TOP 5 VETERINARY PRACTICE TRANSITIONS STRATEGIES
Until, one day, your back blows out, your spouse tells you to retire, or you just plain get tired of managing staff, cutting expneses, and health departments or state taxing authorities coming by for a “little visit”. You decide, it’s time to sell my veterinary practice! Maybe you want to continue doing veterinary work at some level, either part time, or full time. How about forming a partnership? Maybe you want to be completely done. Here are the top five strategies you can think about before that time happens and where we have expertise in making it happen. We offer a courtesy planning session to start the process.
1. SELL AND DON’T LOOK BACK – This is the option for those who are completely done and ready to either find another career, a good fishing hole, or favorite golf course. You can either attempt to do it yourself, or hire a veterinary practice broker to help you out. The pros of this are you are done, you get your equity out of the practice and you do not have to worry about staff, insurance companies or other problems again. The cons are that you do not know how your clients and staff will be cared for by the buying doctor. This is a favorite strategy for the retiring veterinarian or doctors with health issues, those moving far away or who just wants to be done.
2. SELL AND TRANSITION – This approach allows you to sell your veterinary practice and stay on for a short or long term transition. The “staying on” part can be a two hour drop in once per week for a couple of months, working back one or two days per week, or a more extensive two to four days per week for a year. It’s all negotiable and depends on the amount of production in your practice. This strategy is great for those who are closely tied to their clients and staff and want to see them well cared for after the sale. It also ensures the clients will stay with the buying doctor if the seller is there for a bit after the sale of your veterinary practice. The pros are that it allows for a very smooth transition. The cons can be that the staff is still allegiant to you and the clients still want to see you. You need to be an impartial observer more than anything at this point and let the buyer be the owner and do his/her work.
3. SELL AND WORK BACK – If you decide that you still enjoy veterinary work, but just do not want to manage the practice anymore, then this is the strategy for you. In certain cases, you can sell your veterinary practice and work back. This can be done at an early age and does not mean you are retiring. I have several case studies where a 50-year-old veterinarian was tired of managing his staff and getting hit with unexpected taxes or other expenses. We sold his practice to someone that wanted a satellite practice. He is working back full time making more money than he ever made. The buyer implemented marketing and other services to increase production. Pros are that you no longer manage your practice and you may make more money. Cons are that you may be selling to a small group or a large group that may require you to implement systems and procedures that are not what you may like. Be selective in who you sell to. I have found that smaller groups allow you more freedom.
4. PARTIAL SALE – PARTNERSHIP – If your practice has enough production, you can sell a partnership in your veterinary practice and continue to work. Often these practices grow with an infusion of young enthusiasm. There are numerous ways of structuring these deals. And, anytime you enter a partnership, I advise strongly you put everything in writing and have an attorney do their magic to make it legal and fool proof. You sell a portion of your practice, say 1/3, to a buyer. You continue to work and grow the practice. You can then either sell another 1/3 to another buyer or continue to grow, or sell out completely. The pros of this is that you harvest some of your equity while continuing to grow your practice. You then grow the practice some more and then you sell another portion. The cons are that partnerships come with all the trials of a marriage. You will probably have disagreements with your partner. Be sure and structure it right up front to reduce disagreements and to remedy them if there are.
5. DEFERRED SALE – Also called an associate to own sale. This is where you bring on an associate who works in the practice. The associate may work one or two days to start. You can then sell the veterinary practice to the associate at an agreed upon time. The price can either be determine up front or at the time of the sale. The way we typically do a deferred sale is to perform a valuation in the beginning and agree upon the price. We then do a valuation in the end and the buyer and seller split the equity to determine the final price. This can be a good way to transition as the staff and clients get to know the new doctor. It can go very smoothly. Statistics show that these fail about 50% of the time. I typically see them fail when either parties change the deal in the middle of the process, one party gets jealous of the other, or personalities conflict. We structure these so there’s a “dating” period and then we lock in the associate with a deposit.
EVERYTHING IN BETWEEN – Now you know the top five strategies for transitioning out of your veterarinary practice. We often get asked about how creative a transition can be. You can really be as creative as you want to be. The only challenge is finding a buyer who will be creative with you.
So, think about where you are today and what your end goals are. We offer a complimentary consultation to help you determine which strategy is best for you. You can trust that we will come up with a plan that will work for both you and a prospective buyer to make your transition as smooth for everyone as possible.
-Rod Johnston, MBA. CMA