April 2016

​You have had a great career and now you are thinking about selling and transitioning out of your veterinary practice. You would like to get the best value for your practice. Do you just walk away?  Being prepared can not only help you get the best price, it will help ensure a smooth transition.

Here are a few things you can do to help prepare for your veterinary practice transition:

1. Know your financial situation – Meet with your financial advisor, CPA, or whoever gives you financial advice to get a good picture of where you are with your savings and investments.

2. Get a practice valuation – A practice valuation will help you see how much equity you have in your practice.  Additionally, a CPA can help you figure out what the taxes and net proceeds from your sale will be.

3. Update Technology – Buyer’s like to see new technology in a practice.

4. Cosmetic updates – Have you updated the interior with paint and carpet in the last 20 years?  If not, it’s time.  Buyers like a practice with a fresh feel to it.  A 1970’s feel was good in the 1970’s.

5. Review Accounts Receivable Aging – Collect any past due accounts, send to collections or write them off.  Also, review credits to either pay back to the patient or send unclaimed property to the State.

6. Review Staffing – Are you over or understaffed?  Adjust accordingly.

7. Clean up your financial statements – Make sure the expenses you’re running through your veterinary practice financial are related to your practice, or at least identifiable as an adjustment.

8. Consider ramping up production – If you are not sure how, then hire a veterinary consultant.  Ramping up your practice when you’re 3 or more years out will pay dividends on the sales price.

9. Review your fees – Do you have the lowest fees in the area?  Consider a fee increase to catch up.

10. Harvest your Equity – Maybe you are a few years away from retirement, but tired of being an owner.  You should consider selling now, take the equity out of your veterinary practice and work back as a veterinary associate.

​You’ve heard it before, the separation is in the preparation.  This is a quote that is typically heard in athletics, but can be applied to other endeavors as well, including buying or starting a new practice.  But, what do you prepare for before you jump into Veterinary practice ownership.  Just ask any practice owner, there are a lot of things you can prepare for before you buy a Veterinary practice.  Here are a few things that will help you separate yourself from the rest of the pack and allow you to hit the ground running when you become a practice owner:

1. Where You Practice Matters – Know where you want to practice and the demographics of the area you are looking to practice. There are a lot of different websites and services you can look to in order to get this information. A lot of commercial brokers (Steve at Omni Healthcare Real Estate) will have data ranging from a breakdown of the age of the population, to ethnicity, income levels, how much money was spent on dog food per person, etc., There are several services such as Scott McDonald’s that will help you gather data as well.

2.  Knowing Your Market – Understand what the numbers and ratios of a typical Veterinary practice should look like.  Your state or national association has resources that will show how much you should be spending on staff salaries and benefits as a percentage of total collections, as well as rent, marketing and other financial data as a percentage of collections.

3.  Basic Accounting – Start educating yourself on basic accounting principles.  Specifically, learn how to read a financial statement – profit and loss report and balance sheet.  You will be given these by the Veterinary broker when looking at a practice, so you should at least know what they are and what a financially viable practice looks like vs. a not so nice practice.

4.  Bank Financing – Contact a bank that specializes in Veterinary practice financing before you start looking.  They cannot necessarily pre-approve you for a certain practice, but they can tell you whether you can get a loan, approximately what rate and terms you can get and possibly how much you may be able to qualify for.  You don’t want to go after a $2 million practice if you cannot get a $2 million loan.

5.  Looking For Red Flags – Knowing where to find the skeletons in the practice is a key element in the process. Where do you look for embezzlement in the practice?   How about hidden staff incentives and payments?  Over or under treating patients?  Uncollected accounts receivable?  Etc.,

6.  Learn About Leases – What is a triple net lease?  What is the market rate for leases?  How much time is left on the lease?   What’s a tear down clause?,etc.,

7.  Surround Yourself With a Good Team – Surround yourself with a good team; CPA, Broker, Attorney, Consultant, etc., Find those that specialize in your specific discipline.  They can help you avoid some of the pitfalls you may miss.

By preparing yourself ahead of time with some of these things, you can avoid having to spend more than you need to and find a practice that will bring you great professional challenges and rewards in the long run.