Who Should be on Your Exit-Planning Team?
By Corey Young, MBA, CVA
Let’s discuss the best approach:
- Financial Planner. A financial planner helps clients meet their current money needs and long-term financial goals. They use a structured process to guide clients toward prudent financial decisions to maximize their potential for attaining life goals. Using their knowledge of personal finance, taxes, budgeting, and investments—combined with analytical tools and data that can illustrate potential outcomes—financial planners make recommendations, which help clients make informed decisions.
- CPA. Almost everyone reading this article has a CPA. While they are an invaluable resource, over-relying on them on a consultant basis can put them in a conflicting role when it comes time to exit your business. Per Investopedia, “Although some CPA firms serve as business consultants, the consulting role has been under scrutiny following the Enron scandal where Arthur Andersen simultaneously provided audit and consulting services which affected its ability to maintain independence in its audit duties If the CPA firm is auditing the same company that the firm also does consulting work for, then there is a conflict of interest. This conflict voids the CPA firm’s independence for multiple reasons, including: (1) the CPA firm would be auditing its own work or the work the firm suggested, and (2) the CPA firm may be pressured into unduly giving a positive (unmodified) audit opinion so as not to jeopardize the consulting revenue the firm receives from the client.”
- Transition Consultant. A business transition consultant helps a business owner assess the current asset value of the business and establish its attractiveness to various buyers. A transition consultant also helps owners assess where they’re at motivationally, as professionals and business owners in their readiness to sell. The consultant then works together with practice owners to develop exit strategies that could begin in the immediate future or develop over a couple of decades. Frequently, transition consultants also serve as the broker of practice sales. This is a real plus because their work in the open market makes their recommendations much more meaningful. A widely accepted recommendation is to engage a transition consultant long before you are ready to sell. Analogous to this recommendation is diagnosis and prevention. Waiting to contact a broker when you are ready to sell is considered emergency care.
- Attorney(s). Two different types of attorneys need to be engaged at some point during a well-developed exit strategy. First, an estate planning attorney to help set up wills and trusts. Second, an experienced transition attorney when the time comes to exit the business.
- Banker. Developing a solid relationship with a banker can open doors of possibility both currently and into the future. Because of banks’ (mostly outdated IMO) hiring and retention policies, bankers tend to move around quite a bit. My recommendation is to focus on the banker more than the bank.
Who do you currently have on your team?
Read MoreLooking at Veterinary Practice Ownership in 2022
By Happy New Year! We want to wish you a happy and healthy 2022. As the new year gets underway, we have to look at some trends that will continue into the new year, some events that may be slowing down, and other news happening in the veterinary industry. Here are a few things to think about:
Veterinary Employee Shortage – This has been going on for several years now and there doesn’t appear to be an end in sight. There’s nothing that can happen overnight to help put an end to the shortage. Veterinary schools can’t graduate students fast enough and there are not any new veterinary schools that are starting up. Corporates are offering large bonuses for veterinary associates to join their practices. It’s tough for individual practice owners to compete for associates.
Burnout and Compassion Fatigue – This is one of the causes of labor shortage amongst veterinarians. Long work hours and days have been magnified with Covid. People are working from home and pay more attention to their animals. When they see their pet acting strangely, they immediately make an appointment with their veterinarian. Even before Covid, veterinarians typically face burnout after 5 to 10 years with some of them leaving the profession.
Veterinary Telemedicine – Telemedicine has become prominent in human medicine. Some health plans are even built around not going into the doctor’s office. There are companies offering telemedicine in the veterinary space. Will this become as prominent as it is in human medicine? Time will tell.
Corporate Buyer Consolidation – There are hundreds of groups buying veterinary practices paying exorbitant prices. Some of these groups have been purchased by larger groups. This buyer consolidation will continue for the next several years. What that may mean is less buyer competition for practices which may mean corporate buyers paying less for practices in the coming years.
Resurgence of Individual Practice Owners – This is a prediction more than based on fact. But, I believe individual veterinarians will get tired of working for corporate owners and will thus look to go out on their own either opening their own new practice or purchasing an existing practice. It will be a good and healthy thing for the veterinary industry as well as for the pet-owning public.
