How To Sell Veterinary Practice: Definitive Guide
In the market and looking to sell veterinary practice?
This guide will help answer some of the common questions that owners have before selling their clinic and help you decide on your next steps from the eyes of a veterinary broker.
Learn the pitfalls to avoid, questions to ask, and answers to essential questions here.
Why Do Veterinarians Sell Their Practices?
Veterinarians, like any other business owner, cannot always continue their business and must list it on the market for any variety of reasons. Sometimes, these reasons range from personal life changes, such as a necessary move or a death in the family, to retirement, or even a change in work.
A recent study conducted in the veterinary medicine space estimated that 43% of all practices are sold because the owner is pursuing a change in career. As any veterinarian knows, burnout in the industry is a real challenge to contend with even without the stressors of owning the business.
For a successful business, however, dissolving the company does not make sense financially, and may leave many pet owners without essential care for their pets. Thus, the decision to sell, rather than liquidate the business makes more sense. Just because the owner is leaving the business doesn’t mean they want to see the business fail.
Furthermore, selling the business allows the clinic owner to reap some of the rewards of their labor over the years; the payout may fund their retirement or pay for extensive medical care, allowing them to pursue other avenues of work.
How Much Do Veterinary Practices Sell For?
Depending on how the business was valuated, a clinic may be listed on the market for 75% or even 100% of the business’ gross revenue over a single year. More traditional valuations take the business’ overall growth over the previous three years and forecast it into the future, providing buyer and owner both with insight into how the business is run and how profitable it is.
The overall purpose of the valuation is to estimate the business’ value to the buyer based on its previous history, therefore as the seller, you might assume that you need to lower the cost as much as possible. To the contrary, a low price on the market may cause the buyer to think that there’s more to the business than meets the eye; perhaps lower than average profits, or even hidden debt.
These considerations are important to make at the beginning. If you need help selling your business, a veterinary broker from BSF may be able to help you take the next step with your practice.
How Long Does It Take to Sell a Veterinary Practice?
Selling a veterinary practice is not a short process. Many business owners, at first guess, think it takes 6 months at most, but you might be surprised by the actual answer.
From start to finish, most veterinary practices take 1-2 years to finalize and complete from listing on the market to final close. Preparing in advance can help you mitigate this timeline, however, much of the timeline is spent waiting on approval from lenders and signing over ownership of business paperwork.
Without additional preparation prior to listing the business on the market, this timeline can be extended even further out as documentation – such as a list of debts or previous financial records – must be acquired and reviewed.
Once the sale is finally closed, the original owner may then proceed with any handover processes that were agreed upon, whether it is in working with the new owner to help familiarize them with current operations, handing over essential documentation like client lists and other assets.
How Much Does an Average Vet Clinic Make?
The average veterinary clinic in a medium-sized city offering basic pet health services will often generate a revenue of anywhere between $100,000 to $1-million in sales once it is established. Industry standards begin at just over $250,000 across the US.
Startup clinics often struggle to make that within the first few years as they must establish themselves with the local population and increase their marketed presence before revenue stabilized. An established clinic, however, stands to make more with each veterinarian they have on staff, uncapping their capacity for new customers.
As long as the current petowner market can support a new veterinarian on staff, practices can make anywhere from $300,000 to $600,000 more annually with each new full-time veterinarian on staff.
These revenue numbers, on average, range between 10-25% profitability depending on the level specialization the clinic has, as well as the size and visibility of the location and current marketing efforts.
Are You Ready to Sell Your Practice?
Before you sell your practice, consider whether you are ready to make such a drastic change in your career. Many veterinarian-owners go through the work of preparing their business for sale that they haven’t faced the emotional concept yet, and back out before they reach out to prospective buyers.
It might be the right decision to make, but you have to be ready to sell such an important part of your life as well. In many cases, the clinic is a place where you’ve spent much of your career, fretting over the quality of care your patients are receiving and stressing out over paperwork and financial stability.
While it might be a burden to relieve from your shoulders in some cases, it is also representative of your labors over the years.
Recognizing it as something you are letting go so that it may blossom and further develop with the next owner is something that no paperwork or financial sheet can help you do, but it is just as necessary of a step when selling the business.
Important Pitfalls to Consider When Selling
When you’re ready to sell your veterinary practice, it can be tempting to bootstrap the journey if you feel like it’s more trouble than its worth to hire additional help. This, however, is just one expensive pitfall that many business owners fall into on their first business sale.
There are many other pitfalls that you will need to consider before relinquishing your business to a new owner:
Failure to prepare ahead of the sales process can lead to lengthy transaction delays, and with a sales process that already extends easily into a timeline of 1-2 years, it is critical to avoid any delays. Having all your documentation ready at the beginning of the negotiation will also help the buyer move faster, as they are able to provide that documentation to their lender to finance the purchase.
