Author: omniadmin

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By Jim Vander Mey

Practice Transition Advisor

I meet hundreds of veterinarians each year who are looking to buy an existing veterinary practice.  Of those, I would estimate that 30% have done any research on what is involved in buying a practice. Of that 30%, none know the beginning to end process of buying a veterinary practice.  While all the steps cannot be covered in this article, here is some guidance on where to start and what steps to take before buying a practice.

1. Contact a bank that finances veterinary practice acquisitions and makes sure you can qualify for a good loan.  Banks can require decent credit scores, cash in the bank, that you are two years out of school, and show production from your current employer. Every situation is a little bit different.  Try to avoid SBA loans if you can, as they can be expensive with early payment penalties. However, if that is the only avenue to ownership, do not pass it up.
2. The next step is to understand a little bit about veterinary practice valuations.  You don’t want to go into a sale not knowing if the practice is worth the price listed or not.  If you are looking at a practice that a corporate entity is also looking at, the rule of thumb is that valuations are out the window.  Practices grossing 1 million or less could be worth between 65% and 75% of its’ last 12 months’ production.  Remember, that’s a rule of thumb – I’ve seen practices go for as high as 160% of production and as low as 30% of production.
3. Think about where you want to practice.  You’re probably going to be there a while, so you might as well like the area.   Research demographics – there are excellent demographic services that sell great Veterinary demographic information for about $500.  It will tell you where the best locations to practice are located.  Also, do not ignore the smaller, older, and not-state-of-the-art-equipped practices. These can be the best opportunities allowing a higher return on your investment.
4. Put together a good team.  Get referrals for a good veterinary broker, attorney, banker, and accountant.  They’ll help you analyze the veterinary practice, do the legal work and help you find a practice.
5. Get an understanding of the true cash flow of the practice and if expenses are above industry averages. For example, is the staff expense greater than 25% of production? Is the reason because one employee is overpaid and will be retiring at the same time as the seller, or is there an overstaffing issue?  Be an informed buyer.
6. Be prepared for your due diligence.  You need to know what to look for when you do get to the point of buying a veterinary practice.  Is it an older veterinarian selling that outsources surgery and does very little dentals? Does the practice have a website?  As the practice should be valued on current performance, not future potential, there could be real opportunities for immediate growth. Know how to spot these things.
7. Finally, spend some time with a veterinary broker before you go look at the practice.  Understand what the practice you are looking at is all about.  Does the broker think it’s honestly a good practice?  Why?  Does the explanation make sense?  Once you’re comfortable with the numbers, then go take a look at the practice.

By being an informed buyer, you will avoid a lot of headaches and potential problems down the road.  There are practices that are hidden gold mines and practices that you should not touch.  Being educated and knowing the difference is critical in your veterinary practice acquisition success.

Owning and growing a dental practice can be one of the most challenging things in dentistry.  Advertising for new patients can be hit and miss and expensive.  That’s why one of our favorite strategies is to purchase another practice and merge it into your existing practice.

The reason you would consider doing a merger is because you get all of the revenue and current patients from the new practice, but you don’t get all of the expenses.   You don’t bring over the fixed expenses like rent, telephone, electricity, etc.,  You already have those in your practice and don’t need to incur them again when you bring over the practice you just acquired.

As an example, say you own a practice that collects $600,000 per year. You have overhead of $390,000 with 30% of the overhead in fixed expenses – rent, utilities, insurance, etc., Another practice comes on the market that collecting $500,000 with overhead of $325,000 with fixed expenses again at 30% or $150,000. You purchase the practice for $350,000 giving you a debt service payment of $3,500 per month.  You work closely with the broker to ensure 100% of the patients transfer to your practice. Your practice now goes from $600,000 up to $1.1 million in revenue.  You incur the variable expenses of the second practice, but you do not incur the 30% fixed expenses of $150,000 because you already have rent, utilities, insurance etc., at your current office. In essence, you just gave yourself a $150,000 raise, less $42,000 in debt service and dropped your overhead to the neighborhood of 55%. It would take you much longer to do this if you just did marketing and advertising. By consolidating practices, you get instant growth and income. If you have a practice for sale near you, you should consider merging it into your practice in order to achieve quick growth.

​Owning and growing a veterinary practice can be one of the most challenging things in the veterinary field.  Advertising for new clients can be hit and miss and expensive. That’s why one of our favorite strategies is to purchase another practice and merge it into your existing practice.

The reason you would consider doing a merger is that you get all of the revenue and current clients from the new practice, but you don’t get all of the expenses.  You don’t bring over the fixed expenses like rent, telephone, electricity, etc.  You already have those in your practice and don’t need to incur them again when you bring over the practice you just acquired.

