The decision to sell your veterinary practice is a complex, and often emotional, one to make. Compounded with the need to understand your financial records, the greater market trends, and how the decision will impact your team— we understand you may feel lost as to where to even begin.
At Community Veterinary Partners (CVP), we’ve helped hundreds of doctors navigate the intricacies of practice transition. To get you started, our team has compiled this list of 10 Tips For Preparing to Sell Your Veterinary Practice.
- Identify the reason you are selling.
- Know what’s next for you after the sale of your practice.
- Consult your accountant and have a firm grasp on your practice’s EBITDA.
- Understand your real estate circumstances.
- Identify the key players and decision-makers at your practice.
- Be forthcoming with any pitfalls that might arise during the sale.
- Determine your needs and expectations when it comes to your team.
- Do your research and understand the current market.
- Consider the cultural fit and how the sale will impact your hospital today and your legacy tomorrow.
- Mentally prepare for the journey.
Identify the reason you are selling your veterinary practice.
The very first step in selling your practice is to have a firm understanding as to why you are taking this action. When speaking with veterinarians, we often hear a few common themes— ask yourself if any of the following questions are driving your decision:
- Are you experiencing burnout?
- Is it time to start your transition toward retirement?
- Are business operations becoming too much to manage?
- Are you looking to capitalize on your investment for financial gain?
Outlining the pain points you are experiencing and the driving factors behind the decision to sell is a good starting point for your journey. This is your guiding star and will help you determine the right fit (professionally, financially, and culturally) for the sale of your practice.
Know what’s next for you beyond the sale of your practice.
As you probably know, there are a multitude of options when it comes to selling your practice. Whether an individual sale, transferring your practice to an associate, or joining a consolidation group, the decision can be daunting. When you step back and visualize yourself post-sale, what does that picture look like?
- Do you wish to continue to practice?
- Are you interested in mentoring or training a new doctor to take over your patients?
- Is the goal to sever ties completely or maintain ownership to some degree?
- What are your financial needs now and in the future?
The path toward selling your practice should lead to your ultimate goals after the transaction is complete. And finding the right buyer that is supportive of personal and business goals is key to bringing your ideal picture to life.
Consult your accountant and have a firm grasp on your practice’s EBITDA.
If you don’t already have a strong partnership with an accountant, you will want to find that support before entering any conversations about selling. Financial documentation is a critical part of the sale of your practice, and an accountant can strategically guide you in this process.
Regardless of the buyer, you will need to understand the worth of your practice. This is calculated by EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization)— which basically translates to your practice’s overall profitability.
When a buyer considers purchasing your practice, they will want to understand your historical EBITDA records to see the overall performance and value of the practice. Therefore, we suggest working with your accountant to document the last three years of your EBITDA growth trends. If there are significant changes, dips, or influxes, you should also have supporting explanations as to why these shifts occurred.
Understand your real estate circumstances.
The physical brick-and-mortar component of selling your veterinary practice can add an additional layer of complexity to your transaction. Whether you own or rent, you will need to understand your options and limitations.
If you own your real estate, consider what you want to happen to the property when you sell your practice:
- Option 1: Continue to maintain ownership, omitting the property value from the sale evaluation, but factoring in a lease agreement.
- Option 2: Bundle the real estate and sell it to the same buyer as your practice.
- Option 3: Sell the real estate to a third-party buyer (an entity different than the buyer of your practice), shifting the management responsibility going forward.
If you rent your real estate, have a firm grasp on the binding agreement you entered, including details about:
- Lease terms and obligations: What is the duration of your lease, and are you permitted to sublease the property?
- Termination penalties: Is there a fee for breaking the lease early, or is there an option to transfer the responsibility to the new buyer without incurring fees?
Identify the key players and decision-makers.
Every veterinary clinic is unique, and this includes ownership structures. Be sure to review and fully understand the legal agreements in place in regard to ownership. For example:
- Are you the sole owner of your practice or do other individuals, such as a partner or associate doctor, also hold a stake in the clinic?
- Are you selling 100% of the practice or just your, say for example, 60% share?
- Do you have any other outside investors you need to consider?
If there are other owners or investors, this does not mean you are unable to sell your portion. However, you will want to (one) consider how the sale will impact your partners, and (two) understand what you specifically have to offer buyers before coming to the negotiation table.
Be forthcoming with any pitfalls that might arise during the sale.
As you can imagine, there is an extensive due diligence process in the sale of any veterinary practice. From financial history and legal requirements to patient records and equipment evaluation, everything is on the table during a practice transition. If there are any red flags, pitfalls, or risks, it’s best to be open and transparent from the start. This is another area your accountant can serve as a resource to help you identify and resolve these issues prior to approaching a buyer.
Determine your needs and expectations when it comes to your team.
One of the best parts about being a veterinarian (besides helping animals), is the culture and team you build over the duration of your career. Before engaging in conversations with a potential buyer, outline the “must haves” for your team. A few things to consider include:
- Are you interested in obtaining better benefits or development opportunities for your team?
- Is it imperative that your staff stay employed at the practice after you sell?
- Are you willing to have the buyer determine and/or change the pay scale of your staff?
- Are there associates within your practice who you may have considered offering or who may be interested in having a partnership stake? If so, these options may be available to them depending on who you chose to sell your practice to.
In addition, it’s a delicate act when it comes to sharing the fact that you might be selling, and how to deliver that message to your team directly. Finding a partner like CVP that knows how and when to have that conversation, can go a long way.
Do your research and understand the current market.
Even though you may be armed with an experienced accountant and skilled legal consultant, we suggest you do your own research to broaden your understanding of the market landscape. Pay attention to current interest rates, industry trends, market value of veterinary practices, and so on.
A few helpful resources include:
Consider the cultural fit and how the sale will impact your hospital today and your legacy tomorrow.
Strip away the EBITDA; the brick-and-mortar; the terms and agreements. At the end of the day, we understand your practice is your legacy and what that means to your clients, patients and team. It’s what matters most but cannot be evaluated.
For example, at CVP our doctors were drawn to us because we are passionate about veterinary care, and we’ve created a culture of learning, compassion, and community. In addition, our practices focus on providing excellent care and upholding a certain standard of treatment. When it’s time to transition, you too will want to find a buyer that shares your values and work ethic. A few things to ask potential buyers include:
- Will my practice maintain its name and brand?
- What type of community support is available on a local level?
- Will the doctor taking over my practice someday uphold the level of service and care I have provided?
- How will you preserve the culture I’ve created at the clinic?
- What will happen to my team and the way we work within my practice after the sale?
- How will patient care decisions be made once I sale my practice?
- Can I talk to a few other owners who have sold their practices to you about their experience?
Mentally prepare for the journey ahead.
When you decide it’s time to start the process of selling your practice, it’s important to go in with the right mindset. As you can imagine, transitioning ownership is a big deal. There are several moving parts, in-depth evaluations, and time-consuming initiatives. As the saying goes, approach the milestone as a marathon rather than a sprint. It will likely take several months of planning, negotiating, and due diligence before the transaction is complete.
Selling your veterinary practice is a major decision and not one to be taken lightly. By preparing yourself with as much information and support as possible from the start, you will be able to determine the best option for you and your practice.
The team at CVP has walked this journey with many sellers and is always here to help answer questions and provide resources along the way. We believe every practice is unique and therefore we tailor our deal structures to meet your needs. We are always happy to have a no-obligation conversation if you have additional questions, and would also be willing to put you in contact with an owner who has already walked this journey.