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Issue: 32 - Aug 15, 2011
Common Veterinary Student Questions
By: Jared M. Pelcic
Marsha L. Heinke, CPA, Inc
With a new class of veterinary students graduating and entering the business world, and our CPA firm taking on several of these students as interns, Marsha L. Heinke, CPA, Inc. wanted to find out the most common questions that veterinary students entering their profession have for CPAs that they didn’t learn in school. Here are a few of these popular new-graduate questions answered. 
Can my practice make payments on student loan debt and are there tax benefits?
While it is not common for practices to include student loan payments in their compensation package, they are able to include such a provision. However, those payments will be treated the same as normal pay when it comes to both business and personal taxes. Since there is no additional benefit to either you or your practice, it is probably best to focus on your potential salary rather than get bogged down in talks over student loan payments. 
Should I get a business valuation before buying a practice?
Another common question stems from buying into a practice, as many students will be entering into this process over the next several years. Should I get a valuation? A practice buy-in is a process that impacts the rest of your life. You need to make sure you get this right. A proper valuation performed by an experienced firm that specializes in the veterinary industry provides veterinarians with many key benefits. The most obvious benefit is that as a young veterinarian with student loans to contend with, you want to make sure that you don’t overpay for your share of the practice. The last thing you need is to incur unnecessary additional debt. You may be tempted to skip over the valuation and base the purchase price on one of the many so-call “rules of thumb.” This may be a convenient shortcut now, but it can be costly in the long run. Following a rule of thumb may or may not lead to a fairly accurate number for practice value. Is it worth the risk? 
There are additional benefits above and beyond establishing an accurate purchase price that a practice appraisal provides. By digging into the numbers, valuators can highlight problems that you probably did not know existed. A valuation will compare a practice’s operation and spending habits to industry averages, and averages of veterinary practices of a similar size. Without a valuation, you probably will not realize the extent of cash flow problems, what their causes are, or many other potential issues that your practice is having.   You may also want to include additional services like fee and budget analysis, compensation reviews, and financial forecasting to get a solid picture of what is going on in the practice and what steps can be taken to build upon your strengths and successes and neutralize your weaknesses and struggles. 
What is goodwill, and should I really be paying for it?
Goodwill is another issue that is frequently asked about. Many young students don’t have a good understanding of what goodwill is or why they should be paying for it. Goodwill is an intangible asset that is a crucial element of a successful practice. If you are buying into an established practice, you’re a purchasing a portion of a business that was built by doctors and staff who were there long before you. These individuals put in a lot of hours and hard work to create a solid reputation in the community and with clients. Any business with a brand name and proprietary procedures that have been time-tested requires a purchase premium—goodwill. The alternative to purchasing goodwill is starting your own practice from scratch and building up goodwill on your own. Goodwill is also another reason why a business valuation is important—it is tricky and complicated to estimate, and requires an experienced valuator with a lot of accurate numbers sitting in front of them. Rules of thumb can grossly over- or under- estimate goodwill.   
What do I need a CPA to do?
Finally, there is the issue of the value of a CPA. What capacity should they be hired in as, and should they be industry-specific? CPAs are able to impart a wealth of knowledge and experience upon your firm and yourself. Many look at CPAs as someone to do their taxes whilst preventing them from paying more than they need to. A CPA, especially industry-specific, can provide so much more than that. 
A CPA is a business analyst that can audit, consult, train bookkeepers, provide support for practice managers and owners during strategic planning, and even offer personal financial services. CPAs can help you set, understand, and meet your personal financial goals while taking into account your actions on your tax liability. Veterinary students have brought to our attention a great level of uncertainty about their future financial position. There are concerns regarding their high level of student loan debt and how it will affect the size and nature of the loan they will need to buy into a practice. Not only will overall student loan debt affect the length of a business loan and its interest rate, there are additional factors to take into consideration. The type of lifestyle you want to live may be unachievable without adequate financial planning. A CPA can sit down with you, look over your compensation package and goals and help you draw up a budget that will give you a very good idea of the level of debt you can take on without compromising your lifestyle. Many people take on the largest level of debt that they can—believing that the money will flow later—and find themselves in bad financial shape down the road. Having a professional like a CPA sit down with you and go over various scenarios will provide more than just peace of mind, but the tools for financial success and stability for the years to come.
Further, hiring a CPA that specializes in the veterinary industry will have a greater level of knowledge of the nuances of veterinary-specific issues, goals, legalities, and planning. You will never find a CPA with intimate knowledge of every industry, so it is best to narrow your focus to a CPA with experience in your field. As you are well aware, a veterinary practice is much more complex and multifaceted than your average small business. If you want the best value for your money, paying for a CPA with experience in and knowledge of the veterinary field is the way to go. 
Are you a recent graduate with questions about the business side of veterinary practice? Submit your questions to Jared M. Pelcic at or call Marsha L. Heinke, CPA, Inc. at 440-926-3800.