Why use a Veterinary Broker to Sell your Practice?
After many years of the hard work, long hours, and substantial investment that go into building a veterinary practice, you’re now thinking about selling the practice. It’s easy to assume that the practice will sell quickly and for a great price when you are ready to sell. Feedback from doctors who have recently sold their practices shows that the process is more complicated and stressful than anticipated. This is why it is essential to hire a veterinary broker to help guide you through the process.
Potential individual buyers and corporates will have experts who can help them navigate the sale. You will also need someone to advocate for you and help you understand the process from start to finish. In most cases, the last time you were involved in a practice sale was when you bought the practice, which means you need someone to help you navigate the process.
Benefits of Hiring a Broker
Here are just a few reasons why hiring a veterinary broker to assist with planning and selling your practice would be a sound investment.
Determining Fair Market Price
At Omni Practice Group, we have certified practice appraisers that put together a valuation to maximize a fair market sales price for the practice and real estate (if applicable).
Develop a Marketing Plan for the Practice while Maintaining Confidentiality
Omni provides confidential marketing and advertising services for your practice that do not identify you or your practice until a buyer is screened and signs a confidential Non-Disclosure Agreement. Omni also provides the financial prospectus for your practice along with confidential personal showings of the practice to potential buyers. Finding the right buyer that you will want to take over your practice can take some time. Good practices can sell quickly, but some can take months or even a year to sell.
Letter of Intent
Omni brokers negotiate on your behalf, a Letter of Intent with your approval for the purchase price of the Practice and the Accounts Receivable. Your broker will also guide you through the due diligence conditions for bank financing, help negotiate a new lease agreement, non-compete agreements, and other conditions that both the seller and the buyer will agree on. If real estate is included, your Omni broker will determine the value of the real estate with a “Broker’s Real Estate Opinion” that is used to market the real estate with the practice.
Finalizing the Sale
Your Omni broker works with you to determine a possible closing date based on whether your practice has real estate to sell or a lease that will be negotiated with the new owner. Omni’s brokers work with attorneys to finalize the Asset Purchase Agreement for both the seller and the buyer.
Omni’s 70-point-plus checklist helps guide both the seller and the buyer through the process of items to be completed prior to the sale closing.
A banker at one of the major banks recently said, “A high percentage of deals that fall apart is due to the seller not using a veterinary broker.” Using a broker typically saves sellers a lot of time, money, and headaches in selling their practices.
Omni Practice Group has been helping veterinarians for over 15 years with the planning and transitioning of their practices. If you’re thinking about selling now or in the next few years, give us a call for a “free consultation” to help you determine a plan that works for you and how we can assist with a smooth and profitable transition.Read More
Happy Holidays and congratulations on making it through another year! And what a year it’s been. Covid is still rearing its ugly self in new forms. Wearing masks went away, then came back again. Some veterinary conventions were canceled, some held virtually and others allowed in-person attendance. Corporate veterinary practice buyers are still around. Individual buyers are also acquiring practices albeit hesitantly. Banks started financing practices again. So what’s going to happen in 2022?
We hope that we can get back to some form of normalcy. Wouldn’t it be great to go out to dinner and not have to get carded as if we’re a 21-year-old buying our first beer? Having to show your vaccine card and wear masks is getting to be a pain. Covid is probably going to be around in some form or another for a very long time and will be similar to the flu as time wears on.
Corporate buyers will also be around for a long time. I’ve heard that corporates currently hold between 12% and 22% of all veterinary practices. Depending on who you ask and how you calculate what constitutes a corporate buyer. I would guess the real number is probably around 17%. There has been some consolidation of corporate buyers that is occurring. Getting acquired by a larger corporate buyer is the goal of the smaller corporate buyers. As they get gobbled up, there will be fewer and fewer buyers to drive up the value of practices.
Individuals are still buying practices and will continue to do so forever. It’s our job as practice brokers as well as the job of others in the veterinary industry to educate and assure veterinarians that they can be successful owning a veterinary practice and do very well. Many buyers worry about competing against the corporate owners thinking that they cannot get the same pricing on supplies and services that the big guys receive. Most supply companies have told me that they will in fact give the same pricing on supplies that the corporate owners get.
