Why You Need a Broker When Selling Your Practice
TIME – Time is money. I’m not sure who came up with that quote, but boy is it right. It’s especially true when selling a practice. We have done studies and found that it takes over 200 hours to sell a practice. We have had several practices that took over 500 hours. This includes doing a valuation, putting together a prospectus, posting ads in various publications, receiving phone calls from prospective buyers, emailing them a non-disclosure agreement, sending them the information on the practice, meeting them at the practice during off-hours, following up with them after the showing, possibly showing it to them a second or third time, helping put together a letter of intent, sitting through due diligence with the buyer for hours, reviewing the purchase agreement, following up again with the buyer, cancelling ads, meeting with staff and finally closing. Hopefully closing. Attorneys and bankers that specialize in dental practice sales have told us that when a broker is not involved with the sale of a practice, the transaction is 50% more likely to fall apart prior to closing.
EXPERTISE – You have to be a jack of all trades to complete a practice sale. A sale involves understanding legal contracts. You have to know how to write and post effective ads for your practice. You must also be able to read buyers and talk about the practice in a positive manner discussing the opportunities in the practice. Understanding numbers in your tax return and profit and loss statements is a must. Buyers and their advisors are always asking detailed questions about the numbers in your tax return and profit and loss statements. Be a good negotiator, from the price to how long you will help with the transition -these are just two of the terms that are negotiated. Other items will come up as well. And, of course, you need to know the practice management system, what the reports are saying and how to interpret them. A good broker will have some level of expertise in all of these areas.
MEDIATOR – Quite often there will be a dispute that arises. It may be taking over an advertising contract, working back as an associate, or the final price of the practice. On occasion, the dispute may get heated and the buyer will get upset with the seller or vice versa. The broker acts as a buffer in maintaining the peace and diffuse the dispute. Often the broker will keep things under wraps and dissolve the dispute before it becomes a dispute. This can save the transaction from falling apart.
TRANSACTION ENGINEER – Everyone involved in practice transitions, from the brokers to the bankers, CPAs, and attorneys will tell you that getting the buyer and seller to harmoniously cross the closing finish line is a difficult task. The broker keeps everyone on task. The broker ensures the buyer gets approved by a bank, hires the right dental attorney and CPA. If something is needed, whether for the buyer or seller, the broker is there to get it done.
Let us be the time-saver, the expert, the mediator, and the transaction engineer so that the sale of your practice is a success. Contact us today to schedule a no-cost, no-obligation planning meeting.
info@omni-pg.com
877-866-6053
Why You Need a Transition Specialist On Your Side
The Seller May Not Receive Full Practice Value
A broker can help their client to achieve full value for the money they’ve placed into their business over the long-term. They can then work to obtain viable selling opportunities and to locate qualified buyers within the marketplace. Without this type of guidance, the seller may find their selling opportunities restricted. They may discover that they can only achieve a small proportion of their total Veterinary practice value in the sale. With corporate buyers in the mix, this can mean losing out on potentially a million dollars or more.
Sellers are unable to Handle the Legal Aspects Alone
The legal aspect of a practice transition is often a critical element within the Veterinary practice sale process. Buyers will have their lawyers review the business’s paperwork and any issues they find must be analyzed closely by experts in the legal field. Brokers often have significant legal experience or have a legal team on their side and can help handle any challenges that arise during the transition process, while keeping the seller’s needs as the foremost consideration. The broker will be available at any time via phone or email to answer the seller’s or buyer’s questions and move the transaction process along. This can help prevent the seller from making poor choices and becoming embroiled in legal challenges.
The Seller Doesn’t Have Marketing Experience
When bringing a Veterinary practice to the marketplace, the seller must be able to highlight the advantages of their business in a way that attracts qualified buyers. Brokers are often experts in this area. They can use their experience to craft compelling marketing materials for the seller and use their experience in the marketplace to build target buyer lists and send out high-value content to these buyer lists.
