Broker Vs. No Broker
Thinking of selling your practice but don’t want to pay the broker’s commission? Think again. History shows that any time you sell your business and/or real estate yourself, the chance of failure of the transaction is over 50%. A commission will be much more digestible than the result if you try to do it yourself. We receive calls from senior veterinarians stating they sold their practices and took payments and it didn’t work out. After one year, they often must take the practice back and struggle to resurrect it to try and sell again. This is typically an experience that is new to both buyers and sellers. It takes time, marketing expertise, sales experience, buyer and advisor contacts, and lots of patience.
Your broker may spend hundreds of hours on your transition and your time is better spent at the clinic and planning your retirement agenda. Brokers do lots of specialized marketing which can be costly and time-consuming, and it includes many weekends and evenings meeting with potential buyers. When working with a broker, the average practice sells in about 6 months so selling it alone can be much longer. Your broker should have a list of qualified buyers and a commercial real estate license. If you own your space, it’s often critical to sell the building at the same time or get a solid agreement together for future purchase. Time and time again we see senior veterinarians sell the practice and lease the space with a loose agreement and lose their renter. The buyer decides they like a newer building down the street and leave you with an empty veterinary building.
A good broker will determine the value of your practice and there is much that goes into this process. It’s not just about collections. Everyone’s goal should be to sell at a fair price in a timely manner. If the price isn’t “right”, the banks won’t finance, and you certainly don’t want to carry the loan. If you get pressured to sell too low, which we often see, you can lose tens of thousands of dollars. Brokers spend a lot of time working with all the trusted advisors you need such as veterinary specific banks, CPAs, and attorneys to determine the value of your practice and facilitate a smooth and successful transition.
Broker Vs. No Broker
Thinking of selling your practice but don’t want to pay the broker’s commission? Think again. History shows that any time you sell your business and/or real estate yourself, the chance of failure of the transaction is over 50%. A commission will be much more digestible than the result if you try to do it yourself. We receive calls from senior veterinarians stating they sold their practices and took payments and it didn’t work out. After one year, they often must take the practice back and struggle to resurrect it to try and sell again. This is typically an experience that is new to both buyers and sellers. It takes time, marketing expertise, sales experience, buyer and advisor contacts, and lots of patience.
Your broker may spend hundreds of hours on your transition and your time is better spent at the clinic and planning your retirement agenda. Brokers do lots of specialized marketing which can be costly and time-consuming, and it includes many weekends and evenings meeting with potential buyers. When working with a broker, the average practice sells in about 6 months so selling it alone can be much longer. Your broker should have a list of qualified buyers and a commercial real estate license. If you own your space, it’s often critical to sell the building at the same time or get a solid agreement together for future purchase. Time and time again we see senior veterinarians sell the practice and lease the space with a loose agreement and lose their renter. The buyer decides they like a newer building down the street and leave you with an empty veterinary building.
A good broker will determine the value of your practice and there is much that goes into this process. It’s not just about collections. Everyone’s goal should be to sell at a fair price in a timely manner. If the price isn’t “right”, the banks won’t finance, and you certainly don’t want to carry the loan. If you get pressured to sell too low, which we often see, you can lose tens of thousands of dollars. Brokers spend a lot of time working with all the trusted advisors you need such as veterinary specific banks, CPAs, and attorneys to determine the value of your practice and facilitate a smooth and successful transition.
Analyzing a Lease in a Practice Acquisition
When you get a copy of the lease, you or your advisor should contact the landlord. Be sure the seller has informed the landlord that they are selling the practice first. If there is a short time left on the lease, the landlord may be willing to do an extension on the lease. You can put conditions on the extension that can include getting a tenant improvement credit to cover new paint, carpet, etc., free rent for a few months, lower rent, etc., I’ve even had a situation where the landlord loaned money to the tenant to completely remodel the practice.
Remember that everything is negotiable. Don’t automatically assume the lease is set and you cannot change anything. At the same time, know how to negotiate. If you go for a home run right off the bat, you may turn the landlord off and they won’t be willing to negotiate.
If you’re working with a broker, it’s best to let them handle the negotiating. They’re the experts and can save you thousands if done right.
If you are coming to the Pacific Northwest Dental Conference, stop by booth 604 and talk to Steve if you have more questions about this. You can also email him at steve@omni-pg.com. If you’re in Oregon, email Megan at megan@omni-pg.com.
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HARVESTING YOUR EQUITY IN YOUR PRACTICE
You Don’t Have To Retire If You Sell Your Practice
By Rod Johnston, MBA, CMA
A few years ago, I decided to sell my house in Kirkland, WA. I wasn’t planning on moving anywhere. I still planned on living for quite a while longer. I didn’t have any health issues, nor was I downsizing from my 1,100 square foot house to a smaller house. I purchased the house almost 20 years prior and it was nearly paid off, so I had quite a bit of equity built up into it. I had just decided it was time to harvest the equity I had built up in the house and use part of the equity to buy something else, part of it to put towards retirement, and part of it to have as a safety cushion for a rainy day. I’m glad I sold the house as it was over 1/3 of an acre and had a lot of flower beds and landscaping. It was also getting older and required quite a bit of maintenance.
I’m telling you this story because you can do the same thing with your practice. You have put in many years of hard work in your practice. It may need maintenance every year that you may be tired of taking care of. After 20 years of staff issues, they may be getting to you. Maybe you just had a new corporate move in down the street, and you’re worried about competing against them. It could be that you just want to be a veterinarian and just want to see patients – not manage staff, clean the office, pay the bills, deal with the leaking roof, post to the office Facebook or Twitter pages, come up with new ads to get clients in the door or any of the other 100 items that are required of a veterinary practice owner. I know, as I’m also a business owner – and who do you think cleans our toilets on the weekends?
No laws say you must own a practice to be a veterinarian. You can Harvest your Equity from your practice and continue to be a veterinarian. Imagine getting hundreds of thousands, if not millions, out of your practice, continue to work in your own practice, or go to work in a different practice if you choose and no longer have to manage a practice. You can put the money you receive to work for you in a retirement or investment account. You can free up some of your time to enjoy your family. You can buy a vacation home that you’ve always dreamed of, or just simply put the money away for a rainy day and continue to work.
So, what are the steps to Harvesting Your Practice Equity?
- Set up a free consultation with one of our advisors.
- Have a practice valuation done on your practice.
- Meet with your financial advisor to discuss your plan and the valuation.
- Meet again with an Omni Advisor to discuss possible options in selling your practice and the feasibility of working back in the practice.
- Let Omni take over the selling process and find a buyer that matches your needs. The “your” is vitally important as we are matchmakers and want to find a buyer who will be a near-perfect fit for you, your practice staff, clients, and the community.
- Close on the sale of your practice and plan your new, less stressful life.
That’s all there is to it to take back control of your life. Of course, there will be some work between steps such as running reports, meeting with a potential buyer(s), and discussing options with your advisors. But if you rely on Omni and other experts, the process can be simple.
We have helped numerous veterinarians who sold their practice and are working back in their practice or are working for someone else and appreciating their newfound joy again being a veterinarian and helping animals get better. The first step is the easiest. Just give us a call at 360-941-2341.