is a roll-up of vet clinics. We look at two that are for sale right now.  Thanks to our sponsors this week: Tinyacquisitions.com - buy a business with a few clicks, most for less than $10,000 SMBash.com - THE conference for buying, operating, and investing in the SMB and Micro-PE space.-----* Do you love Acquanon and want to see our smiling faces? Subscribe to our Youtube channel.* Do you enjoy our content? Rate our show!* Follow us on twitter @acquanon Learnings about small business acquisitions and operations.-----Past guests on Acquanon include Nick Huber, Brent Beshore, Aaron Rubin, Mike Botkin, Ari Ozick, Mitchell Baldridge, Xavier Helgelsen, Mike Loftus, Steve Divitkos, Dzmitry Miranovich, Morgan Tate and more.-----Additional episodes you might enjoy:#62 Two Landscaping Businesses for Sale - Mike Loftus CEO of Connor's Landscaping#66 Analyzing Software Businesses for Sale with Steve Divitkos, experienced industry CEO#42 $900k Moving and Storage Company / $500k Rural Mini-Storage#61 Two Manufacturing Businesses for Sale - Brent Beshore - Founder and CEO at Permanent Equity#24 $5mm pool services and lifeguard staffing co / $2mm septic services business -  featuring baller @WilsonCompanies as a special guest!#45 $800k/yr cleaning business in Midland, TX / a $565k/yr window cleaning business in San Antonio, TX #48 Two Landscaping Businesses for Sale - Mike Botkin of Benchmark Group--- Support this podcast: https://anchor.fm/dealtalk/supportSubscribe to weekly our Newsletter and get curated deals in your inboxAdvertise with us by clicking here Do you love Acquanon and want to see our smiling faces? Subscribe to our Youtube channel. Do you enjoy our content? Rate our show! Follow us on Twitter @acquanon Learnings about small business acquisitions and operations. For inquiries or suggestions, email us at [e-mail]

All right, everybody. Welcome back to another episode of Acquisitions Anonymous. Really glad that you're here. We have a fun one today. I'm Mills Snell, one of your co-hosts, joined by Michael Girdley. Our other co-host, Bill De Alessandro, isn't with us today. He's out gallivanting around with his wife. But we have a really fun guest today in a really sweet episode. We have Dmitri Maranovitch. Good afternoon. Did that say, all right? Yeah, dude. It's perfect. All right. I took my college professors four years. Dimitri is here with us as a subject matter expert. We're going to have a couple of fun deals to talk about in the vet space.

And some of the consolidation that's going on there. And I guess we don't really talk about a ton of roll-ups. We talk about them from a distance, but we don't necessarily talk about them in depth. So, Dimitri, really glad that you're here, man. We'd love for you to just give us kind of a little snippet about you and maybe 60 seconds worth of an intro. Yeah, absolutely.

Thanks, guys, for hopefully. me. I love your podcast, so happy to be on. Yeah, my name is Dimitri. As Mel said, I have background in finance. I did invest in banking and private equity, you know, lived in New York for, what, eight, nine years, then moved to Virginia to do this. I truly covered the best space of my last job and, you know, we invested in several larger roll-ups in the space and like the industry, you know, has those, you know, attractive economic characteristics and, you know, I love pets, a lot of animals. and I ended up connecting with a friend, friend of a friend who's a veterinarian,

and the two of us collected from values and sort of where we wanted to take this. And, yeah, so, you know, the two of us embarked on the journey of, you know, building this together, and here we are. That's awesome. So you tell me, what do you guys, what do you own right now in terms of kind of number of practices or however you would quantify and where are you in that journey? Yeah, so we're, we're a relative. early on. We have two clinics that we partnered with. So our ammo is a bit unique in a sense

that we partner with clinics. So in a typical scenario, we would, you know, by a majority stake in a clinic, was the doctor who's the owner, committing to stay with us, usually for four or five plus years in a true partner capacity in the sense that they benefit the economic lift up from the growth on the same terms as we do. And so the incentives are really aligned. and yeah, we get a committed partner on the ground. So we've closed two partnerships so far. Actually, both happened within the past months. So it's been quite busy.

And then we're hoping to do maybe two or so by the end of the year. And then, you know, we're working a handful of others as well. And so you're buying a majority stake in these practices. So that means that like if, say, somebody came along after you do this with 50 them, everybody else will get dragged, all the minority partners would get dragged along with you at a sale time. Okay. And that's some expectation, right? The structure is not that unique. You know, there are a number of roll-ups in the Beth industry and, you know, dental dermatology that have a similar structure in the sense that they have, you know, equity sitting in the

OECO versus the P. Sorry, versus the WholeCo. I think what's unique about? our structure is the fairness of the economic incentives and how they're aligned and how the economic values split between us and the clinical partners. I think that's unique. The actual, you know, what's typically called the MSO-BSO structure is not that unique per se. But yeah, so generally, you know, there's an expectation that at some point there will be an event in the future and the partners will benefit from that event. And they'll, you know, essentially get to tag along with us to that end. And we are not rebranding clinics.

