Episode #5 with Peter McCann of CARR Healthcare Realty
The all-important subject of real estate is once again the topic of conversation for this episode of the Veterinary Start-Up Practice Podcast in which Rob is joined by Peter McCann, a veterinary-focused commercial real estate agent with CARR Healthcare Realty, one of the nation’s leading providers of commercial real estate services for healthcare tenants and buyers.
In the episode, Rob and Peter discuss the advantages and disadvantages of leasing versus purchasing the practice real estate, the role that demographics play when looking to lease or purchase in a particular location, and issues regarding zoning and how it may impact a project and a vet practice’s ability to succeed.
In addition to working as a commercial real estate agent for CARR, Peter is also an attorney and long-time business law and real estate law professor who relies on his legal and teaching experience to guide vets through the most challenging parts of the real estate process—negotiating the terms of their lease/purchase, navigating the nuances of zoning, and re-negotiating terms for practices that are captive to their expiring leases.
Listen to the full transcription below:
Welcome to the veterinary startup practice podcast with Attorney Rob Montgomery, where Rob and his veterinary industry guests seek to demystify the process of starting up a veterinary practice. Since Rob is a lawyer, we need to tell you that this podcast is for informational purposes only, and shouldn't be considered legal advice. listening to this podcast does not and will not create an attorney client relationship. As is always the case, you should formally consult with legal counsel before proceeding with any legal matter. And now, here's Rob Montgomery.
Rob Montgomery 0:34
Hello, everyone. I'm Rob Montgomery and welcome to the veterinary startup practice podcast where as we like to say, we are seeking to demystify the process of starting a vet practice by bringing in experts thought leaders from the veterinary world to talk about the startup process, what to do, and sometimes even more importantly, what not to do. So I am excited for today's guest. He is one of our local guys here. Peter McCann, who is a realtor in the Philadelphia, southeastern Pennsylvania region and to Delaware, news, jersey and other surrounding parts of this area who we've done a bunch of deals with and Pete works with car healthcare, Realty and helps navigate that's through the process of starting and expanding their practices. He helps vets who are looking to lease spaces, he helps with the purchase of real estates. He works with one doc startups, two specialty groups, multi location franchises, all the way up to large corporate own practices. He only works with tenants and buyers, which allows him to provide services at no cost of his clients. And in turn, he becomes the doctor or the group's trusted ally from the beginning to the end. And Pete strives to be the very first call when the idea of a new practice or new additional location first occurs. And Pete's also an attorney, which is maybe why I like him, especially and longtime business law and real estate law professor. And I think Pete really brings his legal and teaching experience to guide vets through some of the most challenging parts of the process and negotiating the terms of their lease and purchase, navigating the nuances of zoning, which we're going to talk a little bit about today, renegotiating terms for practices that are captive to expiring leases, and really helping their his clients to understand the lease process and the real estate process and to really strategize how to help them put themselves in the best position to succeed. And so without further ado, thanks for being on the show today, Pete.
Peter McCann 2:47
Thanks, Rob. Great to be here. That intro was incredible who wrote,
Rob Montgomery 2:51
I don't know. But it's all true. And it's good stuff, you know. And I truly think that the level of professionalism that you bring in the expertise and the attention to detail, don't give us be a little biased here is something that your legal profession really helps I think, to serve your clients. So we always love working on deals with you and do a great job for your clients. And so we're really excited to have you have you on the show. And you are one of our our live in person, backyard Philly guys. So it's awesome for us. And it's great to have you in person here in the studio. So, you know, we've had some other guests on the show. And we've talked about different aspects of things. And so today, Pete, I want to talk a little bit about let's kick it off with what I consider to be the sort of the all important question which so many people ask me and I'm sure even more ask you should I lease? Or should I purchase a space that right?
