Nick Lodestro worked in the pet medical industry for seven years. During that time, he talked to a lot of veterinarians and realized that many had no interest in running a business. They had grown their own practices but just wanted to care for family pets.
“They've been business owners historically out of necessity,” Lodestro said.
According to the American Veterinary Medical Association, the United States has 73,900 veterinarians in private practice. Most own single-location practices, and the majority are small animal veterinarians. Lodestro saw an opportunity.
He earned an MBA in 2013 from Babson College in Massachusetts and wrote his capstone project about buying veterinarian practices and managing the businesses for the vets. The veterinarians would continue to work for the practice as employees.
Lodestro discussed the idea with his friend, Paul Habenicht, and that led to the formation of a partnership. They founded VetEvolve in 2014. The company now owns 32 veterinarian practices in Virginia, Maryland, Tennessee and West Virginia. Lodestro serves as the CEO, and Habenicht is the vice president of business development.
Based in Richmond, the company recently ranked No. 3,512 on the Inc. 5000 list after growing revenue 147% over the last three years. VetEvolve expects to record $70 million in revenue in 2022.
“We run very, very lean for an organization of our size,” Lodestro said. “We have over 650 employees at our 32 locations. It's crazy. We started with two.”
The growth has been slow. Initially, Lodestro and Habenicht and a couple of high-net-worth individuals funded the company. It bought one or two veterinary practices a year. They had to have long conversations with the clinic owners that a sale was the right choice.
“[Veterinarians] are not in people management, they are not in leadership, and they're not good at vendor negotiations,” Lodestro said. “We take everything that's nonmedical related and we run it or delegate or empower and develop people to do it within the practice. “
The company learned the business and grew. In recent years, VetEvolve has brought in venture capital, which has helped to fund its growth. Lodestro declined to give specifics about the investment, but PitchBook said VetEvolve was acquired by Align Capital Partners "through [a leveraged buyout] in March 2020 for an undisclosed sum.” The Shaker Heights, Ohio, private equity firm says on its website it has added 14 clinics to VetEvolve's holdings.
“That's been a two-and-a-half-year journey now to accelerate and fuel that growth,” Lodestro said.
Lodestro and Habenicht have a long history together. They served in the Marines and were deployed together in Iraq where they managed a unit. They learned they operated well together and realized the organizational and management skills of the military worked in the business world.
Although the company has been around nearly a decade, Lodestro admits VetEvolve has kept a low profile. They had to develop relationships within the veterinary community and create a management structure that worked for the individual clinics. Initially, they had to seek out the veterinarians and explain the benefits of selling. Now, they say veterinarians seek them out.
The biggest challenge right now is labor, Lodestro said. Not enough licensed veterinarians exist across the county. Typically, there is a single licensed veterinarian available for every 12 openings. That has led to an increase in salary. Lodestro said the average salary of a veterinarian was around $80,000 when VetEvolve was founded. Now, the average salary is $130,000.
Lodestro said VetEvolve is a unique business because it has two clients — the veterinarians and the pet owners. After a sale, VetEvolve does not change the name, because it wants to keep the connection to the local community. VetEvolve then manages bookkeeping, staff, inventory and real estate. With the pet owners, it must find way to engage them even if they only visit a clinic once a year for an annual exam. VetEvolve wants pet owners to know it cares about pets.
“We’ve got to find new and unique ways to reach and engage pet owners those other 364 days a year,” Lodestro said.