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Comment by mattmaroon | Hacker News Reader

I don’t really think vets are fretting. It cannot cost that much to start a vet clinic, and if they’re such a great profit source that PE firms are snapping them up, surely some other banker of some sort would be happy to give loans to enterprising ones.

The real issue is lack of supply. Which is good for vets, so I’m sure they’re not fretting too much about that.

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My brother was a veterinarian who bought an existing clinic in 2008. As I recall it was close to a million dollars before the cost of the building. There was another 2–300K in capital costs for modernizing the clinic.

So, yes, it can cost a lot to start a vet clinic.

Many younger vets will do housecall practices, which do have lower startup costs, but it’s necessary to have a good relationship with a practice with a hospital for any procedures which need to be done and, given that they’re nominally in competition with those practices, this may not be the easiest thing to do (before buying the hospital, my brother did housecall work, but mostly outside the service area of the hospital that he used for his procedures. He also was their on-call fill-in vet for when the in-practice vets were on vacation or out sick).

There was a kind of standard progression in veterinary careers where owning or being a partner in a practice with a hospital/clinic was the end stop of the career, but remember that a practice run by PE has different goals than a practice run by a vet. The vet-owner is looking to have junior vets who will one day buy them out and finance their retirement. Very different from a PE-owner looking to maximize cashflow and profitability with little concern about the vets working at the practice who are viewed as fungible widgets.

I do understand what you’re saying, I just think it’s a problem that’s at least self-limiting. A million dollars is not a lot to start a business of that scale. You can’t open a steakhouse in any mid-sized city for that much, and vet clinics actually make money. You don’t see PE firms buying up restaurants.

If PE firms are buying them the ROI is clearly very good. If vets are really fretting, I’m sure a bunch of highly educated, high salary people in a very lucrative field can drum up a million bucks.

> You don’t see PE firms buying up restaurants.

c.f. the 2-5 "restaurant groups" in every midsized city with a portfolio of "concepts" who open up a new one just as the one from last year starts to get stale and lose momentum. The ones that always seem to have absolutely exorbitant interior design budgets. Where exactly do you think their funding is coming from?

I work in the food industry now. The answer believe it or not is usually private investors who really love food and think it would be really cool to own a restaurant. You can easily start a small restaurant with what is a small investment to a few wealthy people. 1 million or two just ain’t much these days.

That’s actually why it is an unprofitable business, the people who do it aren’t really doing it for money. Supply outstrips demand which pushes prices down.

Also, he bought an existing clinic which, if already successful, has business value. It generally costs more to buy a successful business than to start one, though that’s not an ironclad law.

I struggle with this same line of thought. I get it, there are sometimes bad outcomes with PE but same goes for any business.

If this is so lucrative that PE is rolling up businesses, surely there are margins to be made starting up your own practice.

> You don’t see PE firms buying up restaurants.

Huh? The chain restaurant space is chock full of this.

https://www.cnn.com/2023/08/24/investing/subway-sale-roark/i...

" Roark holds investments in a number of large restaurant chains, including Arby’s, Auntie Anne’s, Buffalo Wild Wings, Carvel and Sonic, among others."

"Roark’s deal is one of the biggest acquisitions in fast food history, coming in just under Inspire Brands’ $11.3 billion purchase of Dunkin’ in October 2020. Roark owns Inspire, which also operates Subway rival Jimmy John’s."

Subway alone is twenty thousand restaurants.

> You don’t see PE firms buying up restaurants.

They do, just usually restaurant chains.

> My brother was a veterinarian who bought an existing clinic in 2008. As I recall it was close to a million dollars before the cost of the building. There was another 2–300K in capital costs for modernizing the clinic.

While this may be true, if anyone is reading this and thinking "that sounds like so much", remember that it is very easy for vets to get very large loans that they can pay back over a long time. The actual amount of money that needs to come from the vet's own pocket could be close to $0.