Peter McCann 3:53
This is always where we start and there's a lot of elements to it. But the you know, from from the big picture, it's, I always start with leasing space is checkers, purchasing spaces chess, we're going to talk about the financing and how that plays into this. But if you are starting a veterinary practice, there are a lot of decisions that need to be made in terms of staff equipment, budgets, you know, all of those things that many my vets are doing for the first time. And there's an opportunity if you're leasing space, to to create something that will not only be fulfilling but also very valuable. At the end of the day with the lease, you don't own that property of course, right. So if you're purchasing and you're starting a practice, it's the same all the same decisions in terms of your staff, your budgets, your your equipment, developing and building the trajectory of that practice in it. addition, you have all of the opportunities, as well as risks and expenses that come with owning real estate, right? So what happens if, you know, you get a bad storm and the roof falls in, you know, over time, the value of your practice can increase, and you might own real estate that is stagnant or doesn't increase at the value, you know, at the rate that you want. But it's two different risks, right? How do you build the practice, and what's going to happen with the value of that real estate, whereas with the lease is just, it's just one risk building your practice. And so I say, checkers and chess, because it's, it's harder to, you know, calculate, you know, what your odds are, up successful be. But if you play things the right way, with a purchase, it can be a double win situation,
Rob Montgomery 5:55
right? I guess I feel like to like, along those lines that I like to win clients have an open mind, you know, like, I want to own a practice, I want to do a start up, whether it's purchase or lease from a real estate standpoint, I feel like it's important to really kind of see what your options are. Right? You know, like, and I feel like, a lot of times, you'll see that people will make concessions to own the real estate, where they may not be we're going to talk about demographics next, but they may not, they may be sacrificing good demographics, or an ideal set up to in order to own the real estate, I kind of feel like, that's a mistake. And it to me, I my thought with that is, hey, you know, put yourself in the place where you can make the most money. Sure, you know, with your practice, which is what exactly you say like, because the there's no guarantee with real estate, like, you know, we've we've been fortunate in this country, you know, as real estate owners and investors that, you know, things have continued to increase over the last however many, you know, 10 plus years, like things have been good. And I think sometimes people get, like, kind of roped into that mentality like, well, it's always gonna get better and better and better, or, and there are no guarantees of that
Peter McCann 7:05
note and the opportunity. Being a vet building vet practice, you know, that independent of the real estate has the opportunity to be incredibly valuable in and of itself, whether you're going to borrow against that, or sell that or bring on partners. There's not necessarily need to overcomplicate what it is that you're you're trying to accomplish. So, and the other aspect of that is you have to keep in mind the lenders, right? You know, we'll talk about this a little bit later, but the, they're going to have a major say, in terms of how you go about getting your practice off the ground. And there's a reason why lenders will push you in the direction of a lease, and you would think, okay, if they're, they're going to be investing into my my practice into my business, wouldn't they want me to own the real estate so that they have some, you know, tangible asset to, that I'd be borrowing against. And there's some truth to that. But in in, in practicality, the bank knows, this is the first time running a business, this is your first time running a practice. And if you are leasing that space, all of the risks that are associated with the real estate, get put onto the landlord. So two hats instead of three. And it makes things a lot smoother, you can focus on on building your business, you know, managing your practice. And in time, if you want to expand or purchase another practice, there's all kinds of different ways that you you can, you can go about that process, and the lenders will be there at that point, to help you buy if you prefer, but you should always keep in mind that banks aren't in the business losing money. And if you're starting a practice, and they're pushing you towards leasing, there's probably a reason why.
Rob Montgomery 8:58
Yeah, right. Yeah, that's a great point. And I think people really underestimate that. And I think that there's a certain misconception that I see a lot of times with, with clients, where they think like, well, you know, if I, if I own this, like, somehow it's free, you know, or like, I'm paying myself but like, it's not, you still have to borrow the money, you're still paying interest, you still have all the maintenance, you stop all this other aggravation. It goes on top of it. And my understanding and my observation, like a lot of the big corporate groups don't own the real estate, right, Pete
Peter McCann 9:31
a lot of them don't. Yeah, and even a lot of them won't actually consider practices that are put on the market for acquisition. If they own real estate, they explicitly don't want them out. Now, all kinds of different consolidators and private equity groups out there have different philosophies and see different opportunities. But you don't see any that will say we only are going after practices that own the real estate, but you will see some that that say the opposite. We only want practices that are at least innerspace I mean,
Rob Montgomery 10:01
because like for them, they have a bucket of money pot of gold, so to speak. And if you, they have the option of buying real estate, putting it into the dirt, or buying practices, businesses that have income, they're going to spend it on something that's going to throw off income, right? And not that we all should always follow those corporate groups and do what they do. But like, it makes sense to kind of pay attention to what they're doing. Because they've they're oftentimes good business reasons to do that. Like that's what they do business, right. So if they're not doing it that way, maybe you scratch your head and say, Well, why am I so insisted on doing it? The opposite way of these people have this successful playbook.
Peter McCann 10:41
You got it. And it's it's vets tend to underestimate or don't fully understand that it's it's their practice. It's, it's, it's their expertise. It's their license, that is the revenue generating machine behind, right any veterinary you know, business. And so if the private equity groups or the consolidators want to buy you, and they see you as the value and not the real estate, pay attention to that, yeah,
Rob Montgomery 11:08
that's a great point. Great way to put it. Pete, what are some misconceptions that you feel like veterinarians have about about startups? What things do they miss or not? You know, what things do you find yourself repeating over and over again, that it's like, wow, you know, this is a common thread?