We're not changing their identity. And that's also one of the selling points is that we'll tell them, hey, we'll preserve your legacy. A lot of the time, those clinics have been founded by either sellers, you know, 20, 30 years ago or their, you know, mothers, fathers, you know, long time ago even before that. And so I think, you know, that's an important part of our pitch is that, you know, we'll preserve of likes for them and will be a good partner for them. And, yeah, Josh.

All right. Well, we have a couple of fun deals to talk about. But before we get into those, Michael, you have one of our sponsors. Yeah. Yeah. Well, in our never-ending quest to make this podcast break even, we have two sponsors today. So the first one is the guys at SMB bash, SMB bash, I guess. I'm still not straight on how to pronounce it.

But Mills, me, and Bill will actually be. be recording an episode live at this conference in Orlando in February, and then both, I think, Bill and I are preparing talks. So evidently, mine will be about hiring. So it should be pretty entertaining to say the least. And this is really, it's something special that's come out of Twitter. It's an intimate gathering of acquisition entrepreneurs and S&B entrepreneurs. So kind of what Moses Kagan's reconvene, or what capital camp was for allocators or reconvene was for real estate, this is for for S&B people. So being S&B people, we're excited to be part of it, and me, Bill, and Mills will be there. We'll be doing a book signing. Did you know that, Mills? It's on your head, right?

We have to write a book first, but yeah. Yeah, yeah. But in all seriousness, check out Smbash.com. The guys are working hard to put on a good intimate show, and thanks to them for sponsoring the episode today. Awesome, thanks. All right, Michael, you have our first deal as well. Yeah. Believe it or not, it is a veterinary clinic. I have no idea why. But yeah, so this one is actually on a biz buy-sell. Mills, I know you're proud of me. I pronounce it correctly, and that's because it's written on my screen.

But it's a nearly 50-year-old veterinary hospital for sale in Oregon. In a true broker fashion, Chuck Atkins, the broker from Business Connection, did not put a photo up. So thanks to Chuck for not putting your typical stock photo on the listing. They're asking $900,000 for the business. The cash flow is $230,000 a year, so $900,000 asking price, cash flow $230,000. The gross revenue is $925,000, so they're selling for about one-time's revenue. There is $250,000 in furniture, fixtures, and equipment, FF&E, and it was established in 1972 and has $0 in rent.

They go on to describe it as a well-established veterinary clinic in an excellent location, nearly 50 years old, high-demand area. It is the only veterinary hospital in its regional location and is on the highway through town. It is a suburb of Portland, Oregon that is made up with two communities, according to the 2010 census, had a population of about 15,000, and they are growing, Columbia River Gorge, all that kind of stuff. The reason for the sale is that it's because a larger veterinary business with multiple locations is hiring away their veterinarians. That's kind of depressing. But, yeah, so they've had vets here, and I guess they're, they're. getting hired away for more money elsewhere.

The owner is a veterinarian that also owns another location in a neighboring community. Due to shortage of veterinarians nationwide, the owner is having a challenging time competing against the larger hospitals, finding replacement veterinarians when they are offering $30,000 to $50,000 signing bonuses. Since they are now in the situation, they don't feel like they can staff both locations. They are now selling one of the two locations. Man, that is like the most depressing teaser intro I've ever read. They feel like they are selling the best of the two locations and they are selling

selling this one because the other one they own is in a community where I live. The two locations support the owner and the four veterinarians that work between the two locations. Two of the veterinarians are gone and one will be there through July and another through September. So it sounds like we're buying a business here that is understaffed from the get-go and challenged that way. Continually turning away business and the owner feels like this location could support a new owner vet and another veterinarian with annual sales in the million dollar range. They operate five days a week and the owner feels if it was open seven days a we could support a third vet and be on track to go up 20 to 40% based on last year's sales.

