The sale of a veterinary practice is a complicated procedure, and you should use the services of a professional broker.
FREQUENTLY ASKED QUESTIONS:
Why not start now? Veterinary doctors love their work, their patients, and their staff. The thought of leaving a practice may be uncomfortable, but the doctor who plans ahead will be able to do it when they’re ready. With a successful sale, they can look forward to a comfortable retirement and time spent with friends and family, or room to pursue a specialty or a different passion before they retire. Planning is what makes all these options possible. Additionally, personal circumstances such as health issues, family needs, or a sudden emergency can mean it is time to relocate or sell a practice. Gross income can suffer if a doctor hangs on to a practice for too long, and a practice with declining revenue will be unattractive to buyers. A doctor who works until the last possible moment before shutting the doors, or who passes away suddenly, will leave behind a practice that is virtually impossible to sell, due to the immediate decline. It is highly advisable to have a plan in place with a broker for an immediate sale, minimizing the loss in value due to an unexpected event.
We recommend starting to plan three years before your desired exit date, because it can take a long time to create and implement an exit strategy. Begin with a valuation from your broker, which will likely suggest changes ranging from cosmetic improvements to long-term financing strategies. By starting well in advance, you’ll have a better chance to implement these improvements; but waiting until the last minute can adversely impact marketability and price. Business owners will often hire expensive consultants before selling, but veterinary practitioners can get the same service from their broker, who is likely to have more specific knowledge about the veterinary market than the typical consultant; for example, PS Broker has been evaluating veterinary practices exclusively for more than three decades. This valuation and consultation is an important first step in a successful exit strategy. Remember – approximately 70% of doctors do not have an exit strategy, and it eventually costs them money at the closing table.
You’ll want to think about what kind of buyer you want – after all, it’s not just about who can come up with the money. After building relationships with your community, your clientele, and your staff, you’ll want a buyer who will value them as much as you do. You may be reluctant to sell to a corporate buyer or a chain – but if you have a sound exit strategy in place, you won’t have to. Be prepared to explain the philosophy of your practice, and what you’re hoping for in a buyer.
If you have partners in your practice, you will have to reach an understanding with them. This can be a very difficult process, and emotional responses can take over. PS Broker knows and understands this tricky terrain, and can help you avoid conflicts with your partners.
Your staff is one of the major assets of your practice. As part of your exit strategy, you should develop a solid, productive staff. A staff with low turnover, long service, and good training is attractive to buyers. In general, delegating office functions to key staff is a wise decision. Having a good practice manager is especially attractive to a new doctor who wants to concentrate on medicine. If you are working as both doctor and manager, consider hiring a practice manager who will stay on. Buyers find it reassuring to have an experienced office manager in place for the transition. At some point, you will have to inform the staff of your intention to sell. You will be expected to protect the staff as you would any other asset, seeking their continued service with the new owner and assuring them that the practice will continue to be in good hands. The clientele will need similar reassurances – and PS Broker has a great deal of experience in these delicate subjects.
You will have to decide how to structure your proceeds, and PS Broker can explain the options that are commonly used. With the assistance of your tax specialist, accountant, and attorney, you can specify a plan that is best for your tax situation and future plans. Typical arrangements range from a simple lump sum payment to 1031 property exchanges. Sellers sometimes provide partial financing to the buyer, in the form of a note or lease agreement, and you should consider how much financing you’re willing to provide, if any.
Yes. A non-compete clause will be part of the sales contract, and it’s an important part of how to sell a veterinary practice. The length of time and the geographic area of the non-compete agreement will be negotiated. Typically, in a highly-populated area, you will not be allowed to compete for 3 years within 5 miles; in a less-populated area, it might be for 5 years and a much larger radius. It all depends on the specific circumstances of the practice. In many cases, you will be asked to continue working at the practice after the sale as part of the transition process – 30 days is the typical request, but this point is negotiated during the sale. You may also have the opportunity to continue in an associate or relief position, and you should think about that as part of your exit strategy. Do your personal goals include some continued full or part-time involvement? And for how long?
KEEPING AN EYE ON THE BIG PICTURE
Take an interest in local, national, and global events that can affect your sale. Interest rates are a prime example – even modest changes in interest rates can increase or decrease the number of buyers who can get financing. The economic trends in your area, as well as nationally and globally, will also impact the value of your practice. The winds of political change often affect buyer and consumer confidence.