Peter McCann 11:25
Sure. So there's quite a few misconceptions, I think the you know, one of the things that I find myself talking through over and over again, is, this is not as difficult as you think it is. A lot of, you know, so the vets will come they'll have an idea, they don't like working for their new corporate Overlord, as they might see it or, like, you know, maybe they lost their the the best practice manager, we see all kinds of things, you know, some quickly, some slowly, will influence a doctor to consider starting their own practice. And when they think about that, they say, I have no idea how to do this, I didn't learn how to do this in veterinary school. And so they start to ask other vets who may maybe have gone about the process. And oftentimes, I'll hear that they had considered this several times along the way, but they gave up because they, they didn't think that they had the bandwidth to put together the team, and figure out all the elements that that go into starting a practice, it is a lot to consider. And there are a lot of decisions to be made. They are right in that respect. But what they don't understand is that this is a well trodden path. And you can only move one step at a time. And if you do things in the right order, use the right lenders use the right attorneys, you know, right use the all the people that are in this network that have been helping other practices get up and running. It's just a matter of following the script, there'll be plenty of opportunities along the way to make decisions about design and, you know, logos and, you know, how many do you hire Practice Manager, do you do it yourself, there's all kinds of ways to personalize it. But you don't have to make all those decisions at once. And if you just start walking down the path, start with me, hopefully, start with the lenders. Start with some of the trusted consultants, whoever it is, that's going to be your team, start with right people. And, you know, make sure that you get guidance, not only on the decisions that need to be made, but make sure that you fully understand the order that they go in. And if you follow that it's hard to get, it's hard to really mess this up. So it is complicated, but it's a well understood path.
Rob Montgomery 13:57
And I think you said you said the team and I think it's important for people to realize and understand and a few of our guests have talked about this. You don't have to do this by yourself. This is not a startup where a DIY startup, nobody says that when you do a startup, you have to be the lone wolf here. You know, and so, you know, there are teams of people that have this expertise and specialization that can help you with these different different steps along the process with, you know, your main consultants and in some deals, there's a consultant involved. A lot of times you're the one that's running point Pete in these deals and really helping organize things, you're telling them the order that they need to do things in, when they need to be talking to contractors, when they need to be talking to an insurance rep when they need to be talking to a lawyer when they need to be talking to the equipment supplier, you know, this is you know, and then those people are able to help them with those different aspects but like, I think I see a lot of times that people just get hung up on like, well, I don't And I'll do this well, you don't have to, you just have to have a desire to want to do it. And the ability to take advice and do things the right way. And I think this is important, we talk about this in a lot of different contexts in our practice, because we help people that are transitioning into practice ownership through acquisition through buy in, through startup we help people to sell to, but the thing with, with a vet who is an owner operator, for the most part, most of them are going to do these once. These are one transactions, you know, like you get one crack at your startup, you get one crack at your acquisition, nobody could be possibly expected to know how to do something they did the first time anything. I mean, we could sit here for the next 15 minutes and think of examples of the first time I did this, well, here's how it worked out, not so well, right. But the next time it got better, and the time afterwards, better, you don't have that luxury. So, but the good news is you don't have to do this yourself. And you can work with people who have done it hundreds of times, to help you with their specific aspect of things and guide you and then and then you don't you're able to succeed.
Peter McCann 16:13
Sure, and that's a great point. These a lot of the people that can assist along the way are you know, in the doctors day to day universe, right. So you know, even if you have a relationship, you're an associate, there's a equipment supplier distributor that comes in, whether it's, it's them, or it's you, it's an attorney, it's a, you know, it's a contractor, all these different people that need to be involved in that process. They all want to make this work for you. And they're not going to put you in a position where they're pressuring you to make decisions or sign on the dotted line. If eventually, there comes a point in all of this, where we, the doctor has to make a decision, this is going to be my real estate agent, it's gonna be my attorney. But you have to keep in mind that we will we all work together to help you to understand the order of operations. And you're not putting yourself at at risk by just asking a couple questions asking for some guidance. It's not a high pressure sales. situation, you know, again, I don't want to we all have to earn our money. And there does have to come a point where say, this is what we get paid. This is how we get paid. You know, what do you choose to work with us, but you'd be surprised with how many people involved in that process will give you some time will answer certain questions and help point you in the right direction.
Rob Montgomery 17:37
But definitely shouldn't be a high pressure situation, if you feel like you think that's the case, then chances are you've got some problems with your team, you know, and I think that's a good thing too. And we've talked about this with some other folks like, you know, the, when you're working with a team, and you have your trusted advisor that's really linking you up with the other people that their clients have worked with successfully. I mean, that's the best way to vet professionals and figure out who you want to work with, you know, like, you don't have to, nor should you just start Googling people and assembling your team through like a free agent of from the search engine, right? Like, that's not, that's not good, either. But, you know, we all we like to work together, because we all like to see everything turn out successfully, you know, like we have a vested interest in, in our clients, our mutual clients doing well, because that looks good for everybody involved. It's just like anything nobody wants, you're working with a good team of trusted advisors who have good relationships, everybody wants to help everybody else else's client out, to make it to make this a positive thing, because it's a reflection on on everybody involved. And so, you know, I think it's important, you know, don't you should also shouldn't feel like, wow, you know, how do I find the equipment person? How do I find the real route, I find the lawyer, like, you link into your trusted advisor, and then just run down through their network of trusted people, right? Yeah, you don't have to worry about it.
