Are you ready to sell your veterinary practice? As a veterinary practice owner, the decision to sell can be overwhelming, whether you’re preparing for retirement, seeking a new career path, or simply ready to hand over the reins.
Selling a practice involves more than just finding a buyer; it requires strategic planning and careful consideration of various factors that will shape the outcome of the sale.
For example, the U.S. veterinary reference laboratories market was valued at $660 million for production animals and $315 million for companion animals in 2016.
In this blog, we look at the key things to consider when selling your veterinary practice. From preparing your financial and legal documents to finding the right buyer and negotiating terms, we go over each critical fact you will need to know to have a successful sale.
Overview of Selling a Veterinary Practice
Selling a veterinary practice involves the right amount of preparation and strategic planning. Indeed, several steps are involved in this process from understanding market dynamics to engaging the right legal help, which is crucial in terms of securing the best terms and outcomes of a sale.
Preparing for Sale
Valuing your veterinary practice accurately is essential to attracting serious buyers. Veterinary clinic brokers often play a key role in helping practice owners navigate the market and set a competitive selling price.
Staying informed about current market trends is equally important, as it allows you to negotiate from a position of strength. A well-researched valuation can make all the difference in attracting serious offers. Consider:
- Professional Appraisals: Obtain evaluations from experienced appraisers to get an objective market value of your practice.
- Market Conditions: Keep abreast of current trends and sales in your area to help set a realistic selling price.
- Financial Performance: A solid financial history enhances your practice’s attractiveness, signaling stability and profitability to potential buyers.
Financial Health: Maintaining strong financial health is vital for presenting your practice as a valuable asset.
- Organized Financial Statements: Ensure your financial documents are orderly and transparent to avoid deterring buyers.
- Profitability: Showcase a consistent track record of profitability which can justify a higher selling price.
- Expense Management: Streamline operations to demonstrate efficient management, appealing to buyers looking for a well-run business.
- Accounts Receivable: Aim to clear up outstanding debts to present a healthy balance sheet.
Legal Considerations: Addressing the legal aspects is essential for a smooth sale.
- Early Legal Counsel: Partner with a lawyer who specializes in veterinary practice sales to navigate complex regulatory landscapes and draft necessary documentation.
- Contracts Review: Evaluate all contractual agreements to identify any potential issues that could impede the sale.
- Compliance: Ensure your practice meets all industry regulations to avoid any legal pitfalls before listing it for sale.
- Confidentiality Agreements: Use NDAs to protect the sensitive information of your practice during negotiations.
Choosing the Right Buyer
With the growing interest of corporations in veterinary practices, there are several buyer options available for sellers, each with its own set of advantages and disadvantages. Individual practitioners often have close alignment with the philosophy of the existing practice and offer continuity of care, although normally they do not have the financial robustness when compared to corporate groups.
These groups generally comprise large firms or private equity entities and tend to make higher offers but often come with significantly streamlined processes, which may greatly alter the practice’s operational culture. The partnerships balance personal ethos with additional financial heft, but decision-making is more complicated due to the number of stakeholders.
Considerations in the selection of a buyer should include practice philosophy, plans for retention of staff, management of client relationships, post-sale options, and financial security to provide for future growth of the practice.
Individual vs. Corporate Buyers
| Factor | Individual Buyer | Corporate Buyer |
| Valuation Offered | Generally lower | Often higher |
| Practice Philosophy | More likely to align | May implement corporate strategies |
| Staff Retention | Usually high priority | May restructure |
| Decision-making Speed | Can be slower | Often faster |
| Post-sale Involvement | More flexible options | May have structured transition plans |
| Financial Resources | Limited | Substantial |
| Practice Autonomy | High | May be reduced |
Negotiating the Sale
The Importance of the Contract
The sales contract is the backbone of the transaction. Important elements to include are:
- Purchase Price and Payment Terms: Outline the total price and how it will be paid (e.g., lump sum or installments).
- Assets Included/Excluded: Specify what assets are part of the sale.