Let's see here. They didn't tell you how to value a veterinary hospital, which I guess is basically a key for maybe they're looking for somebody who is not a vet to buy this or somebody already in the roll-up space. The real estate is leased. It's a 3,800 square foot space, six employees, and that's what we know about this one. So what do we think about this nearly 50-year-old veterinary hospital for sale in Oregon? Yeah, so first of all, I'm sympathetic with the seller. I think it's a, you know, recruiting betweenernerants is challenging in certain parts of the country,

especially in rural hospitals. Now, it's definitely not impossible, and I feel really bad for him, but yes, he essentially seems like Shad one of the hospitals that he owns because his challenge, you know, his challenge to retain illness, sorry, some internearines. So what we've seen, I mean, first of all, I think it's a top deal, right? Like, I don't know much about Oregon. You know, there are certainly some areas where getting zoned for that clinic is difficult. And so if that was one of those areas, they might be an angle whereby you buy into this business

to get that essentially lease or that zoning and then you staff it and, you know, you have a successful business. I mean, here it sounds like you're basically buying a building with no vet staffing. So I assume there is support staff is in there. So maybe technicians, receptionists, maybe a practice manager and so forth, which is valuable. But I think what's the core of what's lacking is bitternarians, right? Because you can't produce revenue beyond sort of relatively minor amounts without veterinarians. And so I think that's challenging. I think it's interesting that they're being so upfront of the fact that there is one or two larger

insulators around there trying to coach, actually approaching their veterinarians and that they're struggling to retain them. Yeah, I mean. Dimitri, can I ask a couple of kind of maybe dumb questions? Yeah, yeah, no, absolutely. Sorry. Is there a difference between a veterinary hospital? hospital and a veterinary clinic? No.

There's not the same thing. It's not like the hospital's improved in some way. No, no. I think historically they might have been some difference, but in today's, you know, no, it's the same thing. Okay. Yeah. Is there, is there any difference in your mind?

I don't know a lot about vet clinics, but the one kind of delineation that I'm aware of is like small animal versus large animal. is there is there one that is better i mean i'm thinking about like the obvious differences right of like hey this is my childhood pet and i want to spend a lot of money on it versus like this is just you know another horse on my farm or something but is there any delineation or is one of them preferred uh or or kind of better better liked in in your analysis yeah so most of the consolidation is actually happening in the small animal space. Small animal is a lot more attractive than large animal.

Now, equine that you mentioned is actually its own beast of its own. Equine is very unique. It's a very tight community. It's almost like they don't let outsiders in. Like they, you know, oftentimes they wouldn't even talk to you if you're not coming from the equine background. But usually large animals, you know, that large animal clinics, the business model is different, right because a lot of the time that's a that's a rural hospital and a lot of the time they deliver

the service on the client's premises so you know they have a bath who jumps in truck or a van or you know the vehicle and drives to a farm and then they made the minister into biotics or do like the what's the the cattle like pregnancy tests and stuff like that i'm not using reticumannology by the way but it's very different from your typical you know small animal clinic which is where people come to use pets. Some clinics do mixed animals successfully where they would be an 80% small animal, 20% large animal,

maybe that's sort of some of the kind of side thing that they have going. There's also exotics that is out there, you know, that's birds, lizards and things like that. Usually it's a small, you know, some small portion of any clinic's business, And most lot of claims don't do exotics at all. But I think at the end of the day, comes down to two things.

First is economic characteristics. You know, the small animal is just a better business. And then the two recruiting staff, because it is a lot harder to find a veterinarian who's proficient in, you know, exotics, you know, lizards and birds versus to find a veterinarian who's proficient in dogs. And so that also comes down to your recruiting retention. strategy. And that's actually one of the reasons why, you know, rural practices have struggled is because they're struggling to attract younger bats who are interested in doing large animal work.

And so this clinic, you know, obviously they don't tell us, but I would suspect that they're probably doing a good amount of large animal work. And that makes it more, you know, harder to attract veterinarians as well. Yeah. Is there no, you know, in human medicine, we've we started to stratify primary care or what doctors do, right? You have nurse practitioners and then there's, and then there's specialist on the other end. Is there equivalent of like nurse practitioners or nurses in the veterinary space or is it just like either you're a DVM, Dr. Vetting Medicine or you're not? And are you able to solve some of this labor shortage through people whose training process is maybe quicker? Yeah. So that's a endpoint. So yes, there is a,

similar certification, somewhat similar. It's called, you know, licensed vetting technician, but this requires, on a comparative basis, less schoolwork than ORN registered nurse. And in the legal framework of most states, there is no framework for that individual to be able to do as much as an R and is able to do as humans. So in some ways, Batman is, you know, tougher than human medicine because, you know, you don't have that paraprofessional to the same extent that they're able to do all the same things that are in is able to do as humans and that's one of the problems and there are few schools there's uh i think prudeau in indiana is working as a program that's targeting to create this you know sort of

paraprofessional uh profession uh within bat mad uh but then it comes down to state certifications and where in which state they can actually practice what they are being taught that's number one and then uh Yeah, and also like actually, funny enough, telemedicine in some ways is more regulated with animals than it is humans in the sense that with animals, you know, obviously animals can tell you what's wrong with them, right? They can tell you all my life hurts and this is how it hurts. And so most states have a framework whereby for your animal to be seen by veterinarian, you know, there has to be a pre-existing relationship between the veterinarian and the animal.

