When to Tell your Staff your Practice is For Sale
Congratulations, you just accepted an offer on your practice! With all the emotions associated with the transition, when to notify your staff is surely at the top of your “to-do” list. Telling employees that you are selling your practice is an extremely delicate process. Breaking the news too early can come with many risks, so best to wait until all final closing documents are signed by both parties and no more than one week before the new owner takes over.
So, what are some potential risks?
One of the primary risks is that employees will naturally be worried about their job security the moment you make your announcement. Oftentimes if they have too much of an advanced notice they may start searching for other opportunities. Staff leaving could negatively impact the transition and patient experience because of how instrumental they can be in helping the buyer and the patients adjust to new ownership.
The other major risk is that nothing is final until its final. Veterinary practice sales are extremely complex and can be delayed for a multitude of reasons or fall through completely. Making the announcement before the sale is complete will cause stress and heartache amongst your staff during a time that you will be preoccupied with navigating a significant professional milestone. If the staff were to find out before closing was final, you wouldn’t be able to offer any reassuring answers because of unforeseen changes to the closing timeline.
Finally, regardless of your views of your staff’s maturity level, gossip will ensue. I have seen it countless times where a veterinarian tries to provide honest reasons on why they are selling, only to have their words misconstrued. Comments such as, “I’m selling my practice to focus on my health” can quickly morph into, “S/he is selling because the practice is going under,” or lead to unfounded conclusions such as, “After the new guy starts, we will all be replaced.” This kind of fear and uncertainty will have a profound impact on staff morale during a time where they will be needed to ensure a great patient experience during the transition process.
In the end, you probably have a deep and meaningful relationship with your staff. They deserve to know about ownership changes as they will be impacted, but it is best for them (and for you) that they be kept out of the loop until you have concrete answers to provide them.
Veterinarians Sell in 5 years? 1 year? Now?
Jim Vander Mey, CPA, ABI, and Certified Practice Transition Broker with OMNI Practice Group, helps veterinarians analyze whether or not it is the right time to sell.
Read MoreExit Planning in the COVID Era
Are you ready to transition?
Is your practice ready to transition?
What is the market like?
These are all key questions to ask yourself. When is a good time to start thinking about all of this? The real answer is as soon as you buy or start your practice, but the more practical answer is dependent on you. If there any chance you will want to transition in the next five years, you should start working on your transition today.Personal readiness and practice readiness are both more important than current market conditions; however, considering the COVID crisis, I am going to focus on market timing.
If any of the following sounds even slightly familiar, raise your hand:
I was ready personally, and my practice was ready in August 2019. I choose to wait because (pick one or more):
- I have a kid with one year left in college
- I have one year until I can draw Medicare
- There is one more room in the house I would like to finish
- My spouse retires in a year
- I pay off my house in a year
- I turn (insert round number like 60 or 70) next year and I would like to wait until then
- Etc.…
Now, for those of you that raised your hand, consider the reality of August 2020. How does that August 2019 decision to wait look? Questionable at best.
My intent is not to beat up on those of you that this struck a chord. Rather, I want to emphasize the need for starting early and getting help.
Transitioning is a difficult process. Do not go it alone. Contact an experienced, qualified transition specialist and get the ball rolling. We are here to help.
Broker Vs. No Broker
Thinking of selling your practice but don’t want to pay the broker’s commission? Think again. History shows that any time you sell your business and/or real estate yourself, the chance of failure of the transaction is over 50%. A commission will be much more digestible than the result if you try to do it yourself. We receive calls from senior veterinarians stating they sold their practices and took payments and it didn’t work out. After one year, they often must take the practice back and struggle to resurrect it to try and sell again. This is typically an experience that is new to both buyers and sellers. It takes time, marketing expertise, sales experience, buyer and advisor contacts, and lots of patience.