We wanted to keep you informed and know what’s going on in the veterinary practice buyer world. We wish you a happy and healthy 2022!Read More
Your practice has successfully worked for you for many years so why isn’t it selling? It could be the transition consultant (broker) you are using, or it could be your practice.
Working with an experienced transition consultant is important. We know where and how to advertise. It doesn’t work to simply advertise on a website. You will want marketing and advertising in schools across the country, veterinary journals, and county/state societies. An experienced consultant already has a list of potential buyers for your area or type and may have other creative grassroots ideas to find the right buyer.
The right consultant cares about you, your team, practice, and goals. It shouldn’t be just about the commission money. Your consultant should be responsive and professional to potential buyers and you.
A comprehensive valuation and prospectus are important. If you or your consultant price your practice too high, it can be offensive to potential buyers, and they won’t feel comfortable offering a lower price. Even if you find a buyer willing to overpay for your practice, the bank will not finance 100%, which means you have to become a bank for a specific amount of the purchase price.
Sometimes even when you have the right consultant your practice may have other reasons for not selling. Sometimes it’s simply not finding the right veterinarian at the right time. Often it is because your location is not desirable to new buyers and their families. Sometimes it’s the size of the practice. We all know practices with two exam rooms can be very efficient and profitable, but many buyers want 3 rooms or more.
Declining collections the last 3 years or simply low collections can be a deterrent to potential buyers and banks. They understand reasons such as more time off due to vacation or health issues.
Most buyers understand they may need to update style or equipment and technology, but if it’s a lot of cost and effort, they may keep looking for a better practice.
If your practice falls into any of these areas of concern, it will take more time than the average to sell. Lowering the price may help, but if there is no interest, it’s not the price that’s the problem. Don’t give up or get mad, just understand that while your practice may have been perfect for you, it can be a while to find the right buyer.Read More
The best time to start preparing for your practice transition is three to five years from the date you plan on selling your practice. Since you may not really know that date, the best time to prepare is NOW! Here is a checklist of things you should do as you get closer to deciding to sell your practice:
___ Meet with your Financial Advisor – Discuss with your financial advisor that you are thinking of selling your practice. If the intention is to retire, let them know that is your plan. Ask them how much you may need to retire at the income level you desire.
___ Discuss Taxes with your Accountant – This is especially important in the current environment. There have been discussions at the government level to increase both capital gains and income tax rates significantly. Both affect the proceeds you will receive from the sale of your practice.
___ Obtain a Practice Valuation – It’s best to get a full valuation. You can provide this to your financial planner which will help determine when you will be able to retire if you get the desired amount from the sale of your practice. If you can’t yet retire now, most practice valuation companies or brokers will update the valuation for a minimal charge.
___ Keep your foot on the gas – Don’t slow down in your production. In fact, if possible, ramp up production to get the maximum value from your practice sale. Banks and buyers like practices that are trending up in production instead of going down.
___ Assess the condition of your practice – Do you have 20-year-old flooring that is faded, stained or torn. Replace it. Do you have mustard-colored countertops from 1970? Update the countertops. Paint will do wonders as well. Don’t spend a mint, but spend a reasonable amount – $10,000 to $20,000, to make the practice look and feel fresh and updated.
___ Clean up your Accounts Receivable – If you have credit balances on patient accounts, you’re required to send those back to the patient after a certain number of years. Each state has its own Unclaimed Property or Escheatment law. You can find it on the internet. If you cannot find the patient, you are required to submit the balance to the state. Note that you can charge a nominal processing fee to the patient.
___ Self-assess your practice numbers – Is your staff payroll and benefits expense above 25% of your total collections? Is your production down, but you have the same staffing level? Is your veterinary supply fee over 7% of collections? Know what your ratios should be and manage to your numbers. Contact a consultant if you’re not sure what to do.
___ Know the market – Are practices in your area selling quickly? Are interest rates super high? If it takes two or three years to sell a practice in your area, then you may want to list it soon rather than later.