and so that makes it harder to serve, you know, a lot of patients, you know, unlike in human medicine, where that becomes an option in the instances. Well, and so these guys are struggling and trying to solve for four times cash flow almost, but they say they have this like strategic problem where they can't keep staff. And it says here that the other like, I guess veterinary clinics of America, some of the larger hospital chains in the vet space are offering $30,000 to $50,000 signing bonuses to steal away the vets that are working for this guy.

How much does a typical vet make? So I'm going to give you that answer, but it depends. Usually vets make about 20% of production or so, 18 to 22% of production that they made, which obviously differs very much. across the country. And so, you know, it could be anywhere between $70,000 on the low end, maybe like $65,000 in some rural small communities. But that would be an outlier up to, you know,

$100 plus $1,000. Now, I think, you know, specialists and people working emergency room 24-7 being on call or, you know, that's working like New York City in large metro areas. make more. But yeah, I'd say, you know, I think that that's probably the range. Those bonuses that they mentioned here are not they seem rich. You know, it's not unheard of, but you know, for a small town in Oregon, that that feels like a lot. Now, obviously, we don't know the local dynamics and what those numbers actually imply, what they mean. So it's hard to actually engage that, but that feels like a lot. Now, with your question about

valuation and, you know, sort of four times cash flow. I mean, this cash flow figure is not real, right? Like, there's no, there's no cash flow, right? There is some cash flow because you could steal around what's called tech appointments, meaning, you know, a technician could do what you're cleaning and some other things. But, you know, that's a relatively small portion of your entire business. And so if there is, if there are no veterinarians, there's no cash flow. So I think the only buyer who would, so two buyers could buy this. One is a veterinarian who is, you know, wants to live in the community and would buy this clinic and they would essentially become the production themselves. And then the other type of buyers may be consolidated, maybe one of those larger ones

in the area would buy the clinic as a sort of hub and spoke on or just have like a satellite location of some sorts. But with Beth clinics and that's actually not dissimilar for dental clinics and, you know, physical therapy offices and whatnot. Cashel figures that brokers often show are not representative of the actual cash flow that you get as a owner because they're often not adjusted for between their ends compensation. So, you know, in this instance, right, if the clinic is doing $900,000, you know, $1,000 of production, I think it's probably doing 125 or so

150,000 dollars of EBIT at best if it's like a very well-drawn I mean really well-grown well-operative clinic of this scale it's probably doing 10 to 15% evaluation and so when they show you a casual figure that's way in excess of that that tells me that they're either not factoring

in doctor production or like doctor compensation, which is probably the case for rent because they show that the rent is zero, but they also say that the building is leased. I would assume they factored in rent, I would, I'm like 80% certain that they're not factoring, factoring in doctors' compensation. So there are, one of the businesses I dug into once was veterinary Centers of America, VCA, I think you see they're blue and white signs everywhere. So that's owned by, what's owned by something weird like Mars Corporation or something like the candy people yeah it's on the Mars so why would why would a big chain like that not be interested in a business like this it seems like that

that would be something they could potentially make work right because they have a ability to recruit and transfer their people around and all that kind of stuff yeah VCA is i think VCA is probably doing some sort of you know mapping better than aliases and they think that they you know vCA is known for buying clinics and combining clinics like they they could buy a few smaller clinics and getting them all together into one building and made them more efficient that way and so you know these days they're usually buying two two-three doctor clinics you know they own a clinic nearby they probably don't have a need to buy this clinic they probably think they can just you know essentially approach clients and

make sense. With independent clinics, what really works is having a strong culture and that sort of attracts veterinarians and stuff because, you know, all those like very large consolidators, like VCA and MBA and that, or, you know, don't get me wrong, they in some ways they offer great benefits, some of them do and, you know, they actually have a structure in place and process that some employees very much appreciate, but there's a subset of professionals, there's a subset of professionals in the veteran space that are opposed to that model.

And so they would actually much rather prefer to work for an independent clinic. And that's actually, frankly, what we do at the APP is we position ourselves as being vet founded, the vet lab, not pride equity back. And that helps us to, that's our culture. And so we partner with clinics that they're like-minded, right? that they have this feeling of being an independent clinic.

