Buying A Veterinary Practice: What You Need to Know

Are you looking to purchase your first clinic, or expand into multi-practice venture?

Buying a veterinary practice can be an overwhelming process, but with the right due diligence and loan choice, you can better secure the future of your business.

In this article, you’ll learn about the considerations to make before buying a veterinary practice and whether it’s the right choice for you.

Taking the Leap Into Practice Ownership Takes Passion and Know-How

As a veterinarian, you understand what it takes to provide excellent quality of care. Whether you have worked in a veterinary clinic before, or are straight out of school, it’s not difficult to imagine all the ways you would run a practice better.

This type of passion is essential for anyone getting into the veterinary medicine field, whether as a business owner or an assistant.

As a business owner to-be of a veterinary clinic, however, it takes more than just passion; it takes know-how. A little bit of due diligence before you purchase your first veterinary business can help save a lot of headaches in the future.

It is always important to remember that there are always resources to help you find a solution for your problems in business, whether you need a broker to help connect you to clinics for sale, or an accountant to review financial statements.

This support system is essential in business. To start your journey into owning your own practice, contact the team at BSF today to learn more about buying a veterinary practice and find a business for sale that’s right for you.

Are You Ready to Own a Veterinary Practice?

Before you get into the market, first consider whether you are ready to own a veterinary practice.

If you are fresh out of school, you may want to work in an established veterinary practice to gain insight into how it is run and what improvements you would make on the business. This experience is not only helpful in understanding how a veterinary practice operates in the day-to-day, but in how client experience plays into the business and how that affects revenue.

Once you have this experience, consider whether you feel ready to take on additional responsibilities and risk to own your own practice. While practice owners can typically take a higher salary than staff, providing yourself with a stable paycheck relies heavily on the success of the business. Balancing revenue from clientele, operating costs, and other business costs can be difficult, especially in the first few years of operation once you take ownership.

How Much Does It Cost to Buy a Vet Practice?

An established veterinary practice is often valued multiplicatively, based on the business’ historical revenue. This revenue is projected forward with documented improvements and market data.

The price may also change based on location; a visible urban location can improve its marketability, versus a clinic that is outside of town in a rural setting.

Most veterinary practices sell for anywhere between $500,000 and $5,000,000 depending on these factors. The actual cost to you may vary based on financing terms applied to the loan you are accepted for, as well as fluctuations in the economy.

An accountant can help you with financial due diligence once you find a business you are interested in purchasing; it is important to only purchase a business that you are comfortable with taking a risk on.

The goal when buying a veterinary practice, ultimately, is to achieve a positive ROI on the purchase and become cash flow positive in as little time as possible, stabilizing the business’ profits and losses.

How Profitable is a Veterinary Practice?

There are many variables that determine how profitable a veterinary practice is. (1) These variables might include the local pet owner population, local competitors, services offered, the size of your practice, how established the name is and the marketing efforts the business makes to attract new clientele. 

“About two-thirds of U.S. households own a pet, and Americans are expected to spend about $75 billion on their pets this year.”

– Forbes.com

These variables can make or break a business, and as the business owner, it is up to you to delegate responsibilities and ultimately make decisions that will place your business in better position for an increase in profitability. Most established veterinary clinics make anywhere from $300,000 to $1,000,000 in revenue.

Tips for a Successful Vet Practice Purchase

A successful vet practice purchase is one that goes through with streamlined, efficient effort. The easier the purchase is, the quicker you can get to running the business. Ideally, the handover will be smooth and painless for both new and previous owner, as well as the staff who currently work in the business.

  • ALWAYS DO YOUR DUE DILIGENCE

It is important to always do your due diligence and inspect a business before entering into purchase negotiations. Professionals like the veterinary practice brokers at BSF can help you do your due diligence and find the right business for you.

  • ENSURE YOU HAVE THE RIGHT DOCUMENTS

It is important to consult with your broker, lender, accountant, and attorney to ensure that you have all the right documents before entering purchase negotiations with a seller. This can help you facilitate a smooth, streamlined sale. Likewise, they will provide advice on what documentation they need from the seller to complete the sale.

  • SECURE FINANCING AHEAD OF TIME

A seller needs to know that you are qualified to purchase the business before they sign any documents committing to the sale. Pre-qualification of financing from a lender can help secure the right business for you.

  • COMMUNICATE WITH THE SELLER

Communicating with the seller is important in the purchase negotiation process. If the seller doesn’t hear anything from you, they may assume that you are no longer interested in the property and may re-list the business on the market or consider other offers.  

3 Ways to Prepare for Vet Practice Financing

You don’t start a business by going straight to market; most business owners are not able to pay for a new business with cash on hand. First, you must be able to finance the business. (2) There are many ways to prepare for applying to finance loans, and your veterinary practice broker can help you find the right financing options for your needs.