___ Do a self-assessment – Think you’re five years away, but your back, neck, or hands are telling you – SELL NOW! Burned out on managing staff and insurance companies? Just tired of living where you live and are ready for a change? All these may lead to selling sooner than your retirement date. Just because you sell your practice does not mean you have to retire. You can still practice either in your or someone else’s practice. Or, maybe you’ve always wanted to do something different. Maybe it’s time to test the waters. You can always go back to being a veterinarian. I know several veterinarians who are semi-retired and work as a veterinarian two days per week and drive Uber or LYFT two days per week for fun.
___ Contact a broker – Some of the best transitions we have done began several years before the sale occurred. We built relationships with the seller. In several cases, we found a buyer asking for a specific area. We made the call to one of the veterinarians we had a relationship with and they said “it’s time”. Brokers can also be advisors over the final two, three, or five years of your practice ownership. Should you buy the new x-ray equipment? Should you hire an associate? We can help answer those questions.
Selling your practice is a major life event right up there with buying your first practice. Be sure and prepare, have a plan and get the right advisors. We’re always here for you and phone calls are always free. Give us a call – 877-866-6053.
Download your own checklist here: Seller Preparation ChecklistRead More
There are many advantages to owning a veterinary practice over being an associate veterinarian and not owning a practice. For one, the average veterinary practice owner makes approximately 20% more in income than an associate veterinarian working for someone else. A veterinary practice owner also gets to choose what procedures he wants to perform and what type of animals he or she wants to work on. Heck, they even get to choose which animals they want to work on. They can also choose their own hours, pick the days they want to work, and how much vacation they want to take. So, why aren’t veterinary associates owning practices? What are they afraid of? Here are a few fears we have encountered and how to overcome those fears:
- Fear of the unknown – Associates feel they don’t have the experience in owning a practice. They haven’t managed staff. They haven’t kept financial records. They don’t know what marketing to put in place. They don’t know what benefits to give employees, how to hire or fire employees, or even how to balance a checkbook.
Fear not, you don’t have to know everything at once. You know how to do veterinary medicine. That’s the first step in owning a practice. You have a few years of experience working as an associate in a veterinary practice. You’ve observed the owner working with and managing staff. You may have experience leading a team in school, playing sports, etc. These are all examples of good experience in handling staff. You don’t have to know how to keep books right away. We suggest getting a veterinary bookkeeper and then getting educated on reading financial statements. This can happen over time. Bottom line is if you are good at what you do and willing to learn the other parts of practice ownership, you’ll be just fine.
- Fear of taking on more Debt – Read Robert Kiyosaki’s book, “Rich Dad, Poor Dad”. Not all debt is created equal. There is good debt such as student loans and practice debt that helps generate an income and there is bad debt such as credit card debt where you just borrowed money because you wanted something. Practice debt used to buy a practice that will help you make more money and build equity in an asset (the practice) is a positive thing. As long as it’s a good practice with good cash flow, you’ll be money ahead in the long run.
- Fear of the Corporate Giants – Don’t fear the corporate giants. They have their own niche targeting bargain shoppers and lemmings who follow the crowd. They also have a high turnover in their staff and doctors. You will provide excellent service with the same staff and veterinarian that the clients will see every time they come to your office. In a corporate environment, they’re not sure who they’re going to get.
- Fear of not knowing what to look for – This is a valid concern. You can educate yourself in a number of ways. There are great resources via podcasts, YouTube, etc., that can help you know what to look for. Quite simply, you start by looking at your desired location, then look at the cash flow of the practice and after that, you can get into the details. There are consultants and brokers who can also help you with reviewing practices. Identify your team that will help you overcome this fear.
- Fear of a recession – Recessions happen, typically every 8 to 10 years and last 10 to 12 months. You cannot avoid recessions or downturns in the economy, it’s part of life. But, during recessions, employees typically get laid off from work. If you own your own practice, you’re probably not going to fire yourself. You’ll probably keep yourself employed and busy. Owning a practice is a deterrent from getting laid off during a recession.
These are a few of the fears that we’ve seen over the years, and there are others as well. But, the best thing you can do is educate yourself and talk to practice owners, brokers and bankers. Seek advice and counsel from everyone you can. This will help you make a wise decision in moving forward with practice ownership.Read More