They have this very strong culture. And so if you do have a strong culture, then generally speaking, you're a much better position to recruit someone if you don't have a strong culture. And I know this is very subjective. Yeah, it's such you feel it's very subjective. But it's true and it's very hard to gauge in the first visit or the first time you see the clinic. But sort of when you come in and you speak with the staff, where it becomes apparent.

Yeah. Well, reading this teaser for this veterinary clinic in Oregon, it just smells like a place that's not good to work. You talked about the vets typically have an incentive plan where they're taking a percentage of their income generated for the clinic. It wouldn't surprise me if these people haven't even gone there. They're just like, oh, like it's 1965, we'll keep paying you a salary and no incentive plan, no nothing.

Yeah, it's surprising. Yeah, you could be right. It's surprising. So the clinic has been around for 50 years, right? And that's great. I mean, usually that's a great sign, right? There is usually the legacy. And I mean, I have utmost respect for the owner.

I think, right? Like, they've done a great job keeping in this clinic, running it for 50 years. I'm wondering if that's not the culture aspect, if it's just fatigue aspect, where the owner has two clinics and maybe. Maybe they're approaching an age or already eight, you know, at an age where they just don't, you know, they just don't have energy to deal with all kinds of issues that come up and they just find it hard to compete. So it might not be culture issue at all. They might have great culture and that might be a wonderful hospital. So the one who's a very family style and true independent hospitals, but they're just struggling because, you know, the owner is, you know, exhausted from, you know,

trying to compete with others and also running to hospitals at the same time. It does, I mean, it's interesting, one of the things when I'm looking at these businesses, I'm thinking about, what am I buying, right? And when you're going in and partnering with these vets, you're actually solving the biggest problem that appears that these guys have, which is who's going to do all the work? And, you know, it's tough to see a lot of value in something like this if you're not already a vet or you don't have an ample supply of them. Right.

You're right. you're right if this business had been healthy right if they weren't like bleeding off physicians

or practitioners what I mean are they right is the rule of thumb correct is it kind of one times revenue or maybe

four-ish times cash flow even though that maybe doesn't reconcile with EBAD truly yeah so

the the the four times cash flow well we were just talking um is Michael about this

the cash flow here must be a significant lower than that, right? Because typically a vet hospital of this size would have a 10 to 15% EBITDA margin, and, you know, which would be $90,000 to $355,000 roughly. You know, here they're showing a much larger figure. My bet is that they're not factoring in a veterinarian compensation

in that figure. So, you know, usually vats are compensated, you know, roughly speaking 18 to like 20%. 20% of production. And so that usually comes out of that, obviously, your EBDA before you get to actually EBDA or from your operating income before you get to your EBITDA. I bet they're not doing it here.

I bet they're viewing this as like a cash flow that's available to you. If you're the veterinarian and you buy this clinic. So if I'm a vet, then I buy this clinic, I'll be generating 230K of cash flow to me, but that includes my compensation as a clinician. Yeah, like a seller's discretionary earnings. One times revenue sounds about right. I think it depends again on geography and other factors,

but that generally sounds right. You also have to look at the composition of revenue because especially more rural clinics, they would sell a lot of product and not a lot of service. So service is a lot higher margin component of your revenue, right? and services, you know, any sort of exams, tests. It's actually

could be characterized differently, but it's like surgeries and whatnot. And then products is basically, you know, anything that oftentimes you can get in truly. And so products are lower margin. And again, at the time, some products are higher margin, but general rule of thumb

is that products are lower quotes of revenue. And so you would want to know what split is before making that assumption, but generally speaking, like a one-time sales is a good estimate. But then again, if your margin, if you

sell, if your sales makes it such that your margins are less than your thing, then you know, you'd probably go with less than one-time's revenue. Or you could go more than one-time's revenue. I think that's really high quality revenue. Sure. Let's move on. Let's move on.

You should move on to deal number two. Yep. Yep. Yeah. That's good. You got our sponsor first. Yep. Yep. It's our longest running sponsor, Tinyacquisitions.com.

So it's a great website where you can go and buy and sell small money making projects. So usually selling for 10K or less. So mostly online businesses. So if you're the typical kind of tech builder who's built something up with a little bit of, with a little bit of revenue and you want to go sell that FBA business or online sales. business that's tiny to somebody else. You can do it all in one click. They handle escrow and all that stuff. So they have a bunch of projects here showing their website and, you know, the money will show up straight in in Skype or stripe if you're if you're a seller. So pretty fun little business.

Thanks to Jake and everybody on the team for supporting us and check out tightening acquisitions.com if you're interested in a good way to get up to speed on owning a side hustle business with a few clicks. So back over to you, Mills. Awesome. Thanks to the tiny acquisitions. So our second veterinary practice deal for the day, Michael's going to pull up the website for it. But this is one that Dimitri sent over to us and that we kind of talking ahead of time found online. So this is in California.