Peter McCann 19:05
It's a spider web, we're all connected. And, you know, we're not going to put you in a position where, you know, if the whole thing falls apart, I don't get paid, if the whole thing falls apart, you know, you might not get paid. So So we also know, you know, there is a vested interest financially on our side to make this work. And, you know, I'm very open about that. It's, if I don't, if I'm putting you in touch with the wrong contractor, and their their bids, 50% you know, more than 50% less than what that actual bill is going to be, you're not gonna be able to pay that. So make sure that you're, you're relying on connections that that I can put you in touch with Rob and put you in touch with, you know, because we were going to make sure that that you know, this doesn't go off the rails.
Rob Montgomery 19:58
Yeah, well, even more importantly, you You're not going to put them in touch with a contractor who can't get the job done so that the next time that you are the next vet that was working with you, that's a friend of that vet says, Well, yeah, you know, put me in touch with that contractor did a lousy job like that doesn't it doesn't work for any of us, for sure. True. Let's kind of circle back I started alluding to this, we were talking about the lease versus purchase. You know, I was talking about the fact that a lot of times I see that when people want to purchase real estate, when they're just really having that that narrow focus, like I'm buying the real estate. And that's it, I'm not going to consider a lease. I feel like like I said, sometimes concessions are made, and they compromise as to certain things. I think one of the things that I see the biggest compromise that comes up in that setting, this is what I want to talk to you about next is demographics. Like I feel like you know, back to the lease purchase in this context, if you consider both and you go to the place where you can make the most money running your practice, right? And if that's a strip mall, then your chances are, you're not going to be able to own that you're going to have to be a tenant, but I feel like what should drive the decision as to where you're going to buy or lease or whether you buy or lease? To me Pete really starts with what are the best demographics for you to have a thriving practice. So if you can kind of talk about what our demographics in this in this world, why they matter? And kind of what's given give me demographics, one to one for our listeners. Yeah,
Peter McCann 21:28
sure. So two things. One is, AI, we might have a little bit of a different philosophy on this.
Rob Montgomery 21:36
Peter McCann 21:39
Demographics are important, right? So when I'm talking about demographics, what we're usually looking at is some publicly available average household income. We want to identify different, there's a few different metrics that help us get a good idea of the number of pets that might be owned in a certain area. We want to do people have pets? How close are they? Can they pay for your services is kind of the Gen Xers
Rob Montgomery 22:11
are all good things. Right? It's doing a startup practice. Sure. So
Peter McCann 22:16
those are key, the the demographic information that I'm more concerned about is is the competition. That's not necessarily demographics, but it is data that is relevant to determining, you know, where the opportunities are. In my
Rob Montgomery 22:30
world. I kind of throw that in. So for me demographics concludes competition. Sure, yeah.
Peter McCann 22:34
And competition is interesting, because you can look on Google Maps, see how many practices might Nick be nearby? And are they one mile away? Three miles, five miles, you know, there are some different distance metrics that we need to be aware of, but they don't always tell the picture, you have to really dive in and see how many doctors work these practices, how long have they been there? Are they specialists is this also an urgent care, you have to get a real clear picture of the size, the success and the number of doctors that are at these these practices, you don't want to move next door to one of these thriving practices. If they are independently owned, that is especially true, right? If they've recently been acquired by corporate, that doesn't mean that they won't continue to be successful. I know that a lot of our listeners are going to hear that Gus. But but not all, they're there. They're here. They're, you know, part of our world. But they do change the, the vibe of of the practice in a million different ways. And so you want to evaluate a corporate own practice different than you would a individual or privately on practice. We can get into details of that. But I wanted to take a step back regarding demographics and competition, and that is to understand there's a veterinarian shortage that is exists right now, the best estimates as to when that might begin to resolve is 2030. Those estimates were made prior to 2020. So obviously, we saw a huge number of pets that were adopted. Now we are seeing a rush to create some credentialed veterinary schools, but by the time they get their credentials and hire their staff and have their first classes for five, six years, yeah, then it's four years. So so we're not going to see any resolution on that even if the rules are relaxed with international vets and there's some there's some things going on right now to make that a little bit easier. But by and large, the demographics and competition are important into consider. But don't let that fool you from the fact that, that there's just a tremendous opportunity and need for your services. And I've had Doc's get lost in, you know, trying to pinpoint the exact location. And that can take, you know, six 912 months. And if that's where your horse set on being, that's where your heart set on being, you know, at the end of the day you have your your justifications, but that's a year of revenue that you're sure, absolutely. So I like to talk about demographics and competition, but always within the context of Look, your services are needed. You can get 100% financing from the lenders, a CPA can't get that start their business, a lawyer can't get that start to business, not even most physicians, dentists and vet, yeah, so take advantage of that opportunity understand why that is an opportunity, alright, and use the data to push you one direction or another, but But it's one of about six or seven deciding factors. And I don't like that to be the initial, you know, point of evaluating
Rob Montgomery 26:11
the property, right? Well, look, it's just like anything analysis paralysis, right? In our paralysis by analysis, whatever the expression is, or you can't, ultimately, you want to look at data to try to inform yourself as to where it's good to be or not be or where you can be optimal, but not to the point where you've you stymie your, your, your forward progress with with a project for sure. And I didn't to your point, I mean, we see that too a lot with you know, it's the cost of not doing a deal. It's the time that it takes and for, especially I find like in the vet world, more so than even other health care industries, is like just the disparity between the associate income and the owner income, you know, and the longer you sort of keep yourself out that associated income, and you're not making that step to ownership, there's a significant cost associated with that. And it's a snowballing thing too, because it's like, the sooner you start, the more it is, and the bigger it gets, and it grows and grows. And the longer you wait to start that snowball, it is there is a price that's associated with that and negative price.
