Where To Start When Selling Your Veterinary Practice
Posted on April 19, 2022
Getting Ready to Sell Phase: Items to Consider
Deciding that it might be the right time to sell your practice is a big step. Once there, it is important to take the time to get ready. There are numerous reports to review, one-time events to remember (What disruptions or measures were taken during the pandemic lockdowns?), and forward planning. To achieve maximum potential value for your practice, there are some items you may want to consider before actively marketing the practice for sale:
New Associate Veterinarian
If the practice has just recently brought on a new associate veterinarian, their production might not be at a point where they are contributing profits to the practice. Consider whether you should delay the sale process by a quarter or two until that new veterinarian has production ramped up.
If your practice just opened a new location, it may not yet be contributing (or only marginally contributing) to profit. Consider if more time would allow the clinic to ramp up revenue and earnings, which will benefit your valuation in a sale process. Or talk to your advisors about how best to position a new location with a prospective buyer.
New “Growth Oriented” Expenditures
You may have your heart set on a new x-ray machine or want to update your kennels. All of these purchases may help the practice in the long run, but if now is the right time to sell the practice a buyer will most likely not offer commensurate value for these new purchases (depending on the nature of the expenditure, it may negatively impact your earnings). However, any deferred maintenance expense on existing equipment should be completed prior to sale.
Contracts are not fun to review, but it will be important to get all practice contracts together. Every contract including lab services, purchase commitments, and the practice’s IT provider are important to know about and have available. Then reviewing the major contracts for their term and any renewal details will be important. (“The devil is in the details”)
Third Party Leases for Clinic Space
Be mindful of the remaining term in real estate leases. If a location that produces a significant amount of revenue and earnings operates from a space where the lease is set to expire and there are no renewal options, consider dealing with either the relocation of the practice or the renegotiation of the lease during the getting ready to sell phase.
Extraordinary Historical Income / Expenses
Your mergers and acquisitions advisor and your accountant can work with you to identify unusual and non-recurring income items and expenses that should be brought to the attention of a buyer when marketing the practice for sale. Examples of these may include unusual professional fees expense, personal expenses that will not be expenses incurred by the practice after a sale, adjusting rent on owned real estate to fair market value (if real estate will be retained by seller), compensation adjustments, PPP income and other items.