Whether you are considering leaving your practice now or sometime in the future, having a succession plan in place will simplify the process whenever that time comes.
Without a doubt, your first step when considering selling your practice should be to have it appraised. Taking this essential step correctly will ensure that you are not pricing your practice too high, which could scare away potential buyers, or too low, causing you to miss out on its true worth.
Once you know its value, you can determine whether any enhancements are needed to make your practice more attractive to potential buyers. The value of your practice should be greater than the total value of its tangible assets. If it’s not, you may need to invest in new equipment, make facility upgrades, or hire new staff to attract real prospective buyers.
The value is the most important first step in selling a practice, but there are more things you’ll need to consider before you get serious about selling.
How Much Money Equals Future Comfort?
Consider meeting with a financial advisor who specializes in the veterinary industry to determine how much money will you need to live comfortably after you sell your practice and no longer have a steady income. Knowing how much you’ll need for the future will give you an idea of how much profit you need to make from the sale and a feasible timeline for selling.
If you wish to make more than what your practice is currently worth, your financial adviser may suggest that you hold off on selling for 5 to 7 years so that you can increase its value. An adviser can also offer insight about taxes and fees, and help you determine whether providing financing to your buyer is an option.
What Is the Current State of Your Practice’s Finances?
Selling your practice means you will be scrutinizing potential buyers and examining their financial records, but those potential buyers will also be interested in your practice’s finances. Be prepared for buyers to ask for prior year tax returns and interim statements, and make sure that your financial management system is updated and can provide accurate, timely financial statements.
If your practice has a recent history of declining revenue, consider staying until your proceeds reflect a positive number. Declining revenue not only gives buyers a negative impression of your practice, but it could also compromise their ability to receive the financing they need to purchase it.
Where You Will Find a Buyer?
If you don’t have an associate interested in taking over the practice, you may need to hit the ground running to find a buyer. Potential buyers can come from anywhere, but they will be harder to find if you have no network of potentials. Building long-term relationships with other veterinarians in your community allows you to choose a buyer whom you trust and whose values align with your own, instead of rushing to choose a buyer because you are short on time. This is important because your successor will carry on your legacy in your community. Other options to consider include merging with a competitor or allowing a larger corporation to buy your practice.
Where Does Your Staff Stand?
No practice can be truly successful without the help of a great staff, and your team deserves honesty in times of transition. Plus, you will need their help in making potential buyers feel comfortable during on-site visits, and they can ease your worries by assuring you that your practice will be in good hands once you leave. Practices with low turnover rates and high service quality are more attractive to potential buyers; an outflux of staff right before a sale will be a red flag.
The Bottom Line
Although you may not be in a rush to sell your practice today, building a succession plan now will provide you with a smoother transition when the time comes. Purchasing and building your practice was one of the biggest investments you made, and with the proper steps you can ensure that you maximize profits, minimize stress, and leave your practice in good hands.
Kelly Jackson is senior vice president—medical and veterinary sales manager for United Community Bank. He provides financing options and guidance to medical professionals through the bank’s national SBA lending programs, and advises veterinary practice owners on growth initiatives, profitability, and strategies for practice selling.