As an example, say you own a practice that collects $600,000 per year.  You have overhead of $390,000 with 30% of the overhead in fixed expenses – rent, utilities, insurance, etc.,  Another practice comes on the market that collecting $500,000 with overhead of $325,000 with fixed expenses again at 30% or $150,000.  You purchase the practice for $350,000 giving you a debt service payment of $3,500 per month.  You work closely with the broker to ensure 100% of the clients transfer to your practice.  Your practice now goes from $600,000 up to $1.1 million in revenue.  You incur the variable expenses of the second practice, but you do not incur the 30% fixed expenses of $150,000 because you already have rent, utilities, insurance etc., at your current office.  In essence, you just gave yourself a $150,000 raise, less $42,000 in debt service, and dropped your overhead to the neighborhood of 55%. It would take you much longer to do this if you just did marketing and advertising. By consolidating practices, you get instant growth and income. If you have a practice for sale near you, you should consider merging it into your practice in order to achieve quick growth.

Buying a veterinary practice can be and is a daunting task. It’s much more involved than purchasing a car or even a house. You have to wear many hats including shopper, negotiator, accountant, finance, lawyer, practice management expert, equipment specialist and even human resources manager. One wrong step and you could set yourself back financially, legally and even personally if something goes wrong.  You have to know what to look for every step along the process. But, what is the process?  Here is an abbreviated version of what those steps are:

1. Find a practice.  Finding a practice isn’t hard. Finding a good one is. Get in touch with all of the brokers and get on their e-mail lists.
2. Begin speaking with banks that specialize in veterinary practices.
3. Review the documents the broker sent you. You should get a prospectus that gives a decent summary of the practice along with demographics. You should get at least 3 years tax returns, profit and loss statements, production by procedure report, production by provider report and an accounts receivable aging balance. And, that’s just the start.
4. Review financials with your accountant. Or, if you minored in accounting or understand numbers, you can review them yourself.
5. Make your offer and negotiate. Don’t low-ball the offer unless you know they may accept any offer. A good practice will go quick, so wasting anytime will result in missing out on the practice. Add your contingencies in the letter of intent.  Review with an attorney.
6. Do your due diligence – review charts, x-rays, staff pay and benefits, equipment, UCC filings, the reputation of the veterinarian and practice, state licensing review on the seller, etc., Get in as deep as you can.
7. Review the lease. Make sure it’s not too high, no tear down clauses, lease expiring, etc.
8. Begin legal review of agreements. Get your attorney involved.  Choose a good veterinary attorney.
9. Complete the Omni 70 point checklist for closing the sale of a practice.
10. Hold staff meeting to be introduced as the buyer.
11. Work through escrow in closing the sale.
12. Begin your new life as a practice owner.

As you can see from this abbreviated  list, there’s a lot to do.  You can go it alone and swim with the sharks, or, you can have our Buyer’s Transition Consultant help you through the process. ​

​​Buying a dental practice can be and is a daunting task. It’s much more involved than purchasing a car or even a house.  You have to wear many hats including shopper, negotiator, accountant, finance, lawyer, practice management expert, equipment specialist and even human resources manager. One wrong step and you could set yourself back financially, legally and even personally if something goes wrong.  You have to know what to look for every step along the process. But, what is the process?  Here is an abbreviated version of what those steps are:

1. Find a practice.  Finding a practice isn’t hard. Finding a good one is. Get in touch with all of the brokers and get on their e-mail lists.
2. Begin speaking with banks that specialize in dental practices.
3. Review the documents the broker sent you. You should get a prospectus that gives a decent summary of the practice along with demographics. You should get at least 3 years tax returns, profit and loss statements, production by procedure report, production by provider report and an accounts receivable aging balance. And, that’s just the start.
4. Review financials with your accountant. Or, if you minored in accounting or understand numbers, you can review them yourself.
5. Make your offer and negotiate. Don’t low-ball the offer unless you know they may accept any offer. A good practice will go quick, so wasting anytime will result in missing out on the practice. Add your contingencies in the letter of intent.  Review with an attorney.
6. Do your due diligence – review charts, x-rays, staff pay and benefits, equipment, UCC filings, the reputation of the doctor and practice, state licensing review on the seller, etc., Get in as deep as you can.
7. Review the lease. Make sure it’s not too high, no tear down clauses, lease expiring, etc.,
8. Begin legal review of agreements. Get your attorney involved.  Choose a good dental attorney.
9. Complete the Omni 70 point checklist for closing the sale of a practice.
10. Hold staff meeting to be introduced as the buyer
11. Work through escrow in closing the sale.
12. Begin your new life as a practice owner.

As you can see from this abbreviated  list, there’s a lot to do.  You can go it alone and swim with the sharks, or, you can have our Buyer’s Transition Consultant help you through the process.