This is true precisely because of the reasons PE firms want to buy them. They’re a relatively high ROI investment in a stable and fast growing market staffed largely by high paid, educated people.

It’s a slam dunk of a business.

>My brother was a veterinarian who bought an existing clinic in 2008. As I recall it was close to a million dollars before the cost of the building.

Are you saying he bought the building/assets of a defunct vet practice or that he bought an operating veterinary clinic?

"It cannot cost that much to start a vet clinic" implies vets are cheap.

There is not an infinite supply of vets, especially those free from debt and who can borrow enough to start a practice.

Correct, that’s the problem, which is what I said. Not PE firms, lack of veterinarians.

If the PE firms buy up the practices and put all the vets in the area under a non-compete (not a hypothetical; see my other comments in this thread, it happened here in Rochester NY and is widespread practice), there aren't any vets to open a competitor.

Veterinarians are not a dime a dozen. You can't go to a boot camp and emerge in 6 months with a license to practice. They should all simply refuse to sign non-competes (not that they should be legal in the first place).

Non-competes aren’t that simple, and in that very article it says they were forced to abandon it.

There aren’t any vets because there aren’t enough vet schools.

Don't worry, hedge funds will snap up those as soon as they realize the potential they've created.

Actually they're largely for-profit already. A good friend of mine does admissions for one, which is why I have a little insight into the industry.

I wouldn't be surprised if PE firms open more vet schools at all.

On the other hand, vets have a high tendency to care about animal well-being.

Sweet, they should start clinics and not sell them to PE firms.

Don't pretend that's easy.

Also running your own clinic is a huge distraction from actual medicine.

It's not sweet at all.

I once dated someone (long ago) who opened her own vet clinic. I didn’t say it was easy.

The wonderful thing about capitalism is that when profits get high, people start doing things that aren’t easy and they go down.

> I didn’t say it was easy.

Personally I don't use "sweet" to refer to an opportunity to do something difficult that only partially remediates the problem, but okay.

> The wonderful thing about capitalism is that when profits get high, people start doing things that aren’t easy and they go down.

With big companies doing their best to set up barriers, things stay not-easy and prices don't go back down to where they used to be. That only prevents prices from getting infinitely high. Usually.

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That I believe. They certainly won’t all do it, but it only takes one vet who is good at business and a few more who are good at animal care to make a great clinic.

> It cannot cost that much to start a vet clinic

In 2011 it was around a million according to one article I read. I'm guessing it's way more now.

The Google seems to put that at the high end estimate. A vet clinic is still, even so, orders of magnitude cheaper to start than a hospital, and veterinarians don’t make orders of magnitude less than doctors.

I expect that PE won’t be able to push it too far before vets just start their own practices much like doctors are doing.

>veterinarians don’t make orders of magnitude less than doctors.

Um, Excuse me? Yes, they most certainly do.

https://www.bls.gov/ooh/healthcare/veterinarians.htm

>The median annual wage for veterinarians was $119,100 in May 2023

https://www.bls.gov/ooh/healthcare/physicians-and-surgeons.h...

>Wages for physicians and surgeons are among the highest of all occupations, with a median wage equal to or greater than $239,200 per year.

You have no idea what you're talking about.

Do you know what the phrase “order of magnitude” means? Half is not an order of magnitude so your math proves my statement correct. From wikipedia: “ Orders of magnitude are used to make approximate comparisons. If numbers differ by one order of magnitude, x is about ten times different in quantity than y. If values differ by two orders of magnitude, they differ by a factor of about 100.”

I will excuse you, despite your rudeness, but next time Google the phrase you don’t understand before accusing someone else of ignorance and then going on to show them they are correct and that you don't know what simple terms mean.

> if they’re such a great profit source that PE firms are snapping them up

This is where the Econ 101 naiveté of your comment goes completely off the rails. I am wondering if you are trolling.