It's a veterinary practice for sale. The asking price is $795,000. It says that they're a very successful, long-established practice. located in Humboldt County. They're a small animal practice, 68% canine, 31% feline, and 1% exotic. So that kind of matches up with what Demetri was saying earlier. It's a rural town of about 136,000 people. It's a great opportunity for the practice to gross over 1.45 million, so 1,450,000. The practice is open five days a week. It's a beautiful landmark building, just under 4,000. 4,000 square feet, and it includes an on-site residence, which allows plenty of space on this 10-acre

parcel. Interesting. So business has been around since 1985. The building is also for sale in conjunction. I'm not sure if it doesn't specify if it's included in this asking price or not. The demographic is rural. They have three operating kind of exam lanes. They kind of give some description about the design of the building, a reception area, nine large kennels, two large cages, 24 medium and 11 small cages, kind of three treatment examines, three surgery, three recovery rooms, three laboratory, three x-rays. They do medications, vaccinations, lab, surgery, professional services, and offer pet supplies. And then their 2020 gross revenue was, you know, that $1,450,000, 2019 gross was about, about $100,000 less, kind of below $1.3 million.

Staff-wise, they have two full-time receptionists, two full-time assistants, and one full-time office manager, which makes me think that it's probably just a one bet, but we'll get Dimitri to chime in on that. They, let's see, it looks like 900 patient visits a month and about 40 new patients a month. And there's some nice pictures of the inside. Dimitri, take us to school on this one. Yeah, so I have questions, but my God's reaction is that this might actually be interesting.

Now, Kevin, that we don't look, you know, we will look at clinics through the Midwest, East Coast, South. We don't go to the West Coast. We don't go to California. There's some regular variant issues there that make it harder to operate, but that's sort of setting this aside. So clinics specifically, so they're saying they did

1.5 million of revenue, gross revenue last year. This is actually a decent size. You know, I would think this is probably a 2-Bet clinic. Maybe one full-time, two-part-time bets. Could even be like 2-5-bets, frankly, depending how productive they are. And also depends on the pricing environment in that area specifically. But this could actually be, you know,

pretty interesting on that standpoint. The staff here, frankly is a leap. I don't know if they've listed everyone. I do have a question because they don't list any. So I guess they list two assistants. There are no technicians. I would think that,

so it's quite challenging to produce one and a half million revenue without more support staff. So usually a good roll thumb as you have two to three assistance slash technicians per veterinarian. So there is two vets here, which is my assumption, you know, they probably need to add another, you know, two assistants or two technicians.

And so my guess is that the clinic, as currently a staff, is actually understaffed. And so if you add more support staff, you could probably leverage more reductional de viztrianians. And so there's potentially some upside there. I also have some upside for more suspension because obviously, well, not obviously, but every incremental dollar of the Trenuio and production

has a higher margin than the prior dollar because of the fixed cost base of the clinic. So, yeah, I mean, the fact that it's listed as rural, like, it doesn't concern it at all in it. It's a town with, you know, 130,000 people. It's not that rural, right? Like, in my playbook rural, it towns, like 3,000 people. This is actually, you know, like a decent size town.

frankly. What else? Yeah, I bet the building is not included. It's priced. I think it's interesting. You know, they're pricing it less than, you know, roughly, you know, 0.6 times revenue. I bet there's something going on there. Maybe the owner is retiring. Maybe the owner's a full-time scenario and he's retiring. Maybe Mills, you're right. Maybe it's a a one and a half. I mean, I doubt it's a solo clinic. Maybe it's a one and a half clinic and then the owner is just extremely productive like we've seen the tournarians doing over a million on their own who are just like extremely hardworking and overworked. So maybe the owner is retiring and so the production is going to go from one and a half million to half a million. I don't know. Maybe

that's what's driving the price because if this was a clinic that has, you know, truly want to have middle of the production, like you would sell them for more than $800,000. Yeah. Well, you've got the one sign that I came back to is the clinic was established in 1985. So if you do the math, that's 37 years ago. Like, okay, yeah, like, it is precisely the time in which I'd expect somebody who's been working their butt off for the past 37 years to be tired, ready to just get out of it, move on to their next thing.

