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Veterinary Practice Brokerage Services
9 Steps to Exit Your Business Gracefully
Looking to Sell a Veterinary Practice?
Many abbreviations are associated with your veterinary clinic’s financial health, such as EBITDA, NPV, and PE, but before we start talking finances, it’s important to figure out the values of your practice, and the building and land where your clinic sits. Your real estate value can be derived by getting an appraisal from a local commercial real estate broker. Your veterinary practice and real estate are two distinct assets and can be evaluated and sold separately. There are several ways for a practice seller to maximize the financial gain from real estate. A sales leaseback strategy is one such way.
If your veterinary practice is in a building you don’t own, it’s wise to have an extended multi-year lease with flexible terms and conditions. At sales time, a marketable lease will be both renewable and transferable. It is important to document any agreements between the landlord and yourself, such as expansions or change options that could positively or negatively impact your business.
Addressing issues surrounding real estate will make the property and practice more attractive at sales time. Environmental difficulties, zoning issues, or permitting problems should be resolved in advance. In the medical arena, the presence of hazardous materials is an environmental problem that may challenge a sale, so it is best to understand and deal with these issues before a prospective sale.
Making an up-to-date equipment list that includes all of the equipment names, types, model numbers, and serial numbers will help with the valuation process and be useful to prospective buyers. A few simple steps can help maximize the success of your sale: avoid beginning new equipment leases as you approach your exit date, while leases can be assumed or paid off at closing, early payoffs may be costly. Upgrades to your equipment might not be good for the bottom line so make only the most necessary upgrades. The same thing applies when improving real estate; make improvements and updates only if they can provide a positive return.
Inventory levels should be kept at a minimum as they are typically factored into the asking price of the practice. Often veterinary practices maintain enough inventory to last for 30-60 days. Over this time, the new owners can simply acquire new inventory as needed. In most cases, we advise against purchasing bulk inventory even if it is offered at a deep discount. Lower inventory means a lower asking price.
Ensure that key members of your team and support staff are committed to staying at the veterinary clinic during and after an ownership transition. Build a reliable backup group of veterinarians and support, while creating a dependable network of emergency and specialist referrals.
Understanding the competitive landscape can impact every aspect of the sales process. Examine veterinary practices near you, find out what veterinarians are looking for in an acquisition, and evaluate recent clinic sales to ensure you are getting the best possible pricing. Consider having an associate buy into your practice or perhaps a merger with a competitor would be best for you. Knowing all your options will result in a higher return on investment.
Make sure that your practice accounting system and software can generate accurate reports to provide a current and accurate depiction of your company’s financial condition. We advise reviewing our list of required documentation and how to best present them during the sales process. When selling your veterinary clinic, it is important to understand your financial goals. A good business broker can collaborate with your financial planner to help ensure your personal financial goals and expectations are worked into the transaction.
Using a professional business broker to value and sell your business can dramatically increase your selling price. A broker like NBE can increase your sales price by correctly assessing the market and your practice’s value, increasing your marketing efforts, using a third party for negotiations to eliminate emotions, and streamlining the process to save time and money.
Buying a Veterinary Practice
If you are considering buying a veterinary practice or clinic, there are several factors to consider.
Determine how you will finance the purchase of the practice, whether it be through a loan, personal savings, or investment from partners or family. It’s also a good idea to discuss financing options with a financial advisor or lender to determine the best option for your specific situation.
Thoroughly research and evaluate the practice you are considering buying. This includes reviewing the financial records, legal documents, and any contracts or agreements that are in place. Assess the condition of the physical facility and equipment, as well as the reputation and client base of the practice.
Develop a plan for transitioning ownership of the practice to you, including transferring any contracts or agreements, updating legal documents and insurance policies, and communicating the transition to clients and staff.
Consider the current practice staff and how they will fit into your vision for the future of the clinic. You may need to make changes to the staff to align with your goals and ensure the smooth operation of the clinic.
Seek the advice of a lawyer to ensure you address any legal issues or liabilities that may arise during the purchase process. Have a legal contract in place outlining the terms of the sale and any ongoing obligations or responsibilities.