Sellers Cannot Handle Mediation with Buyers Alone
The buyer will likely have a lawyer driving their purchase process. The lawyer will be negotiating with the seller on all elements of the transaction, including the final price. Having a broker on-hand during this process ensures the broker can handle all mediation, negotiating on the seller’s behalf to get the right price and the ideal structure for the purchase.
Working with a qualified broker can help Veterinary practice sellers reduce their transaction challenges and secure a seamless sale. To learn more, speak with our team at OMNI Veterinary Practice Group at 877.866.6053 or visit our business website at www.omnipg-vet.com.
You haven’t missed the boat… yet!
If you were contemplating a practice sale in 2018, but didn’t get started, you haven’t missed the boat… yet! In 2018, consider the following:
- Interest rates on practice loans were between 4.75% and 5.25%
- 50% of dentists are now over the age of 55
- The economy has been strong
- Consumer spending on dentistry has increased
- Practice values were up 5% to 10%
All of these factors have contributed to a growth in the number of dentists deciding to sell their practices. Dentists have seen their retirement accounts increase thanks to the strong economy. Dentists love the clinical aspects of dentistry but have grown unhappy with the business of dentistry. Insurance company reimbursements have been cut. Managing staff has become more and more of a burden with other industries competing for workers. Finding qualified staff is a major undertaking. Rent in metropolitan areas has skyrocketed. The combination of the good and bad has given dentists the motivation to sell their practices opting for retirement, or harvesting their equity and going to work as an employee for another dentist. The timing couldn’t have been any better for sellers with many of these factors creating a perfect storm to sell a practice and receive an optimum value.
But, it’s not too late and you haven’t missed the boat – – yet. There is still a strong demand for practices, interest rates are still comparatively low and practice values are currently still going strong. If you are considering a practice transition within the next year, now is the time to act. At no cost to you, we can help you formulate a plan to determine the time, the price and even potentially the person to whom you will be selling your practice. We will spend as much time with you and your significant other to ensure you are comfortable with an exit plan that fits your timing and your desires.
We are not like other transition consultants. We know that you care about who you will be selling your practice to. We are experts in matching sellers and buyers. We have a combined 30 years of experience selling hundreds of practices. Our personalized service enables you to relax while we do the work needed to get your practice sold. Our marketing team provides expertise in getting the word out with a goal of every dentist knowing your practice is for sale while keeping your name confidential throughout the entire process.
Contact us today to schedule your no-cost transition planning meeting. You have a lot to gain and nothing to lose. We guarantee you will walk away from the planning meeting much more educated and confident about your practice transition.
info@omni-pg.com
877-866-6053
From the Horse’s Mouth
Each year one of the largest corporate veterinary practice owners holds a one-day conference exclusively for veterinary practice brokers. At the conference, they discuss, amongst many other things, how their company is different than other corporates, how they value veterinary practices, and trends in corporate buying. It’s an interesting meeting to get the “state of the union” from a corporate buyers’ perspective. I wanted to share with you some of the notes I took and give you my thoughts on a few of their points.
- Corporates are continuing to expand. Not only in the U.S. and Canada, but this corporate buyer has begun acquiring practices in Australia and New Zealand.
- Some corporates have begun to do de novo practices. They are filling the gaps where they don’t have ownership of a practice with a startup practice. If you can’t buy it, build it!
- The DVM retention rate for the industry is 62%. A particular corporate claimed to retain DVMs at a rate of 82.5%. They said it’s due to how they treat the DVM and staff leaving everything as close to the same as possible. They also give the owners a piece of the pie.
- There currently is a shortage of DVM associates. They are putting a heavy effort towards recruiting DVMs at Veterinary Schools as well as the general public.
- This corporate has three commitments – Wellness Plans, Dentistry, and Fear-Free Clinics.
- They expect the current acquisition trend to continue for the next three to five years.
- Valuations are different among the various corporate buyers. Their add-back for DVM salaries is 20%. Another corporate buyer uses 22%. That can make a big difference in the purchase price on a large practice. Another example is adding back an office manager salary. That can vary significantly amongst corporate buyers. These are just two of ten examples of the differences they provided.