“Before you start the application process, be sure to educate yourself on eligibility factors and various loan options, so that you have a better idea of what kind of funding you can expect to receive.”

– Huffpost.com

  1. LEARN ABOUT YOUR FINANCES

Assessing your personal finances, as well as your business’ finances is an excellent starting point for preparing for financing.

You must be able to identify the maximum amount you can reasonably pay off under different loan term lengths without putting strain on other areas of your cash flow, whether personal or business. An accountant can help you assess financial reports from the business you intend to purchase.

  1. CONSIDER YOUR CURRENT CREDIT SCORE

When you are first looking for a loan solution, your personal credit score may be pulled to help the lender assess the level of risk that the loan would have for their business. Before you go searching for financing loans to buy your first practice, it is important to first prepare your credit score.

It is estimated that 90% of all credit scores contain some type of reporting error. Requesting copies of your credit score from the three major bureaus can help you find and fix these errors before the lender finds them.

Additionally, if your credit score is poor, credit repair may be necessary before you will qualify for loans. While some loans are offered even in the case of bad credit, the terms are often far worse for the business and can put unnecessary strain on the business’ financial success.

  1. UNDERSTAND DIFFERENT FINANCING OPTIONS

Financial terminology can be difficult to understand at first glance, but to operate a successful business, you must understand the basics at the very least.  

Working with a veterinary practice broker, like the team at BSF, can help you choose the loans that are right for your business. Understanding the different financing options that these recommended lenders offer can benefit your business in the long run.

Acquiring a Veterinary Practice vs New Start-up

There are two ways you can begin your journey into entrepreneurship and owning a veterinary practice. The most common way is acquiring a veterinary practice – buying from another owner who is selling their practice – or building a new startup from scratch.

Buying a veterinary practice is most recommended as you will have an easier time getting approved by lenders; the business should have pre-existing financial sheets, as well as client lists and allow you to start generating revenue from the very beginning. This makes it much easier to pay off financing loans and can help you start establishing your name as a veterinarian to local clientele.

Starting a new practice will require a lot more groundwork to acquire clients, and it is considered riskier, which can harm your approval chances with some lenders. An additional downside to starting a new business is that revenue is not generated immediately, and it can take several years to become cash flow positive with the business and begin paying off your financing loans.

The Importance of Choosing an Advisory Team

Most businesses run successfully when there is a team behind the owner. No business runs off one person’s efforts and due diligence; it is delegation of certain aspects of the business to more specialized professionals that creates a successful business structure.

Ultimately, however, as the owner, you are the decision maker of the business. It is important to choose an advisory team to help you make the right decisions for the success of your business.

An accountant and an attorney are an excellent place to start. Additional advisory team members may include personal veterinary practice mentors, a marketing consultant, and a veterinary practice broker.

Personal veterinary practice mentors are not necessary, as not every business owner has one, but it is helpful to have someone with industry experience and understands your unique circumstances.

A marketing consultant can help advise you on the right path for your business’ outreach and advertising, both offline and online, increasing your client base.

A veterinary practice broker can help you establish a working relationship with many lenders for future financing and loan options, as well as connect you to the right businesses and businesses that suit your needs when buying or selling a practice.

Do you need a broker to help you find the right loan and financing solutions for your business, or need connections to help buy or sell your veterinary practice? Contact the brokerage team at BSF today to learn more about how we can help your business thrive.

Ensuring You Have an Accountant and Attorney

An accountant and an attorney are essential professionals to have on hand with any business. These advisory team members can help you establish a thoughtful business plan and path forward, as well as extend advice regarding due diligence when purchasing a business.

Your accountant can help you establish the right type of business filing for your business model. They will also review any documents that the seller has prepared, if you are buying a pre-existing veterinary practice. This review will provide you with critical information about the business’ validity and potential profitability in the future. This accountant should be familiar with the business structure and laws regarding your filing state.

The attorney’s role is in establishing that your business will be in good legal standing and can make your business look more enticing to lenders for when you begin seeking financing for the business. They will also be responsible for reviewing any documentation from another business in purchase negotiations. 

References:

    1. Forbes.com, Virtual Vets Are Raking in Funding Is Pet Telehealth the Next Big Thing?
      https://www.forbes.com/sites/serenitygibbons/2020/08/06/virtual-vets-are-raking-in-funding—is-pet-telehealth-the-next-big-thing/?sh=76641aa7150e
    1. Huffpost.com, 6 Must Knows Before Getting a Business Loan
      https://www.huffpost.com/entry/6-must-knows-before-getting-a-business-loan_b_592d7a7be4b0a7b7b469cd1a