Your broker may spend hundreds of hours on your transition and your time is better spent at the clinic and planning your retirement agenda. Brokers do lots of specialized marketing which can be costly and time-consuming, and it includes many weekends and evenings meeting with potential buyers. When working with a broker, the average practice sells in about 6 months so selling it alone can be much longer. Your broker should have a list of qualified buyers and a commercial real estate license. If you own your space, it’s often critical to sell the building at the same time or get a solid agreement together for future purchase. Time and time again we see senior veterinarians sell the practice and lease the space with a loose agreement and lose their renter. The buyer decides they like a newer building down the street and leave you with an empty veterinary building.
A good broker will determine the value of your practice and there is much that goes into this process. It’s not just about collections. Everyone’s goal should be to sell at a fair price in a timely manner. If the price isn’t “right”, the banks won’t finance, and you certainly don’t want to carry the loan. If you get pressured to sell too low, which we often see, you can lose tens of thousands of dollars. Brokers spend a lot of time working with all the trusted advisors you need such as veterinary specific banks, CPAs, and attorneys to determine the value of your practice and facilitate a smooth and successful transition.
HARVESTING YOUR EQUITY IN YOUR PRACTICE
You Don’t Have To Retire If You Sell Your Practice
By Rod Johnston, MBA, CMA
A few years ago, I decided to sell my house in Kirkland, WA. I wasn’t planning on moving anywhere. I still planned on living for quite a while longer. I didn’t have any health issues, nor was I downsizing from my 1,100 square foot house to a smaller house. I purchased the house almost 20 years prior and it was nearly paid off, so I had quite a bit of equity built up into it. I had just decided it was time to harvest the equity I had built up in the house and use part of the equity to buy something else, part of it to put towards retirement, and part of it to have as a safety cushion for a rainy day. I’m glad I sold the house as it was over 1/3 of an acre and had a lot of flower beds and landscaping. It was also getting older and required quite a bit of maintenance.
I’m telling you this story because you can do the same thing with your practice. You have put in many years of hard work in your practice. It may need maintenance every year that you may be tired of taking care of. After 20 years of staff issues, they may be getting to you. Maybe you just had a new corporate move in down the street, and you’re worried about competing against them. It could be that you just want to be a veterinarian and just want to see patients – not manage staff, clean the office, pay the bills, deal with the leaking roof, post to the office Facebook or Twitter pages, come up with new ads to get clients in the door or any of the other 100 items that are required of a veterinary practice owner. I know, as I’m also a business owner – and who do you think cleans our toilets on the weekends?
No laws say you must own a practice to be a veterinarian. You can Harvest your Equity from your practice and continue to be a veterinarian. Imagine getting hundreds of thousands, if not millions, out of your practice, continue to work in your own practice, or go to work in a different practice if you choose and no longer have to manage a practice. You can put the money you receive to work for you in a retirement or investment account. You can free up some of your time to enjoy your family. You can buy a vacation home that you’ve always dreamed of, or just simply put the money away for a rainy day and continue to work.
So, what are the steps to Harvesting Your Practice Equity?
- Set up a free consultation with one of our advisors.
- Have a practice valuation done on your practice.
- Meet with your financial advisor to discuss your plan and the valuation.
- Meet again with an Omni Advisor to discuss possible options in selling your practice and the feasibility of working back in the practice.
- Let Omni take over the selling process and find a buyer that matches your needs. The “your” is vitally important as we are matchmakers and want to find a buyer who will be a near-perfect fit for you, your practice staff, clients, and the community.
- Close on the sale of your practice and plan your new, less stressful life.
That’s all there is to it to take back control of your life. Of course, there will be some work between steps such as running reports, meeting with a potential buyer(s), and discussing options with your advisors. But if you rely on Omni and other experts, the process can be simple.
We have helped numerous veterinarians who sold their practice and are working back in their practice or are working for someone else and appreciating their newfound joy again being a veterinarian and helping animals get better. The first step is the easiest. Just give us a call at 360-941-2341.