Is 2021 the Year to Sell My Veterinary Practice?
The process of selling your veterinary practice is not without cost or risk. Determining why you want to sell your practice and assessing your readiness to do so can help you answers the questions of “when should I sell my veterinary practice?”, and “what do I hope to achieve in a sale?”.
One of the first things we ask practice owner clients and prospects is a) why are you considering a sale? A related, but equally important question is b) why are you deciding to sell now?
The process of selling your practice is, just that, a process. Moreover, it is not without pros and cons and costs. In that process you face risk, uncertainty, and potential failure.
To complete the tasks necessary to create the optimum outcome you will need to spend your time and energy on something other than treating your patients. Many of the tasks you will need to accomplish will be less than exciting, if not drudgery. Even if you have third parties working on your behalf, you will need to oversee their efforts.
At the end of the day, you may potentially find yourself, and your lawyer negotiating against an experienced buyer who knows all the tricks to capture value in a transaction. It is possible to persevere, but it is not a process to be taken on without good reason. So…
Why do you want to sell?
There are many individual reasons, but we think the following questions are the most important to answer before you proceed with sale of your veterinary hospital or veterinary practice:
Do you want to continue practicing veterinary medicine?
If you could remove all the administrative work that comes with owning a practice, would you enjoy practice medicine more ,or less? Would that be an all-day enjoyment, or a morning only enjoyment? How many years, or months would you like to continue under these circumstances? Thinking through where you stand on this question is a critical part of the process.
Do you enjoy running your practice?
Here I’m talking about the nuts and bolts– the performance reviews of your staff, the recruiting and hiring of new staff, the financials, monitoring gross revenues, cash flow, marketing and payroll etc.
As you can imagine, there is significant variation across the market in how individual practices are run, the technologies they use, how they are staffed, how they are supplied. How do you think your hospital performs relative to other clinics?
You may know that your operations are relatively superior because you have full control over all the details, and access to points of comparison. Or you may believe there is room for improvement. Either way, running a practice is work. Some will be better than others.
What goals do you have for your career (or non-career) post sale?
Take a second to picture yourself longer term, perhaps five years after you have sold your practice. What do you want to be doing in this picture? This vision is important to develop – both as a motivational tool, but also as a beacon, or a true north to help you navigate the sale process. Thinking clearly about your post-sale future will define key goals for a practice sale. No matter what you vision, there is probably a buyer for your practice if you choose to proceed with a sale.
It is also important to ask another question: Why sell now? You may have some near to medium term flexibility around timing your practice sale. The following are key considerations with respect to timing a sale:
Does the market support a sale of your practice now?
This is a complex question that we think of in terms of near, and medium-term market dynamics. A useful parallel to the market for veterinary practices is the stock market. There are good times to buy into the stock market (mid 2009, for instance) and good times to sell out of the market (late 2007, for instance).
Identifying these times, or “timing the market” is difficult. Even the professionals are wrong more often than they are right. If you hope to maximize your proceeds by timing your practice sale to hit an expected market peak in a certain month, or year (the near-term), you are just as likely to be wrong, as you are to be right. For this reason, we believe it is better to take stock of your readiness for a sale, and let that analysis guide your perspective on timing.
Is my practice optimized operationally?
It may be possible to identify and complete near-term investments in capital or staff to change the trajectory of growth in your practice. While a buyer will want to hear about the plans you have, they are unlikely to give you credit for these improvements unless you have invested to realize them. The good news is that once you have made investments, it is possible to get you valuation credit, particularly if you have hired a financial advisor who has experience with corporate buyers.
Do I have metrics, or records available to support optimized performance?
Consider what Key Performance Indicators (KPIs) you have collected to demonstrate sustainable growth or operational excellence in your practice. Examples of metrics that demonstrate performance include revenue growth drivers (growth in price, growth in patient volume, growth in product / service mix, the number and percent of recurring patients, and your average transaction value.
When you initiate a practice sale process, you will want to have these metrics available and accurate through time. Having easy access to these and other metrics also shows that you have collected and analyzed your KPIs, indicating to a potential corporate buyer an operational focus that can help you stand out.
Do I have key transaction documents available?
To complete the sale, you will need to produce all contracts and licenses associated with your practice. You will want to make sure you have ready access to all of these documents.
Do I have relationships with the right third party advisors?
The right team makes all the difference. Have you done your homework on potential Transition Advisors or Brokers, lawyers Practice Sale Consultants and other professionals that can help you complete a sale, particularly to a sophisticated corporate consolidator? Seek advisors that you can trust, and that are competent, and always check references.