Inflation and its Impact on Veterinary Practices – I would say that inflation is coming, but we’re already seeing an increase in prices at the grocery store, gas stations, and other places. What this historically has meant for pet owners is that they think twice before they go in for what may be deemed by the general public as elective appointments such as canine checkups, consultations, and elective procedures. They will still have the non-elective procedures done when they are required.
These are just a few points to ponder going into the new year. We wish you a happy and healthy new year!
Read MoreWhy Practices Don’t Sell
By Megan 
Urban, Practice Transition Consultant
Your practice has successfully worked for you for many years so why isn’t it selling? It could be the transition consultant (broker) you are using, or it could be your practice.
Working with an experienced transition consultant is important. We know where and how to advertise. It doesn’t work to simply advertise on a website. You will want marketing and advertising in schools across the country, dental journals, and county/state societies. An experienced consultant already has a list of potential buyers for your area or type and may have other creative grassroots ideas to find the right buyer.
The right consultant cares about you, your team, practice, and goals. It shouldn’t be just about the commission money. Your consultant should be responsive and professional to potential buyers and you.
A comprehensive valuation and prospectus are important. If you or your consultant price your practice too high, it can be offensive to potential buyers, and they won’t feel comfortable offering a lower price. Even if you find a buyer willing to overpay for your practice, the bank will not finance 100%, which means you have to become a bank for a specific amount of the purchase price.
Sometimes even when you have the right consultant your practice may have other reasons for not selling. Sometimes it’s simply not finding the right dentist at the right time. Often it is because your location is not desirable to new buyers and their families. Sometimes it’s the size of the practice. We all know 3 op practices can be very efficient and profitable, but many buyers want 4 to 6 ops, especially to add more hygiene.
Declining collections the last 3 years or simply low collections can be a deterrent to potential buyers and banks unless you have a reason. They understand more time off due to vacation or health issues. Low new patient count, too many PPOs with low reimbursement, and low hygiene production can be concerning to buyers.
Most buyers understand they may need to update style or equipment and technology, but if it’s a lot of cost and effort, they may keep looking for a better practice.
If your practice falls into any of these areas of concern, it will take more time than the average to sell. Lowering the price may help, but if there is no interest, it’s not the price that’s the problem. Don’t give up or get mad, just understand that while your practice may have been perfect for you, it can be a while to find the right buyer.
Top 5 Fears Veterinarians Have About Practice Ownership (And How to Overcome Them)
By Rod Johnston MBA, CMA, and Jim Vander Mey, CPA, ABI
There are many advantages to owning a veterinary practice over being an associate veterinarian and not owning a practice. For one, the average veterinary practice owner makes approximately 20% more in income than an associate veterinarian working for someone else. A veterinary practice owner also gets to choose what procedures he wants to perform and what type of animals he or she wants to work on. Heck, they even get to choose which animals they want to work on. They can also choose their own hours, pick the days they want to work, and how much vacation they want to take. So, why aren’t veterinary associates owning practices? What are they afraid of? Here are a few fears we have encountered and how to overcome those fears:
- Fear of the unknown – Associates feel they don’t have the experience in owning a practice. They haven’t managed staff. They haven’t kept financial records. They don’t know what marketing to put in place. They don’t know what benefits to give employees, how to hire or fire employees, or even how to balance a checkbook.
Fear not, you don’t have to know everything at once. You know how to do veterinary medicine. That’s the first step in owning a practice. You have a few years of experience working as an associate in a veterinary practice. You’ve observed the owner working with and managing staff. You may have experience leading a team in school, playing sports, etc. These are all examples of good experience in handling staff. You don’t have to know how to keep books right away. We suggest getting a veterinary bookkeeper and then getting educated on reading financial statements. This can happen over time. Bottom line is if you are good at what you do and willing to learn the other parts of practice ownership, you’ll be just fine. - Fear of taking on more Debt – Read Robert Kiyosaki’s book, “Rich Dad, Poor Dad”. Not all debt is created equal. There is good debt such as student loans and practice debt that helps generate an income and there is bad debt such as credit card debt where you just borrowed money because you wanted something. Practice debt used to buy a practice that will help you make more money and build equity in an asset (the practice) is a positive thing. As long as it’s a good practice with good cash flow, you’ll be money ahead in the long run.
