After years of practice, its time to plan for the next step in your career. Whether that be immediate retirement or a short transition, preparing early on can not only maximize the value of your practice but can help set expectations of the buyer early on to ensure a smooth transition.
Selling your veterinarian practice requires you to give up something that you’ve spent years building, including relationships with patients, clients and staff. For many, it’s a big component of their retirement plan. For others, it’s a slower route to full-time retirement.
What should you consider leading up to listing your practice for sale?
- Financials – the purchase price tends to be the most important item for sellers. Months before you even sell, it’s important to get with your practice accountant or advisor to begin to run numbers. One key overlooked item is for practice owners that own the practice real estate. Many veterinarian practice owners pay rent to their real estate company at a rate far below fair market value. When it comes time for a buyer to evaluate, they see that the practice is producing higher numbers and paying low rent, which might lead to a higher practice price, but in turn leads to a much lower rent for years to come.
- Understanding the transaction – there are two types of buyers: large groups (i.e., private equity and large private groups) and individual doctors. A sale between two individual doctors can sometimes mean less paperwork, lower purchase price, and limitations based on the buyer’s lender. Individual buyers do not have endless cash to pay over and above what the practice is valued it. Lenders can also create limitations on how much the buyer can spend on the lease, employees, and the seller’s employment compensation throughout a transition. Usually, those transitions are less of a time commitment for the seller after the sale. For large groups, they can usually spend significantly more than what the practice is “valued” at. They also have more wiggle room with other expenses. The trade off, however, is the requirement for transition services for a longer period, which usually includes a “holdback” of a portion of the purchase price in exchange for a minimum amount of time spent “transitioning” the buyer into the practice. These larger groups tend to require significantly more in the way of legal documents (longer purchase agreements, corporate documents, leases, employment documents). On average, prepare for a three to six month process (and many times longer) for the sale to finalized. If real estate is being purchased as well, that could expand the time frame. It’s key to include your professional team early on in order to prepare and avoid too many delays.
- Think about what you want – money is an easy choice but choosing a practice buyer that fits as many of your needs and desires sometimes is more important and leads to a smoother transaction. If the buyer isn’t giving you what you want, then the purchase price might not be the most important piece of the puzzle. Make a list about what you desire for employment after the sale, what your property might be leased for, what you want as far as receiving value in the purchase price (all cash, cash plus equity in the buyer, etc.).
Selling your practice is a huge part of your career. Preparing early on – months before you seek a buyer – will help tremendously in ensuring you find and match with the right buyer.