Peter McCann 27:16
Sure, sure. And vets in particular tend to develop relationships with their patients owners write with their clients, and not that a dentist or physician, doesn't they they do. But it it actually seems from my perspective, to in many ways be a stronger bond, a stronger gravity that keeps vets in practices that, that even if they're getting paid, okay, and it's not, it's a job that they like well enough, they won't truly open their eyes up to practice ownership as early as they should, because of that, that, you know, connection that they have, you know, with so many people in the neighborhood,
Rob Montgomery 28:00
yeah, right, that's meaningful. And let me just kind of use this opportunity just to reiterate what I've said a few times, on other episodes, to be really careful about the associate agreements you signed, and the covenants Not to Compete contained in them. You know, there's different states are starting to the trend to sort of scale back the permissibility of those restrictive covenants. So it really is a state by state issue, the federal government is talking about banning covenants Not to Compete remains to be seen whether that's going to happen. I'm going to take the under on that one. Pete, you and I can have a legal debate about that FTC might be slow to move cheese, or, you know, is it even constitutional? And why is the FTC telling people what the law is? And you know, where there's already state law? Yeah, but yeah, so you're not gonna have a legal debate on that. But at the end of the day, just be really careful about about signing these things. Because, you know, while you know, you're talking about demographics, not being the main focus or shouldn't be, you know, what's even worse than that is that if you're signing a 20 or 30 mile non compete, and sometimes maybe measured around multiple practices, you are really excluding yourself from sometimes hundreds or 1000s of square miles where you're able to practice. So I would say, Oh, you've spent so much time and money to get your education to get licensed to be able to practice the profession. Do not willy nilly, give it up by signing some some non compete, that would force you to relocate, sell your house move, if you want to change jobs, or own a practice. And from a planning standpoint, whether or not you know that you want to be unknown or someday, you know, leave your options open. And just be really careful about these things. Yep,
Peter McCann 29:58
exactly. Right. Be careful. You know, I've had a situation where a doctor was working for a small practice three or four Doc's acquired by corporate, they continued on in their role. But they were asked to do relief shifts at different locations around the states, you know, you're going, the whole point from my perspective of asking them to take those released shifts was to expand their non compete radius, because it could be measured from each. Now I don't think, you know, corporate gets a bad rap. And for a lot of reasons, from a lot of people, you know, I'm not, I don't work there, I don't, you know, I don't see it day to day, I don't know how, you know, they're all different. And, you know, so I don't like to wait too far into those waters. But you do have to be aware of the reputation of the corporate entity that may have acquired your practice, and make sure that you are not putting yourself in a position, know their reputation, and make sure you take a look at if you have been acquired, that's always a good point to send your contract over to an attorney and say, absolutely, you know, what, you know, what are my options here? And when are my options and the other thing you mentioned about the non competes is if you're going to be putting together a team of two or more Doc's to start your practice. This is a limiting factor. Yeah. So if if your non compete expires in a year, and nurses in two years, it's going to be difficult to bring them on as as a co partner from from the beginning. So you have to go through all the analysis of can I work with this person? You know, do we complement each other all the things that you would normally need to do but in addition to that, you both need to show each other your employment contracts and make sure that
Rob Montgomery 31:55
you're on the same timeline? Yeah, and for a number of reasons. I mean, first off, most banks won't even lend to do as a start up or to acquire a practice in the area that's restricted. And I think a lot of a popular misconception is, oh, these things are if somebody told me there aren't enforceable, well, two lawyers in the room, we know how you determine whether or not something is enforceable. That's a judge says whether or not it's enforceable. And to get to that point means there was a lawsuit filed an answer filed, depositions, taken motions, hearings, injunctions, it is a very long and expensive process. So anybody that tells you don't worry about it, that's not enforceable, you need to have probably a war chest of at least six figures sitting around ready to throw out a lawyer to find out whether or not it's quote unquote, unenforceable. It's an expense that nobody should, should have to pay and and most people can't afford. And, you know, and frankly, Pete, as we see in our world, in the legal world, usually in litigation, the party with most money wins, right. So you know, if young associate thinks they're gonna go up against a big national corporation to try to beat them on their non compete. Good luck.
