Buyer Articles

​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.

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If you already own a practice, have you ever considered buying an existing veterinary practice located close to your first practice and merging the two together?  If you ask most doctors, they will say the best way to build a practice is through taking care of your patients and bringing in new patients via word of mouth and marketing.  And, they would be correct.  However, acquiring a second practice and merging the two together makes sense in many ways.

First off, have you ever calculated the cost of acquiring a patient via old fashioned word of mouth?  It requires a lot of work if you include everything from building your brand, training your staff, maintaining a spotless, high-tech practice, etc., the cost could easily be hundreds of dollars or more per patient.  The cost of acquiring a patient via marketing is even more.  Acquiring a veterinary practice with existing patients can typically run from several hundred dollars per active patient to $1,000 per active patient.  Slightly less to maybe equal of acquiring a patient through a normal channel.  However, you get a high volume of patients very quickly in addition to adding income to your pocket.

Secondly, you acquire a stream of revenue at a near dollar to dollar relationship.  If the selling practice is producing $500,000 per year, you should be able to repeat the $500,000 in revenue by merging the practices together, or worst case, slightly below the $500,000.  The good news, is you don’t bring over all of the expenses of the selling practice.  You typically can save in a number of ways including reducing staff of the selling practice, utilities are not double as the practices merge to one location, there is only one rent payment (more on that in a minute), only one set of books, so only one payroll service and one bookkeeper and accountant and several other services can be eliminated.  So, while getting the majority of the revenue to increase your practice collections, you only get a portion of the expenses.  This increases the income of the practice owner – you!

Thirdly, by acquiring another veterinarian’s office, you reduce the number of practices in your area by one.  Less competition equals more new patients for you.  You can hire the selling doctor as an employee to help with the veterinary transition as well as perform some other things that will help with patient retention

​If you already own a practice, have you ever considered buying an existing practice located close to your first practice and merging them together?  If you ask most doctors, they will say the best way to build a practice is through taking care of your patients and bringing in new patients via word of mouth and marketing.  And, they would be correct.  However, acquiring a second practice and merging the two together makes sense in many ways.

First off, have you ever calculated the cost of acquiring a patient via old fashioned word of mouth?  It requires a lot of work if you include everything from building your brand, training your staff, maintaining a spotless, high-tech practice, etc., the cost could easily be $1,000 per patient.  The cost of acquiring a patient via marketing is even more.  Acquiring a practice with existing patients can typically run from $800 per active patient to $1,000 per active patient.  Slightly less to maybe equal of acquiring a patient through a normal channel.  However, you get a high volume of patients very quickly.

Secondly, you acquire a stream of revenue at a near dollar to dollar relationship.  If the selling practice is producing $500,000 per year, you should be able to repeat the $500,000 in revenue by merging the practices together, or worst case, slightly below the $500,000.  The good news, is you don’t bring over all of the expenses of the selling practice.  You typically can save in a number of ways including reducing staff of the selling practice, utilities are not double as the practices merge to one location, there is only one rent payment (more on that in a minute), only one set of books, so only one payroll service and one bookkeeper and accountant and several other services can be eliminated.  So, while getting the majority of the revenue to increase your practice collections, you only get a portion of the expenses.  This increases the income of the practice owner – you!

Regarding rent, you may initially have to bite the bullet and take on an additional rent.  A perfect scenario is when the seller is month to month on their lease, or a short period left on the lease.  But, if there is a longer period of time left on the lease, you can evaluate the location to determine if it can be sub-leased.  Another scenario may call to take on the second location for a few years while the lease runs out.  This dilutes the savings, but still allows you to increase your collections.