Rewarding and Retaining Your Staff in a Transition

Why staff retention matters in a successful practice transition

During this interview on the Vet Blast Podcast, Adam Christman, DVM, MBA, speaks with Christopher Rocchio, DVM, CEO and founder of Monarch Practice Transitions, about why retaining and rewarding staff is such an important part of a successful veterinary practice transition.

As both a practice owner and transition advisor, Dr. Rocchio brings a unique perspective to the conversation. In addition to helping veterinary practice owners prepare for ownership transitions, he recently went through a transition in his own practice, creating a joint venture that allowed associate doctors, licensed technicians and managers to participate in ownership.

Below is a transcript, edited lightly for clarity.

Adam Christman, DVM, MBA: Hey everyone, welcome back to the Vet Blast Podcast. We’re going to talk about practice transition and what that means for you and maybe your team. Joining us today is Dr. Chris Rocchio from Monarch Practice Transitions. Thanks for being here.

Christopher Rocchio, DVM: Thank you for having me. I’m excited to be here.

Christman: Dr. Rocchio founded Monarch in 2015 to help practice owners look at transitioning out of ownership, and to help associate veterinarians who are seeking to buy a practice.

After starting two successful small animal hospitals in the Albany, New York area, Chris wanted to create a consulting business that would assist practice owners and associate doctors in transitioning the ownership of private practices. His first-hand knowledge of both the private practice market and the corporate market makes him uniquely qualified to provide transition advice to Monarch clients.

Dr. Rocchio continues to own and operate East Greenbush Animal Hospital with his wife, Dr. Debbie Chiu.

Rocchio: That’s correct. And actually, about a year and a half ago, we went through a transition ourselves and partnered with a corporation in a joint venture.

Through that joint venture, we were able to give ownership to all of our associate doctors, our licensed technicians and the managers at the practice. So now we’re in a structure where we are all owners and working together.

That’s a lot of what we’re talking about here at Fetch: how do we reward and retain associate doctors and other staff during a transition?

Christman: Let’s talk about that, because it’s so important to retain staff during a transition of ownership. Why is that?

Rocchio: We have all heard, and in some cases seen, the horror stories. A large, successful practice in town gets bought by a corporation, the owner leaves, then the staff and associate doctors leave. Before long, what used to be a thriving, multi-doctor practice becomes a one- or two-doctor practice.

For sellers, the goal is to maximize the value they receive, and that value depends on the team. It is not just about getting to a sale. It is about getting through the sale and coming out the other side with the practice intact.

Most owners want their practices to continue long after they are no longer there. These practices should survive and thrive five, 10 or 15 years after a transition.

Christman: When should owners start thinking about their options for rewarding and retaining staff during a future transition?

Rocchio: The earlier they can start developing a transition strategy, the better.

We try to get involved with owners at least seven years before they are ready to retire. Most owners are not thinking that far ahead, but the earlier we are involved, the more options they will have when they eventually go through the process.

Christman: What are the most common options for retaining and rewarding staff in a transition?

Rocchio: The option we see most commonly is a signing bonus, where cash is offered to associates or staff in exchange for signing contracts and staying through a transition.

But that is not usually the best way to do it. It can feel like a panic move. It often means there was not a strategy in place, and then suddenly, at the point of sale, you need people to cooperate, so you give them cash.

A lot of associates may look at that negatively.

We would rather see owners consider equity. That could mean giving associates the opportunity to become partners before a sale, or, in the case of a joint venture, having them participate in the joint venture and become part owners alongside the current owner.

Christman: This is a question I hear often: why can’t you just gift equity or ownership to staff in a transition?

Rocchio: The federal government does not love when you simply give things to employees. Or, more accurately, they do not mind, but they want taxes paid on it.

You hear people say, “I’m just going to give my associate 10%,” or, “Every year I’ll give them 5% of the practice as sweat equity, and eventually they will become a significant owner.”

But if you give someone ownership, they generally have to pay taxes on the value of what they receive. That means you may also need to give them cash to cover the taxes.

Unless the person is a close family member, such as a son or daughter, there can be a significant tax consequence.

It can work during a sale because the seller is receiving cash from the transaction. In that case, the owner may be able to give the associate ownership while also providing cash to help address the tax impact.

Christman: How does an owner navigate all the options available for a successful transition?

Rocchio: Practice sales and practice transitions are becoming more and more complicated.

Ten years ago, it was more straightforward. You sold your practice, received 100% cash, signed a two-year employment agreement, and then you were done.

Now, there are more joint ventures where the selling owner remains a part owner with the corporation. Because of that, owners really need advisors to help them through the process.

That includes people who understand the veterinary industry, the corporate buyers in the space and the different deal structures available. Financial advisors and lawyers are also important to help owners make informed decisions throughout the process.

Christman: Excellent information. Thank you, Dr. Chris.

Rocchio: I appreciate you having me. It’s been great.

Christman: I see you at all of our shows, by the way. Thanks for all the great work you and Monarch do. It’s nice to have you here.

Rocchio: We love Fetch. We are at every Fetch conference, and we will continue to come as long as you will have us.

Christman: Absolutely. Thank you. Thanks for tuning in, and thank you to Monarch for sponsoring the podcast. We’ll see you next time on the Vet Blast Podcast.