Peter McCann 33:10
Yep. No, that's you're exactly right. It's not whether you're, you're in the right, it's whether they can, you know, do they is it unclear enough that they can drag you into court, because it will drag you into court? Now, it's a year 18 months? And that's the whole noncompete time anyway. So just,
Rob Montgomery 33:27
yeah, you know, be careful. Yeah, let's shift gears a little. Sticking in the legal stuff, they still have quasi legal talk to our listeners, Pete about zoning issues and sort of concerns that are really specific evadne Like we again, help other health care professionals. But when it comes to zoning issues, there are always additional wrinkles, when it comes to an animal hospital or a vet practice
Peter McCann 33:57
100% No, this is this is a true. It can be it can be a real nightmare for some of these vets that don't put enough attention on fully understanding how zoning how the local officials in general can impact the trajectory of getting their practice up and running. That delays the costs and ultimately, people that you might not have ever thought about in your community, you have a lot of control over, you know what you can and can't do. Now. There's the zoning code, of course, which is, you know, the rules. But the other challenge is it's not just what the rules are, it just like we were talking about with the noncompetes a minute ago. The zoning code is the rules, but the zoning officer or the local board, interpret those rules, right? And so you need to make sure that you are going you're taking space whether you leasing or purchasing where a veteran or use is, is a either a buy right use, or you have a zoning confirmation from the town that indicates that your use is acceptable in that, you know, at that property. In addition to zoning,
Rob Montgomery 35:16
we stop you there for a second. Sure, let's back that off. And you say it has to be a buy, right? Or you have to have the assurance that you could do it. I mean, this connect the dots here for our listeners, because sometimes I think people this is not intuitive. They don't realize this. If it's not, that means that you can't operate a vet practice there, right, you can't open for business, you can't get construction permits, it's actually
Peter McCann 35:41
worse, because the answer is not that you can't go there. Oftentimes the answer is it's unclear if you can go, which is always bad, right? So then you have to go through you have the hope. And you hire attorneys, then you have that you go through the process of determining, you know, whether you can go whether you can go there, sometimes that process will relieve itself in two months, sometimes it's 10 months, and there's no guarantee that you're ultimately going to get the answer that you want. And so And meanwhile, you've signed a lease the landlord, they don't they don't care, you can't go back to the landlord and say, Oh, gee, sorry, I
Rob Montgomery 36:18
didn't realize I couldn't have a vet practice here. Yeah, no,
Peter McCann 36:21
it's and and, you know, oftentimes, you'll you'll, it's a question that a lot of vets wouldn't even necessarily think to ask, and consultants might not even think to ask, unless you're working with a specialist who's seen all the ways this has gone wrong. For veterinary practices. This can be the biggest obstacle, the biggest unseen obstacle, not only is there is there zoning, you got to make sure that, you know you're complying with the zoning code. But you also need to get a good idea of who is approving the building permits in that town. Because if if, if their party acts and the local zoning board is party, why, and they have gone to war with each other over issues that have nothing to do with you, you can find yourself in a position where you're getting your zoning approval, no problem, you you, you know, you hire your team, you sign your lease, you're you're signing, employment contracts, doing all of these things, and then you submit your permits to be approved for construction, only to find out they're not approved. Yeah. And so it's you it's it sounds trivial. But you have to get a very clear idea of not only what the zoning regulations are, how they will be interpreted, but you also need to know how the the building enforcement officer, how they feel about your use, because it's the zoning is approved, and you can't get any of your permits approved. You can't go there. So two step process. Yeah, that's
Rob Montgomery 37:59
a great point. And even, you know, you talk about even the best case scenario. So you go through the process, and you you succeed, and you get the the, the the approval, or you get the permits, but chances are, you've already done a great job, negotiating some free rent period for whatever for six months to allow the build out, or three, or whatever, you know, generally, for the build out to occur where the tenant, your client is not paying rent. Well, if you have to spend all that time, haggling with the zoning people to even get the permission to start construction. You've just burned through all that free rent period that you wanted to build it as a buffer, and now you're gonna be paying rent on a space that is not open for business yet, which is a big taboo in our world. Right? Sure.