- A vet certainly does not need to be a "great" profit source for PE. I genuinely can't believe you'd say that with a straight face. If it barely breaks even and the owners end up flipping the assets and real estate, that's a win.

- The obvious reason PE has stepped up their investments in pet care is that COVID led to a huge spike in US pet ownership. In about 5 years this spike in vet demand will fade. When that happens, these firms will wring their investments dry before moving on, leaving debt-saddled clinics behind. You can't just ignore the actual economic context because you found a fact-free explanation that high schoolers find convincing.

- in general it might be barely profitable to run a good vet clinic, but highly profitable to run a terrible clinic. I doubt emergency vet medicine is very profitable. You can't just assume PE runs the clinics the same as a vet-owned clinic. In fact the article makes it clear that this is not the case.

- There is just a total lack of humility from you: being smug and ignorant is a bad combination. Sure, the article is full of people complaining about specific PE-owned vets, and the comments on HN are full of people complaining about specific PE-owned vets.... but maybe if they understood the law of supply and demand, they wouldn't be so upset.

These are terrible arguments. PE firms aren’t running around flipping veterinarian firms for a couple hundred grand. They do that with fortune 500 companies for billions, not vet offices for tens of thousands. They’re buying them because they expect good ROI going forward.

They are not dumb, your argument about Covid has surely occurred to them and been rejected for reasons that seem pretty apparent. Who is being smug now? Assuming the PEs miss the most obvious idea? It’s a garbage one though and they know it, the spike wasn’t that big, demand had been growing much faster than supply for decades and will continue to, etc.

They’re buying because they can increase efficiency (I am sure by cutting patient care and other awful things at times but in some ways that are good too), because the industry will grow and consolidate, because demand will keep outstripping supply. They’re probably right. They usually are.

I don’t think humility has anything to do with finding a title of an article to be sensationalized clickbait.

I love it when you guys switch to personal insults because you don’t like a conflicting opinion, because you’re so bad at it. Another thing that used to happen on Reddit and not here, by the way.

The signal to noise ratio here is still high enough to hang around, but the group who come to discuss ideas shrinks a little every year, while the group who likes their propaganda with a side of rage grows.

> PE firms aren’t running around flipping veterinarian firms for a couple hundred grand. They do that with fortune 500 companies for billions, not vet offices for tens of thousands. They’re buying them because they expect good ROI going forward.

This is a dumb thing to say. My views are almost entirely informed by how PE operates in mental health, aka actual facts and not stupid mental models of actors optimizing utility functions. According to you, Blackstone apparently thought childhood autism services was a good ROI going forward, and having to sell off all the assets was just an unfortunate little boo-boo. Wouldn't want to hurt PE's feelings by suggesting they were only in it for short-term gain. https://bhbusiness.com/2022/11/11/large-autism-provider-card...

Here they openly discuss the opportunities for profitable exits in mental health: https://bhbusiness.com/2022/11/15/private-equity-expected-to...

I don't think you are responding in good faith - it doesn't seem like you've read the article, you are just responding to the headline + your own fact-free misconceptions.

The article specifically says “A large number of these funds are seeing veterinary medicine as a good profit center” which is exactly what I said and fairly obvious. You can’t tell me the article is right one minute and wrong the next.

The article is very poorly written, it says they have spent billions on veterinary practices, dog food brands, and pet insurance companies. Two of these things are not like the others. You’d have to buy a whole lot of veterinary offices, like all of them, to get into the billions. It’s probably an insignificant sum relative to the others.

And all of it just shows they think the pet industry is going to continue to do well. If they’re trying to flip real estate, they are going about it in a really stupid way.

And you just proved my point was for the big chains rather than individual practices like what is happening in the veterinary industry.

Also the second link says they are buying up mental health because of anticipated continuing long term demand, which is exactly what I said PE is doing here. I like that you argue against yourself for me. You’re worried about if I’m arguing in bad faith, you’re just arguing badly.

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