Develop a clear business plan for the practice, including your goals, financial projections, and strategies for growth and success. This will help guide your decision-making and ensure you are well-prepared to take on the responsibilities of ownership.
Maximize Your Veterinary Practice Valuation
Several Veterinary industry-specific considerations can impact the valuation of your veterinary practice. These may include:
- Strategic Buyer: A strategic buyer is a Corporation or Private Equity firm that has a specific interest in acquiring veterinary practices, perhaps to roll up operations into a large national organization. In these cases, the buyer may be willing to pay a premium for the practice and represent an excellent buying target.
- Industry Consolidation: As the veterinary industry consolidates and larger practices or groups acquire smaller practices, the valuation of a practice may be impacted. In general, larger practices or groups may be willing to pay a higher price to increase their organizational footprint.
- Market Demand: The demand for veterinary services in the local market can impact the valuation of a practice. A practice located in an area with high demand for veterinary services may command a higher price.
- Practice Reputation and History: The reputation and history of the practice can impact its value. A practice with a strong reputation and long history of serving the local community carries a much higher valuation.
- Practice Location and Facilities: The location and physical facilities of the practice have a direct impact on value. A practice located in a prime location with modern and well-maintained facilities will typically carry a higher value and sell faster.
- Practice Financials: The financial performance of the practice is a key factor in its valuation. A practice with strong financials, growth, and a consistent track record of profitability, will be valued with higher multiples.
Veterinary Practice FAQ
There are several ways to find a buyer for your veterinary practice, including:
- Advertising the practice for sale through online platforms or local classifieds.
- Contact potential buyers directly, such as other veterinarians or investors who may be interested in acquiring a veterinary practice.
- Ask colleagues or other professionals in the industry if they know of anyone who may be interested in buying a veterinary practice.
- Working with a business broker like Next Best Exit which specializes in selling veterinary practices. We can help you find potential buyers and negotiate the terms of the sale.
It is also important to consider whether you want to sell the practice to an individual buyer or a corporate entity, as this can affect the type of buyer you attract and the terms of the sale.
Several factors can impact the value of a veterinary business, including:
- Financial Performance: The value of a veterinary business is largely determined by its financial performance, including revenue, profitability, and growth potential. Financial statements, including profit and loss statements and balance sheets, provide insight into the business’s financial health.
- Assets: The value of the business’s assets, such as equipment, real estate, and intellectual property, impact the overall value of the business.
- Market Demand: The demand for veterinary services in the local market affects the value of the business. A practice located in an area with high demand for veterinary services will be more valuable than one located in a low-demand area.
- Reputation and Customer Base: A veterinary business with a strong reputation and loyal customer base will create more value.
It may also be helpful to work with a business valuation expert like Next Best Exit to accurately determine the value of the business.
You can sell your veterinary practice to a current employee. This can be a good option if you have a dedicated and talented employee who is interested in buying the practice and has the necessary experience and skills to run it successfully.
Before selling the practice to a current employee, it is important to consider whether the employee has the financial resources to purchase the practice and whether they are committed to maintaining the practice’s high standards of care. It can also be helpful to work with a business broker like Next Best Exit to ensure that the sale is structured and finalized professionally and legally.
Five steps to selling a Veterinary Practice, including:
- Preparing the practice for sale by reviewing financial records, updating equipment, and making any necessary repairs or improvements.
- Determining the value of the practice by reviewing financial statements, comparing the practice to similar businesses, and considering the local market.
- Finding a buyer for the practice, which can involve advertising the practice for sale, working with a business broker, or contacting potential buyers directly.
- Negotiating the terms of the sale, including the price, financing arrangements, and any contingencies.
- Closing the sale by transferring ownership and transferring the practice’s assets and liabilities to the new owner.
Considering Selling Your Veterinary Practices or Clinic? Start Here.
Whether you’re looking to develop a sound and well-thought-out plan for exiting the veterinary medicine industry, are seeking expert advice to maximize sales value, or want to expand your current market base – we’ve got you covered.