Peter McCann 38:47
Sure. And that's exactly right. It's if you are denied the permits altogether, or the zoning is denied, that's obviously a nightmare scenario, but but way it usually plays out when there's a problem is delays, hearings, lawyer fees, and it's 689, you know, 12 months of just not knowing, and you've lost all of your free rounds. Now a position where you don't have the capital to pay your rent to pay your staff, and you're struggling,
Rob Montgomery 39:13
right. And that's a bad way to start. And I think you know, it's because go back, you know, like I, I am a huge proponent of startup practices. And people say, Oh, should I buy a practice or who start up or startups risky? This is really the answer that question is, if you do a start up, right, then you can put yourself in position to succeed. And that goes to who you hire your team and doing all the right things and making sure you have experienced people surrounding you to look out for these things. These are the bogey so to speak that could come up and sink your startup right or certainly put you in in jeopardy before you even open your door. And they are entirely avoidable. Right Heavy
Peter McCann 40:00
Yep, it's the landmines are all within the, the, you know, three, three months after you start this prac process to the first say, six months after your doors are open, where you're making all your big decisions, you know, vendor contracts, you know, as, obviously with the zoning and the building permits. And so if you can just get over those humps, it's, there's still problems that you're gonna have to solve, you got to build your business, but there's the variables involved in, in making the whole thing work, they get solved one by one, and the problem becomes a lot easier to focus on.
Rob Montgomery 40:38
Yeah, yeah. And but they do, it does become like a snowball thing, too. So as you're saying to, it's like I'm thinking about, if you don't know when that's going to when the construction period is going to begin, you don't know when the permits are going to be issued. That means you don't know when to order your equipment. And so like there's a lead time with that, like, you just throw off the whole thing, you know, for no reason. The other thing too, that not quite as crucial as to whether or not you can or can't operate your business here, or the permission you need to get is that in in the in the vet world, there are other potential issues with zoning, sometimes we'll see whether or not you can, you can have overnight boarding there, and what that means for retaining your surgery patients overnight. You know, and other business issues that the zoning kind of gets into. And so if the vision for your practice is that yes, this is our business model is this is what we want, but then the zoning code doesn't allow that model there, then you know, then that's not the right place for you, perhaps and you have to find some other place where you can really imprint your the vision that you want for your practice. And again, that's something you want to know before you sign the lease. Because, again, folks, you know, hear me again, right? Once you signed the lease there, chances are, you're not getting out of that, and you can't go back, you can't give a lease back. Can't say that, well, I, I thought it's gonna be different able to do different things here that now I find unrestricted, or either entirely or in whole, or in part, now you're gonna have to try to make things work. And again, now we're reverse engineering, something that was supposed to be this awesome thing that you're going to be able to go out and in print your vision and do what you want it to do. And now you've tied a hand behind your back for no good reason. Sure.
Peter McCann 42:27
So so just just one example of that. In terms of how absurd this can be, I had a client who was going to be leasing space in a retail center, we found a great space, right sighs great parking, the landlord was tremendous. We're getting long free rent period, a lot of tenant improvement allowance, all the things that you want from, from a landlord, we went to the town, we said, Are we zoned? Is our is our use approved here. Yes, by right, here's the zoning approval letter. As we were getting closer to signing the lease, we dug into some of the local code a little bit deeper, just to be 100%. Certain, we actually found that a veterinary practice can't be within 100 feet of a restaurant, in that municipality, we were 90 feet away from a pizza slice, right, you know, three doors down. But because we were thin that 100 feet, we weren't going to be able to go there. So even though we had to use approval letter, there was this other, you know, issue that was not going to be found until we went to apply for a permit. So my doc almost signed off. So it's, it's not just a matter of can I go here or not? There are arbitrary rules that can exist out there for vets that they the they're antiquated, most of them are gone. But you have to make sure that that you are accounting for some of these these these old rules and regulations that haven't fallen off the code yet. And none of them are intuitive. You know, like,
Rob Montgomery 44:09
it's not like you're you would never think that that's a thing. I
Peter McCann 44:12
don't know why. Yeah,
Rob Montgomery 44:13
I mean, I'm just gonna ask you like, I'm trying to brainstorm like, why that could be like, it doesn't. It doesn't make any sense. Right. You know,
Peter McCann 44:19
it's not a it's not a smell, because we looked into like there weren't there weren't a different ventilation requirements that weren't sound attenuation requirements. My only thought was that it was some sort of vestige of people don't want to see animals, and then be reminded of them when they're when they go to eat. Like that. It's somehow that was the only thing that they could come up with. We tried to figure out what the method behind that was
Rob Montgomery 44:50
bizarre, but there's a lot of things out there like that, that are just counterintuitive. So you can't just say like common sense is this should be fine. Not necessarily And that doesn't matter, right? The rules are the rules. And there's a whole process if you're going to try to challenge them, that can be a risky proposition. Sure.
Peter McCann 45:09
If anybody had any ideas on what that was, I'd love to hear Yeah.