Yeah, that's fair. I mean, a lot of, like, you know, one of the claims that we part in ways was actually founded by the current owner's father, right? And so the clinic has been around for, I can, I'm facing it's like 50 or 60 years, but she's only been running it for, you know, 20 roughly, maybe slightly more years. Yeah. But yeah, you're right. I mean, that's right. A lot of the time, that's, you know, that's a good, good rule of thumb. You know, yeah. So something like this, it sounds like the first place you'd kind of go is the same problem the first deal had, which was, how are you going to staff the clinic? And also, like, if the current owner is very productive, like, what does that mean for future production? And maybe this vet clinic is priced around what reality is when you get a mere mortal vet in there at some point, as opposed to the superhuman one or pair of vets and doing closer to $800,000 as opposed to $800,000, as opposed to one point. million. I'm just curious about this scenario. We talk a lot on the podcast about like buyer business

fit and obviously that's a really critical component here. You have a partner who is a vet and that kind of gives you guys, opens up the door to you. I'm also wondering though about transferability of ownership and how, you know,

kind of client relationships can weigh. Obviously, if this is the only bet in this town, I'd be kind of surprised with that population. There's got to be multiple. you know, when you step into this, a buyer like you, you're anticipating, right, you're at least going to have to hire a bet. If you can't partner with existing management, which is kind of y'all's thesis and y'all's playbook.

But if you just were buying this and you didn't have a bet, it was going to stay and you're going to have to hire a bet to be there, I mean, one, it seems like you're going to have to really dial in their incentives and make sure that your interest are all on because you're kind of putting all your eggs in that person's basket. but assuming you can do all that and your partnership is great with the vet who's going to be carrying all the all the revenue i mean how transferable are these you know relationships with with you know i guess not patients in this case but clients how sticky are those relationships through transition i'll address your question before i do that i'll just i'll say something else

in many states in the U.S. medical businesses like that, whether it's a vet clinic or physician's office or a dental office are not allowed to be owned by non-professionals. So I don't know the rules in California. We've never done a deal in California, but for example, in the state of Texas, you know, you're not allowed to own a vet clinic

between a lot of the veterinarian. Now, there are structures around that. It's called, you know, VSO or MSO structure. So there's a way to structure a deal around that, which is fine. But when we start talking about transferability and buying this clinic as a non-withternarian, I think it's very difficult, right? Unless you have a group behind you that has a recruiting arm

and you have a full-time recruiter, a full-time recruiters, able to get on the road that starts trying to hire a veterinarian. You know, you should have, well, in many states, you can't buy this business, and in most other states, you shouldn't. But then to address your actual question with regard to transferability, I mean, usually there's a, it's almost like a, I don't know, not genetic, but there is a memory, right? Like, people come to the place and they know that there's a vet clinic there.

And, okay, maybe now there's a different doctor. But if you preserve the culture and if you preserve the feel of that clinic and you treat your customers well. I mean, they'll keep coming back. Right. Yeah. So that's a good, you know, that's part of the right thesis that we want to be anti-corporate in some ways. If we don't want to change the name of the clinic,

we don't, you know, we want to honor that legacy. We want to honor the doctor who found the clinic and so forth. And so, and I wouldn't worry about that too much, frankly. If you wear a, Nils, if you wear this scenario and then you wanted to buy this clinic and just, you know, start the

business there. Like, I'm sure you'll be fine. Like, you know, assure there will be some intrusion because, you know, maybe someone really loved that one vet was there. But, you know, most people will come back and if they feel like they're treated well, they'll

come back. Yeah, yeah. Demetri, in terms of your acquisition model, how are you guys funded? Are you just internally doing this and then doing more acquisitions from cash flow, or did you go out and raise money? And is that you're going to go raise money, future

money at some point? Or are you a fund? on a holdco? What is what is the model in terms of how y'all are approaching stuff? Yeah, it's a hybrid fund slash holdco, but yeah, we just raise outside capital from a small group of investors, you know, who and, you know, who have relative, relevant skill sets to what we do, you know, someone has a financial expertise, someone has role of expertise. There's actually few people who have role of expertise, but, but yeah, so we did raise outside capital. How much just kind of order a magnitude? Did it take to start doing what you're doing?

I will ignore that question or I'll pass on that question. But yeah, look, I mean, it frankly depends if you want to do it right or not. If you want to do it right, you have to start building infrastructure. You have to start like day one. You have to start investing your accounts insisting your ERP system. you have to hire people. And so that obviously takes resources. And so I've actually been approached by several searchers,

the research funds are trying to buy a vet clinic or a few vet clinics. And, you know, they're struggling because it's because of the ownership rules and because of, you know, just complexity around the industry, it's very difficult to go and buy a clinic, right? Because you could buy like a clinic if it's like a large clinic, but you should, you know, large clinics go for very high multiples. And so if you're trying to do like a role of strategy, you do need to invest in infrastructure.

