Practice Transition Market Trends
By: Rod Johnston, MBA, CMA, Owner and Founder
Over the years, the market for practice transitions has changed. Sellers sell for different reasons than they did ten years ago. Buyers make their buying decisions much differently than they did ten years ago. And, the veterinary industry has changed in a number of ways over the years as well.
When we first started selling practices approximately 20 years ago, the primary reason veterinarians told us they were selling was because they were ready to retire. The average age of retirement back then for a veterinarian was 64 years old. The most recent survey by the American Veterinary Medical Association has the average retirement age for a veterinarian of 70. Veterinarians are selling for reasons besides the fact that it’s time to retire. More and more, we see veterinarians retiring for three primary reasons:
- Staffing challenges – Sellers are having to deal with a revolving door of staff. With the staffing shortage because of the covid shutdowns, staff members are being recruited by other offices. Staff members leave for a little more money to go to work at an office nearby.
- Stress – Veterinary practice owners are complaining that they are working longer hours and more days than they were five or ten years ago. This is due to shortage of not only staff, but also a shortage of veterinarians. Some practices have closed. Corporates are paying associates bonuses and higher salaries. This is causing associates to leave the mom and pop veterinary clinics to go work for more money at a corporate office. Owners are having to work six days per week to keep up with the demand for veterinary care. Pet ownership and consumer spending on pet care is also increasing.
- Compassion Fatigue – This is the psychological, physical and emotional impact of constantly caring for others, often through stress and trauma. Veterinarians are constantly caring for animals and their owners. Veterinarians often work long hours and 5 or 6 days per week. This gives them little to no time to take care of themselves. The result is the stress with no release takes its’ toll and causes compassion fatigue.
Practice Buyers have also evolved. Fifteen years ago, a potential buyer would sign a non-disclosure agreement, take a look at the practice numbers, and then visit the practice. They would typically then decide to move forward or not. It was pretty quick and simple. The buyers would be an associate who had been out of school for from 2 to 5 years. They would focus on the numbers and the location and might bring in an accountant to review the tax returns.
Buyers nowadays are not only those who have been out of school for a few years, there are also corporate’s looking at larger practices. There are more veterinarians moving from other states to buy practices as well. A potential buyer quite often has someone representing them. It may be a buyer’s representative or an accountant who does more than just look at the profit and loss of the practice. Buyers scrutinize not only the numbers, but the technology in the practice as well. Corporate’s do a complete physical on the practice.
Good practices in good locations still sell reasonably fast. Good practices are those that collect $700,000 or more with overhead below 70% and the practice technology and décor is up to date. Good locations are in populated areas that are desirable to the public in general. Metropolitan cities and practices within 30 minutes of these areas are good locations. Locations in other urban areas will also sell quicker than rural areas. Practices in rural locations do sell. They just take a little longer than normal.
Whether you’re thinking about selling, or thinking about buying a practice, we’re here to help. Contact one of Omni’s Transition Consultants to steer you in the right direction.
Read MoreSelling to an Individual Buyer or a Corporate Buyer is Going to Take Time! Start Planning NOW!
By: Steve Kikikis, Vice President, Broker
Retirement…. Ah, that sounds nice! Right? But the process requires careful planning, especially when it comes to selling your veterinary practice. While the idea of selling may seem straightforward, the reality often proves to be far more complex. Selling a veterinary office isn’t putting up a “For Sale” sign and waiting for buyers to come knocking. Whether it’s finding the “right” individual buyer or selling to a corporation with a complex work agreement, veterinarians should start planning to sell their practice at least three years before they’re ready to retire. Omni Practice Group can help you determine your timing now.
Lack of Buyers for Individual Sales and Extensive Due Diligence.
Selling a veterinary practice to an individual buyer is a lengthy process. Depending on your location and type of practice, it can take anywhere from twelve months and up to thirty-six months for remote locations or “unique” practices. The greatest time factor in this scenario is the shortage of buyers across the nation. Potential purchasers are scarce, particularly those who meet the criteria and financial requirements necessary to acquire a veterinary practice. Fewer and fewer individuals are signing up to become practice owners and are willing to work the five days a week that may be required for a successful practice; instead many are opting to remain associates. That being said, good practices in good locations that are well managed do sell reasonably quick.
Omni Practice Group and I work hard to market your practice to potential individuals in as many ways as possible. We place classified ads with state and local veterinary associations, national publications, and veterinary school alumni websites and newsletters. We put on buyers’ seminars, attend conferences, speak at schools, and we work diligently to maintain an extensive database of potential buyers; ensuring if there is a doctor considering buying, they will see your practice (confidentially of course). We leave no stone unturned. Once we have found a buyer, they will need time to thoroughly evaluate the practice’s financials, client base, operational procedures, secure financing, negotiate terms, and other critical aspects. This thorough due diligence helps ensure that the buyer understands the investment they’re making and helps them assess the practice’s viability and potential for future success. But it takes time!
Whether you’re five years away or five months away from selling your practice, there’s no time like the present to not only start thinking but also to start planning for your transition. We are happy to help in any way we can and offer a free transition plan consultation. We’re only a phone call (or e-mail away) Call Steve Kikikis at 425-905-6920 or email at steve@omni-pg.com
Read MoreAm I Ready to Purchase a Veterinary Practice?
Am I Ready to Purchase a Veterinary Practice?
Now is the time to invest in yourself and increase your income! Yes, COVID changed our lives and yes, loan rates are a little higher, but if you surround yourself with trusted advisors, you can do it. Start making more money and driving your own ship today.
Transition specialists/brokers are here to help you understand everything about the practice, such as areas of opportunity to grow and to increase collections. If many services are referred out that you may do, what does that increase look like? For example, if the selling veterinarian does no specialty services and you do, we can potentially research the number of referrals and put an average patient fee to it and determine an immediate possible increase in collections.
Loan rates are a little higher, but that little amount is nothing in the life of your career. You may also be able to refinance at some point and your CPA can assist you to take advantage of current tax deductions and accelerated depreciation if it makes sense in your specific situation. Reducing taxes is money in your pocket. As an example, ask your CPA about sections 168, 179, Special Depreciation, and DPAD. Perhaps it is time to incorporate a retirement plan into your office, again, if it makes sense in your situation.
Start talking with us and we can provide contacts for veterinary specific lending, CPAs, and attorneys to help you move forward with your career plans.
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