Employee ownership options: Sell your practice to the employees

As veterinary hospital owners consider exit options, the advice of Mr. Jorkin in the 1951 film, Scrooge, certainly has appeal: Sell while the going’s good to the vested interests.

But other owners may prefer the response of Mr. Fezziwig: “It’s not just for money alone that one spends a lifetime building up a business,” the character states. “It’s to preserve a way of life that one knew and loved.”

Two former veterinary practice owners offered distinctive spins on Fezziwig’s philosophy. Their business sale models kept their practices independent and now bring the profits to those who do the work: the employee-owners.

Forward-thinking update to a storied UK practice: Employee ownership

Pennard Vets, based in Sevenoaks, Kent, England, became an Employee-Owned Trust (EOT) in 2021. The practice has a long history there; it was founded in 1890 by DL Pugh. In 1983 it was renamed Pennard Vets after the historic building in which it is housed. In 2011, three people with long ties to the business—Matthew Flann, BVetMed MRCVS; Caroline Collins, BVetMed, MRCVS GPCert(FelP); and Andy Green, BVetMed MRCVS—completed their purchase from the practice’s outgoing previous partners.

As the three considered the next stage for the business, their philosophies were similar.

“We firmly believe that most veterinary professionals enter the field driven by vocation rather than financial gain,” explained Flann. “While profitability is essential for any business, veterinary professionals could easily choose more lucrative careers if money were the primary motivator.”

Corporate ownership vs employee ownership

The trio saw corporate ownership as sometimes creating conflicts between financial priorities and clinical care—something they wanted to avoid.

“Over the years, we witnessed many friends and colleagues sell their practices to corporate groups, often leading to significant cultural shifts or further resale,” Flann said.

They agreed that employee ownership ensured a balance of excellent veterinary care and financial sustainability. The trio also appreciated that the presence of an Employee-Owned Trust board—which in Pennard Vets consists of one director trustee, one employee trustee, and one independent trustee—introduces a level of accountability and oversight.

With an EOT in the UK, employees do not own shares directly nor do they retain any equity upon leaving. Instead, they share in the trust’s success with benefits varying depending on how the trust is set up. At Pennard Vets, which currently has eight sites, an emergency center, and employs about 160 people, each employee is assigned points based on length of service, hours worked, and role to determine their distribution share.

How to qualify for an EOT

To qualify for Employee-Owned Trust tax advantages, UK legislation requires at least 51% of company shares to be held by the trust. With Pennard Vets, 70% of shares were sold into the trust and the former owners each retained 10%, said Flann. (In the U.S., information about employee ownership structures is available from the nonprofit National Center for Employee Ownership and the ESOP Association.)

“An EOT structure aligns well with veterinary values as it prioritizes purpose over pure profit.” said Flann. “In contrast, traditional commercial setups require directors to maximize shareholder returns, which can sometimes create challenges if not managed carefully. An EOT helps navigate these potential conflicts while ensuring professional governance and financial sustainability.”

Meanwhile, in the U.S.

In January 2023, Cooperative Veterinary Care in southwest Wisconsin became a worker-owned cooperative, the realization of a hope held by its three former owners.

John Dally, DVM, and Mark Baenen, DVM, established Spring Green Animal Hospital in 2003. When they considered exit options, they partnered with Dally’s wife, Ann Vetter, DVM, to purchase the Mazomanie Animal Hospital in 2021, figuring that a larger practice would be of interest to consolidators.

“But there had always been this hope that we could have a different model that we could try—a cooperative ownership of the employees,” said Dally.

The cooperative model

They decided to explore that idea with the University of Wisconsin Center for Cooperatives in Madison and found that it made sense for their business.

“It felt so much better to have the benefits of ownership be transferred to all the people we work with, the people who do the work. It ethically and socially felt like a really good thing and good for the small-town communities to keep them locally owned and operated,” Dally said.

An outside firm handled the valuation, he said, and worked with existing employees to create bylaws and structures, which took about nine months. The sale was akin to a land contract, set up as a business loan with a business loan interest rate and a monthly repayment over 10 years.

Ruth Stamness, CVT, worked as a technician when she started at Spring Green in 2003, and is now an employee-owner. She became co-practice manager when the Mazomanie practice was acquired and now serves as president emeritus for the cooperative.

How it started vs. how it’s going

When the cooperative was established, all employees who took part in the development process were immediately eligible to purchase a membership stock, she said. Currently, all new employees can apply to purchase member stock after meeting a specified length of employment. Their membership then is subject to vote by current active members.

At present, the two-site practice has 22 employees, including six veterinarians and six CVTs. Of those 22, 15 became employee-owners, including the original three owners.

“This cooperative model allows our clinics to maintain the high-quality care we are known for while avoiding corporate acquisition or the risk of closure due to a lack of buyers,” Stamness said. “Additionally, this structure provides veterinarians—many of whom are burdened with significant student loan debt—the opportunity to attain ownership in a practice without assuming the full financial and managerial responsibility of sole ownership.”

Stamness said the most significant difference is the decision-making process.

“In a cooperative, every member has a voice in discussions and decisions regarding all aspects of the practice, including wages, policies, and budgets. While this process can take longer than in a traditional top-down structure, it is far more democratic and fosters a sense of shared ownership and engagement. What has surprised me the most is that nearly every decision we have made has been approved unanimously, reflecting a strong collective commitment to the best interests of the practice,” she said.

The cooperative choice

Deciding to sell your practice is a major decision and deciding who to sell to is just as important. Ask yourself, are you a Jorkin, looking for the highest bidder; or a Fezziwig, looking to maintain “a certain way of life” in the business after you leave it? Of course nothing is ever that clear-cut, but whether you are ready to sell, or just thinking about selling your practice, if you are interested in maintaining a continuous culture with the business you have built, consider an employee-owned model, rather than simply selling to a corporate entity.

Photo credit: © DenGuy via Getty Images/E+

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