And that obviously takes resources. So like, for example, we hired a, you know, we have now four people, including head of recruiting, head of HR, we call Success Center. And then we have a practice management officer. And those, you know, it's two guys. They're awesome. And, you know, they are.

some ways instrumental in us being able to do deals and persuade sellers to partner with us. And so that takes resources and that's an upfront cause that you have to bear. Dig it. Okay. Well, and then on this deal, it sounds like the price sounds pretty good. There's things that you would want to know as to whether it fits for your model or whether it would fit for anybody's model. Is that kind of what I'm hearing? Yeah, I think that's right. And then price seems attractive. Now the question is, like, what's in there? Like, what are you buying?

When you guys ask that question, yeah, I mean, what are you buying? If you're buying a, if you're buying into a cleaning that has one or two doctors who are staying on board, then maybe when you partner with them, maybe you, you know, sign a partnership-type deal, maybe there is an associate, maybe the seller who's the owner retiring, but then there is a younger associate maybe offered that associate's some equity to stay there

and to become the new, you know, the medical director, the culture care, so to send the brown, that's one way to do it. But yeah, you have to know what's the run rate production at the clinic now and what's the wrong rate production the clinic going to be after you close

because all this to that. That's the most challenging. You pointed really well, Michael. That's the most challenging aspect of those businesses, whether it's a vet clinic or dental clinic, is that the production aspect of it and having those veterinarians or doctors in your clinic doing work.

And yeah, in some, you know, hiring a veterinarian is not an easy fit. And there is a relative shortage. And it's not critical, right? And, you know, vet schools are graduates to more and more vets. But it's region-specific, I would say that. So in some regions, it's very challenging to hire that.

And this could be one of those or not. Is it kind of like the doctor shortage where there's a significant doctor shortage in the major metropolitan areas, but then in rural areas or less desirable areas, there's an acute problem there. That's what I've heard about human medicine. Is it that way for doctors of veterinary medicines, or is it different? Yeah, I wouldn't call it in large metro areas or in, I would say places where most people would want to live, it's not that huge of a problem. But it becomes an acute problem in, like, truly rural areas. Like we're talking about towns was, you know, 3,000 people population, 10,000 population, you know, I think that that's a real problem.

And part of the problem is because, you know, realistically, vets services are not priced where they should be, right? Like that, you know, if you think about it, you know, doing an orthopedic surgery on a dog, it's more complicated to doing an orthopedic surgery in the human, right? Because for many reasons, it's a dog is smaller to begin with, right? But then the cost or doing dental, right, like for was human, right, you could just, the dentist could do your dental work and you're fine. This dog, you have to sedate them, you have to do anesthesia. Like, you know, doing x-rays is more complicated because it's smaller. So it's point being is, but then the cost is, like, the price that you get as a consumer is way different, right? Like an orthopedic surgeon and doc, it depends where it goes for like thousand bucks,

but does a human, it's going to cost you like $20,000? And so, and that trickles down to the fact that bats are, you know, paid less than they should be paid. and, you know. So you're saying we just need to go back to, we need to replicate the human system with the pets. No, I'm not saying that. I'm just saying that. Oh, no, I'm not either.

It's terrible. As a human, I hate it. Yeah, I'm just saying that. And that's actually, by the way, that's an interesting topic to chat about real quick. Like the nature of accounts receivable in Batman is awesome, right? Like, you would collect revenue, usually the same day or two. two days later, depending on the credit cards, it's two days later, it's cashed the same day,

the service was rendered. We pay our vendors anyway between 30 and six days later. So there's a negative working app, though, that obviously funds your operations and whatnot. In human medicine, you flip it, right? In dental or whatever, like we actually, in my job, our firm invested in a dental roll-up and dermatology roll-up as well. And yeah, those are very different and cash flow profiles. But larger businesses, which makes it easy to consolidate too. That's something that's on the offsetting side.

That's good. This has been really, really informative to make sure it's fun to hear you talk about it. Any ways that our listeners can kind of support you and follow along with what you're doing and any way we can be helpful to you? Yeah, and then look, I think they should support their local vets, support the profession. I think it's important. They could follow me on Twitter. I am at Dimitri D-Z-M-I-T-R-Y-9.

And they could, yeah, if they know vet clinics or vet owners who are looking to partner with someone like us who's vet founded, vet lab, non-Givac. Send them my way. Or if they know vets or if we know who went to work for an organization like that, send them my way too. Awesome. Well, really glad you joined us today. Yeah. Also, thanks to our sponsors, thanks to our sponsors, Esham Bash and Tiny Acquisitions

supporting us on our quest to break even. We're almost there. Thanks, guys. We appreciate this. This is great. Super fun. Thank you, Metri. Appreciate you joining us.