Rob Montgomery 45:13
It's crazy. We're, we're going to wrap it up now, people before we do just kind of like, you know, as we won, in closing, what is like, what's a piece of advice that you would give to a veterinarian considering a startup? So if anybody's listening right now, like, what, what is what's sort of like the message that you would want to give? Give that person? If they're thinking then you know, I'm thinking about it? Should I do it? I'm not sure is risky. People told me that it can be it can be hard to do, it's hard to make money, like, what like, what would you say to somebody that's not necessarily in the fence, but maybe early stages of considering doing this, that you know, some of the wisdom that you have that you would impart on them?
Peter McCann 45:57
Sure. So the, the most important thing to keep in mind is this, this is your time, right? There's a shortage of vets. There's all of this chaos in that consolidation world going on. More people on pets than ever before. There's a reason why the lenders want to give zero interest or low interest, sometimes zero, down, you know, don't, you are the opportunity. And this is your time, if you ever thought about owning a practice. There are risks associated with this, of course, and it will cost you'll have to sign a lot of documents, you're going to have to give up a lot of your time. But the the risks associated with making this work, if you have the right team are are minimal. And that should give Doc's that are thinking about this a lot of confidence that yes, you have to be serious about this, you have to give it a lot of time and energy got to build the right team. But if you do things the right way, there's a lot of different ways this can be successful, there's a lot of different ways that you can grow. And even if your choice is not to grow down the line, there's ways to make a small practice successful as well. So don't lose don't lose your your don't lose focus of the fact that that this is the chance, you know, for whatever your motivation was going to veterinary school most Doc's it was not necessarily to go into business. But this is a rare opportunity that's been afforded to you. And sometimes you're just in the right place at the right time. And so don't don't worry, any more than you need to about the risk associated with the venture itself. There's there's plenty of other wearing to be done, you know, on the way,
Rob Montgomery 48:09
right, just to take the leap. And I feel like it's, you know, for people, like just tag on that it was just learn, learn about it, and inquire, get information, start the process. And I think as you move through it, you'll get more comfortable with the decision making
Peter McCann 48:29
guiding, it's empowering. And, you know, it's the path towards, you know, being able to control your, your, your family's financial trajectory.
Rob Montgomery 48:39
Yeah, yeah, I think that's awesome advice. And I, you know, I will say that, to my listeners, I did my start up professional practice 28 years ago. And it's one of the great things of being a professional, and owning your practice is that you get to imprint your vision, how you want to practice where you want to practice, the type of practice you want to have, the type of animals that you treat the people that work on your team in the office, how you want your office to look, this is the have that, that sort of freedom and flexibility to do that is one of the greatest things about being a professional. And, you know, obviously, the actual practice of the profession and, and treating your patients is awesome, but being able to do it the way you want, where and when and how and with whom. It's just an awesome thing. And as you said, The time is now you know, and I think I it's really important for more people to realize that there are alternatives to practice ownership. You know, don't fall in love with this, Hey, I'm gonna have to buy a practice because if I don't, then it's really risky to do something as a startup without existing cash flow and, and patients. Well, not necessarily, you know, there is another opportunity and an alternative Hear that, as you said, Pete with the time is now it's the perfect time and the opportunity is there. And it's something that people should really consider. Couldn't agree more. So, Pete, it's been awesome having you today. Thanks for taking the time. It's always fun to rap with you about the industry and business. If folks want to get in touch with you and learn more about what you do, how would they do that?
Peter McCann 50:26
So I think you could probably get a hold of me by way of the show notes here.
Rob Montgomery 50:31
Whatever you're telling me now is going to be in the show notes. But, you know, as far as, you know, email and you know, best way to reach him. Sure.
Peter McCann 50:38
So email is Peter dot McCann, MC C A, n firstname.lastname@example.org. You know, call me text me. I'm on LinkedIn, you know, I'm on the car website, there's just a lot of different ways to find me. And I encourage you, whether you're in Philadelphia region, you're in Jersey, New York, or if you're in California, you know, and you don't necessarily know who you want to reach out to. First, I'm more than willing to take a call and give you an idea of you know, if there's a car agent that's in your territory, or, you know, if there are attorneys like yourself that might be able to, you know, put them in touch with some of the local folks. It's, you know, don't feel this needs to be geographically restricted. We all work together and try to point you on the right path.
Rob Montgomery 51:33
It's awesome. And then you specifically again, Pete, what territory do you generally cover for
Peter McCann 51:37
so the Mid Atlantic? Right, so most of my projects are in Pennsylvania, New Jersey and Delaware. Great,
Rob Montgomery 51:45
awesome. Well, thanks for taking the time. It's great to see you. Good to see you.
Thanks for listening to another great podcast with Attorney Rob Montgomery. And don't forget to tune in next time to have the process of starting up a veterinary practice demystified. For more information about today's podcast, or to contact Rob's firm, go to www dot your vet lawyer.com