UNWILLINGNESS TO HIRE A PROFESSIONAL
Professional advice can save you a lot of time and a lot of money, yet many people often refuse to hire these services due to their upfront cost. Hiring a professional to help you through the sales process can help make the transaction go smoothly no matter if they are a broker, financial advisor, or business attorney.
MISREPRESENTING YOUR BUSINESS
Misrepresenting anything about your business – from the financial sheets to the amount of debt, or how successful the location is – is a sticky situation you don’t want to be in. Transparency is key when handling sales negotiations, even in the beginning. Not only can it get you into hot water to misrepresent the business, but it can turn a buyer away from doing business with you, halting the sale and forcing you to go back to the drawing board.
NEGOTIATING THE DEAL YOURSELF
Some business owners assume that they have to be the ones on the front lines of a business sale, however, this is far from the truth. Most businesses have a broker represent their during negotiations so that they don’t miss any crucial aspects of the sale and only negotiate with serious buyers.
At BSF, our brokers can help you make the most out of your sale, from guiding you through the preparation stage all the way through helping you negotiate the sale. Give us a call today to see how we can help you take the next step with your business.
Planning Your Exit Increases the Odds of Success
Planning an exit strategy is common in some industries, but in the veterinary practice space, it is commonly ignored by business owners as they are focused on running the business, rather than the future possibility of exiting it. It can seem a bit like a honeymoon phase in business, where you believe you’ll be the business owner forever.
As the years go on, however, an exit strategy becomes more important as you start to consider retirement or are looking for a career change.
It’s never too early to plan your exit and increase the odds of success in a sale and ownership transition. By planning your exit, you can prepare everything in advance for the business, helping it operate without you, rather than hoping it will stay afloat after a mad dash of paperwork and negotiation.
A well-planned handover makes the whole process go smoothly for both the seller and buyer, increasing the business’ likelihood of success with new ownership, as well as the satisfaction of selling the business.
Additional Tips to Help Your Handle the Sale
When you first start considering an exit from the business, it might make the most sense to you to sell the business, reaping the rewards of your labor and setting yourself up for success in your next venture. (1) What you do now, however, can help you prepare for that future.
One of the more important ways you can prepare for the eventual sale on a personal level is detaching yourself emotionally from the business. As a veterinarian, you care about your patient’s quality of care, and you want to leave your clientele in the right hands. This will come when you start negotiating with potential buyers; however, you cannot set forth so many stipulations that the buyer is unable to enact changes to the business.
“If you think your exit strategy is to sell, the most important question you can ask yourself is this: “What can I do today to prepare to sell my business two to three years from now?”
The first thing you should do is seek advice from your legal and financial professionals, hashing out an effective strategy to exit the business if you haven’t already. An exit plan is an essential part of leaving the business and setting both you and the new owner up for ongoing success.
The next thing you should do is tidy up your paperwork; you should ensure there are no more liens on the business’ assets after satisfying debts, and all financial paperwork is ready to be provided to a prospective buyer. If you haven’t started regular bookkeeping and detailed accounting, now is the time to get your books in order, even if your prospective sale date is years away.
Essential Documents to a Successful Sale
There are several documents that you will need to provide the buyer to ensure a successful sale. If you don’t provide them, the buyer can ask for them.
First and foremost on anyone’s mind during the sale is the buyer’s offer and the seller’s asking price. (2) This is covered by the valuation, which should be reasonably verifiable by a third-party.
“You need to ensure your asking price is within the justifiable range a bank, buyer and or business appraiser can validate”
Documents that you will need to provide may include previous financial documents, discretionary owner earnings, lists of all equipment and other assets included with the business, as well as a list of the business’ debts. The buyer, on the other hand, must provide an offer-to-purchase agreement or intent to purchase.
Need Guidance on the Sales Process?
Navigating a business negotiation can be difficult, with plenty of pitfalls and potential losses waiting to happen without the right advice and assistance. If you are looking for help finding the right buyer or getting the right advice, BSF can help you.
At BSF, our professional team helps clients buy or sell veterinary practice businesses of different sizes across the US. We’re here to help you take the next step in your business when you aren’t sure where to go next.
Let us help you take the stress out of the sales process. Give us a call today to learn more about our process, helping sellers connect with buyers.
- Forbes.com, 10 Things to Do Before Selling Your Business
- Forbes.com, 10 Things to Do Before Selling Your Business
- Huffpost.com, Selling Your Business
- Huffpost.com, Selling Your Business