- Transition Period: Define the terms of any transition period where you stay involved.
- Non-compete Clauses: Negotiate the duration and scope of any non-compete agreement.
Employment Agreements
Many buyers may require you or key staff to remain with the practice:
- Duration of Employment: Align the term with your personal goals.
- Role and Responsibilities: Clarify your role during the transition.
- Compensation and Benefits: Ensure fair compensation for your involvement.
Handling of Existing Staff and Clients
Ensure the transition is smooth for employees and clients:
- Staff Retention: Negotiate terms to secure employment for your team.
- Client Communication: Agree on how and when to inform clients of the sale.
- Continuity of Care: Make provisions to maintain care quality.
Due Diligence
Prepare for the buyer’s review of your practice:
- Financial Records: Keep all financials organized and available.
- Legal and Compliance: Ensure licenses and permits are up to date.
- Equipment and Inventory: Provide a detailed inventory list.
Negotiation Strategies
- Know Your Bottom Line: Define your minimum acceptable terms.
- Be Ready to Walk Away: If terms are unacceptable, explore other options.
- Consider the Whole Package: Look beyond just the price, think about transition terms and future roles.
- Seek Professional Advice: Consult legal and financial experts to protect your interests.
Transitioning Smoothly
A well-planned transition will protect the value of your veterinary practice and assure continuity of care for your patients. Elaborate on a specific transition plan, including milestones, roles, and processes for knowledge transfer between buyer and seller.
Communication is the key. Keep staff, clients, and vendors informed; listen to and respond to concerns. Provide continuity of care by updating medical records and treatment protocols, and leaving detailed notes regarding active cases.
Focus on operational continuity through training on key systems, securely transitioning passwords and documentation of standard procedures. Lastly, manage the emotional aspects-support your team, introduce clients to the new owner, and take care of yourself during this transition period.
Post-Sale Considerations
After the sale is complete, you’ll enter a new phase of your professional and personal life. Here are some important considerations:
1. Financial Planning
- Tax Implications: Work with a financial advisor to understand and plan for the tax implications of the sale.
- Investment Strategy: Develop a strategy for managing and investing the proceeds from the sale.
- Retirement Planning: If retiring, ensure your financial plan aligns with your retirement goals.
2. Professional Transition
- Continued Involvement: If remaining with the practice, please clearly outline your new role and responsibilities.
- New Ventures: If you decide to leave your traditional practice, think about how you would like to use your veterinary skills in new ways through consulting, teaching, and volunteering.
- Licensure and Indemnification: Determine what professional licenses and insurance you must carry, based on your plans for the future.
3. Personal Adjustment
- Identity Shift: Prepare for the emotional impact of no longer being a practice owner.
- Time Management: Plan how you’ll spend your time, especially if you’re used to the demands of running a practice.
- New Goals: Set new personal and professional goals for this next chapter of your life.
4. Maintaining Relationships
- Professional Network: Maintain professional contacts that may be useful in the future.
- Client and Staff Relationships: Decide whether and how you will maintain relationships with long-term clients and staff.
5. Legacy Planning
- Mentorship: Consider taking young veterinarians or practice owners under your wing to share your valuable experience.
- Community service: Involvement in the veterinary community or animal welfare causes.
Conclusion
Selling your veterinary practice is one of the significant events that occur in the career of a professional, it involves a lot of planning, preparation, and proper execution. Give more importance to practice valuation, financial health, legal considerations, and the choice of the right buyer to realize the best value for your practice and to have a smooth transition.
Frequently Asked Questions (FAQs)
How to sell a veterinary business?
Get your practice ready by organizing its finances, getting a professional valuation, and finding a buyer that fits your goals.
How do I value my veterinary practice?
All of these are factors to be considered by a professional appraiser, including profit, assets, market conditions, and EBITDA, to ascertain the value of the practice.
What is a good profit margin for a veterinary practice?
A good profit margin for a veterinary practice normally ranges from 10 to 18%, depending on the size and location.
