GLENDALE, Ariz.--(BUSINESS WIRE)--In an industry where more than 20% of general veterinary practices and an estimated 70% of specialty practices are now owned by corporate groups, an Arizona veterinary practice is bucking the consolidation trend and maintaining its independence via an Employee Stock Ownership Plan (ESOP). An ESOP is an employee benefit plan that gives workers ownership interest in the company.
1st Pet Veterinary Centers, with more than 300 employees providing primary and specialty care and 24/7 emergency services at three AAHA-accredited facilities in Phoenix, Chandler, and Mesa, Arizona, was founded in 1989 by Randy Spencer, DVM. As Spencer began succession planning for the thriving business he’s led over three-plus decades, he sought an alternative to a corporate sale as an exit strategy.
“It’s about legacy – we’ve created a great, caring culture and I didn’t want to lose that to a big corporation,” Spencer says of his decision to create an ESOP, a process that started three years ago. “I also wanted to reward those who have helped build this practice and provide a good retirement opportunity for long-term employees.”
Through 1st Pets’ ESOP, all employees 18 or older who have worked at least 1,000 hours in a year are eligible to receive shares as part of their remuneration. They will be vested over the next six years. The number of shares each employee receives is based on their compensation and longevity with the company. When the employee retires, they will receive the share value in cash. An annual independent business valuation determines the share price.
While there are an estimated 6,500 ESOPs in the U.S. (Publix Supermarkets is the largest), they are rare in the veterinary industry. Spencer wants to change that by sharing the significant upside of this approach for both veterinary owners and employees.
“Research shows that ESOPs are a viable option for profitable animal hospitals with 20 or more employees and provide an exceptionally fair alternative to selling to corporations, including significant tax advantages,” he says. “What’s more, ESOP companies have been shown to have higher growth, sales, and productivity than non-ESOP companies. An ESOP can also help attract and retain employees as employee-owners are more committed to providing the best care and service. I believe there’s no better legacy for a successful practice than this.”