- Fear of the Corporate Giants – Don’t fear the corporate giants. They have their own niche targeting bargain shoppers and lemmings who follow the crowd. They also have a high turnover in their staff and doctors. You will provide excellent service with the same staff and veterinarian that the clients will see every time they come to your office. In a corporate environment, they’re not sure who they’re going to get.
- Fear of not knowing what to look for – This is a valid concern. You can educate yourself in a number of ways. There are great resources via podcasts, YouTube, etc., that can help you know what to look for. Quite simply, you start by looking at your desired location, then look at the cash flow of the practice and after that, you can get into the details. There are consultants and brokers who can also help you with reviewing practices. Identify your team that will help you overcome this fear.
- Fear of a recession – Recessions happen, typically every 8 to 10 years and last 10 to 12 months. You cannot avoid recessions or downturns in the economy, it’s part of life. But, during recessions, employees typically get laid off from work. If you own your own practice, you’re probably not going to fire yourself. You’ll probably keep yourself employed and busy. Owning a practice is a deterrent from getting laid off during a recession.
These are a few of the fears that we’ve seen over the years, and there are others as well. But, the best thing you can do is educate yourself and talk to practice owners, brokers and bankers. Seek advice and counsel from everyone you can. This will help you make a wise decision in moving forward with practice ownership.
Read MoreGetting Your Practice Ready to Sell
By Cindy Pauley, DDS & Practice Transition Advisor, OMNI Practice Group
You are ready! You woke up one morning early last week and said to yourself, “It’s Time!”
You have loved being a practicing dentist. But for a multitude of possible reasons, you are ready to sell. So, what’s next? You look around and think is my practice ready to sell? All of a sudden you see the chipped paint and remember the door that sticks if you don’t open it a certain way. Not unlike a house that you are putting on the market, some quick accounting of your practice is in order. Unlike a house, big and costly upgrades will not net you a higher sales price. So, let’s talk about what is a great bang for the buck and what may be money thrown out the window.
First, some really great things that don’t cost much. If your paint is chipped worn or aged… paint! Painting is simple, fast, and the quickest way to make a great first impression during the showings. Second, and advisably after the painting, upgrade flooring if it is worn or really outdated. For both of these options, go for smart clean colors. For the flooring options, keep it simple. Commercial carpet or carpet tiles and vinyl sheet or luxury vinyl plank (LVP) are quick to install and look great.
Second, fix all minor repairs. Doors that stick, duct tape on a hose, or worn fabric on chairs can be easily and inexpensively repaired and add to an overall feeling of a well-run business.
Third, declutter your entire office. It is time anyway. Put things you can’t part with boxes and get them out of the office. Otherwise, use your local goodwill and dumpster and let things go. Walk through the office as if you were going to buy this practice. You know that you would want to have clean, clutter-free spaces to visualize your future dental life in.
Even if you choose to postpone your sale, all the things I have just mentioned should be done if they are needed regardless, so it is a win-win! Your staff and patients will love everything mentioned and it is an inexpensive boost to the whole business.
Notice what I didn’t include? That’s right. I didn’t include any expensive dental equipment upgrades. Much to the dental supply company’s sadness, new dental chairs and a cone beam are not a good investment if you are planning to sell soon. Do not buy a new laser or a CAD CAM machine because big equipment purchases, with rare exceptions, do not pay for themselves when a sale is imminent.
Ok, you are all set. Now what? Well, give a practice broker a call in the meantime to start the valuation process. A side benefit is that we are happy to come out to your practice and let you know what we see as the best things you can do prior to listing. Be ready for the answer to be that nothing needs to be done. If you look around and think “it looks pretty good here”, chances are we will too.
My door is always open for consultations at any stage of your practicing life. I am always excited to help you navigate the pathway to your new life’s adventures.
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