- Valuations have gone up over the past 5 years. Five years ago, they were buying practices at 4x to 5x EBITDA. They are now acquiring practices at a broader range of 6x to 9x EBITDA.
- They believe valuations are currently at their high peak with the expectation that they will start tapering back down to the 4x to 5x EBITDA range they saw five years ago.
- General Veterinary Practices that are in the sights of corporate acquisition teams represent 50% of all General Veterinary Practices. Corporates currently own 30% of all of these practices. The expectation is that once total corporate ownership hits 50%, the acquisitions will taper off dramatically. Corporates then may turn to specialty clinics. Note, we’re already seeing this in the marketplace. They also may focus on de novo practices.
In summary, the presentation confirmed what our thoughts have been:
- Corporates are here to stay.
- Corporate ownership will continue to grow.
- There are some good corporate buyers who treat their staff and DVMs well and there are others that do not.
- Corporates will go the de novo route when they can’t find a practice in an area they want to have a concentration.
- Valuations will begin to trend down in the not too distant future.
The number of corporate buyers in the market and the supply of practices corporates want all play into this. Whether good or bad, the corporate veterinary practice is here for the long haul.
This is just meant as an educational document and we are not promoting this or any other corporate buyer.
From the Horse’s Mouth
Each year one of the largest corporate veterinary practice owners holds a one-day conference exclusively for veterinary practice brokers. At the conference, they discuss, amongst many other things, how their company is different than other corporates, how they value veterinary practices, and trends in corporate buying. It’s an interesting meeting to get the “state of the union” from a corporate buyers’ perspective. I wanted to share with you some of the notes I took and give you my thoughts on a few of their points.
- Corporates are continuing to expand. Not only in the U.S. and Canada, but this corporate buyer has begun acquiring practices in Australia and New Zealand.
- Some corporates have begun to do de novo practices. They are filling the gaps where they don’t have ownership of a practice with a startup practice. If you can’t buy it, build it!
- The DVM retention rate for the industry is 62%. A particular corporate claimed to retain DVMs at a rate of 82.5%. They said it’s due to how they treat the DVM and staff leaving everything as close to the same as possible. They also give the owners a piece of the pie.
- There currently is a shortage of DVM associates. They are putting a heavy effort towards recruiting DVMs at Veterinary Schools as well as the general public.
- This corporate has three commitments – Wellness Plans, Dentistry, and Fear-Free Clinics.
- They expect the current acquisition trend to continue for the next three to five years.
- Valuations are different among the various corporate buyers. Their add-back for DVM salaries is 20%. Another corporate buyer uses 22%. That can make a big difference in the purchase price on a large practice. Another example is adding back an office manager salary. That can vary significantly amongst corporate buyers. These are just two of ten examples of the differences they provided.
- Valuations have gone up over the past 5 years. Five years ago, they were buying practices at 4x to 5x EBITDA. They are now acquiring practices at a broader range of 6x to 9x EBITDA.
- They believe valuations are currently at their high peak with the expectation that they will start tapering back down to the 4x to 5x EBITDA range they saw five years ago.
- General Veterinary Practices that are in the sights of corporate acquisition teams represent 50% of all General Veterinary Practices. Corporates currently own 30% of all of these practices. The expectation is that once total corporate ownership hits 50%, the acquisitions will taper off dramatically. Corporates then may turn to specialty clinics. Note, we’re already seeing this in the marketplace. They also may focus on de novo practices.
In summary, the presentation confirmed what our thoughts have been:
- Corporates are here to stay.
- Corporate ownership will continue to grow.
- There are some good corporate buyers who treat their staff and DVMs well and there are others that do not.
- Corporates will go the de novo route when they can’t find a practice in an area they want to have a concentration.
- Valuations will begin to trend down in the not too distant future.
The number of corporate buyers in the market and the supply of practices corporates want all play into this. Whether good or bad, the corporate veterinary practice is here for the long haul.
This is just meant as an educational document and we are not promoting this or any other corporate buyer.