Seller Articles

Whether you are approaching retirement age or just thinking about a transition, there are several things you can do to prepare your practice for sale.  Doing these things may help eliminate headaches, increase your sales price, or reduce your costs.  Here are a few tips:

1.  Assess your equipment.  Upgraded practices sell faster.  If you are more than five years away from retirement, I recommend a few upgrades such as digital x-rays, recover your chairs if needed and freshen up the paint.  If you’re closer than five years, you will not get the tax benefit of major upgrades. Just stick to updating the paint and carpet.
2. Clean up your accounts receivable.  Reimburse patient credits, collect old accounts and keep the A/R current.
3. If you have an associate, make sure you have an Associate Agreement with a non-compete.
4. If you have an employment agreement with your corporation and you are a C-Corporation, you may need to terminate yourself a few years before retiring.  Consult your tax accountant.
5. Consult your financial advisor and tax accountant.  How much do you need to retire?  How much do you have?  What are the tax consequences?
6. Get a practice valuation to see what proceeds you will get from the sale.
7. Be realistic in the time it takes to sell.  In remote areas, it can take a year or two.  Metro areas, much less.
8. Keep your production up as you near retirement.  I see dentists slow down all the time in their last few years.  Work the same number of days.
9. Assess your staff.  Do you have too many staff?  Do you have one that should have been let go seven years ago?
10. Have a practice assessment performed by a qualified consultant.  Many will do it for free or a small fee.  This may help show you some areas to improve over the next few years.

By focusing on these items in the coming years as you near retirement, you will avoid having your practice production and thus the price of your practice go down in your later years. Call me for a free consultation. I would be happy to take a look at your practice and give you my thoughts.  Or, if you are thinking about transition right now, we have a database of buyers looking in your area.
​877-866-6053

I have heard from other practice transition consultants, bankers and attorneys who are telling me they are busier than ever.  We, Omni Veterinary Practice group, are experiencing the same thing with more listings and more practices under contract than ever before.  So, why are so many veterinarians deciding now is the time to sell?  I believe it’s for a number of reasons:

1. Interest Rates are rising.  Buyers have had the luxury of living through ultra-low interest rates over the past five years.  Historically, interest rates on practice acquisitions have been around 7% to 8%.  The last five years, we’ve seen them dip down to an average of 3.8% and one bank offering loans at 1.89%!  Crazy rates!  Buyers are now seeing the rates creep back up.  Current rates are around 5% to 5.5%.  This is scaring some buyers into acting on their desire to own a practice.  They feel if they wait, interest rates will be back to the 7 to 8% rate soon.
2. Baby Boomers are reaching their peak.  Baby boomers doctors make up the largest portion of the veterinarian population.  Approximately 50% of veterinarians are now over the age of 55.  The largest portion of the baby boomer population is now hitting their mid-60’s.  These doctors are now selling and retiring.  Along with this, as we age life events, such as health issues, or even death happens.  We are seeing sellers with health challenges where they cannot work at the same pace as they were before, or they cannot work at all.
3. Veterinarians tired of being Practice Owners.  Several of our current listings are from doctors in their 40’s or 50’s who are just tired of being owners.  Managing staff and managing expenses such as rent, employee benefits, etc., have caused owners to rethink their dream of owning a practice.
4. Equity Harvesting.  Veterinarians at the peak of their production in their practice are deciding to sell their practices and get the equity out before production goes down.  Many are selling to either small groups or investor veterinarians who allow the seller to not only harvest their equity but also to work back in the practice.  A perfect storm in most situations.

Whether you fit into any of these categories or even if you are in the middle of your career, you owe it to yourself and your family to have a transition plan in place.  Life events happen.  We meet with veterinarians of all ages to discuss their career plan and look at different options of how to sail into retirement, or even sell and work back. We put customized plans in place and offer solutions in the event the doctor needs to sell quickly.

So, where are we now?  In an article I wrote for the Washington State Academy of General Dentists called The Perfect Transition Storm, I explain that we’re experiencing an anomaly in the practice transition market.  I have been working with dentists since 2004 helping them transition into or out of a practice.  There have been times when interest rates are good, but there are not many buyers.  There have been times when the economy was doing well, but not many sellers selling their practices.  But, in the past almost 15 years, I have never seen a time when everything aligned so well. Here’s how this adds up:

1.  The transition market is still a sellers’ market.  There are not many “good” practices on the market.  Good practices are producing over $600,000 per year with 65% or less overhead and at least 10 to 20 new patients per month.
2. Banks love dentists.  The default rate is below .0125% for dental practices.  More and more, banks have been seeking to lend to dentists to buy practices.  Recent offers from some banks include 1.78% interest rate for the first two years adjusting to 4.9% for 10 years after that.  The average rate currently is 5.125% on a 10-year term loan.
3. The economy is strong.  Many dentists I talk to tell me that they are busy.  Patients are employed and either has the funds or have insurance to get theirs and their family’s dentistry done.
4. Competition for the good practices is up.  We are starting to see corporate practices such as Heartland come into the Northwest and other markets seeking out practices grossing over $800,000 in collections.  Small group practices are also out there looking for good practices.  We also have solo buyers looking to acquire their first practice.
5. Practices values are up due to demand for good practices.  A typical practice may sell for 70% to 75% of collections in an average market.  We’re now selling practices for 5% to 10% higher, mainly due to demand.

Mesh this all together and you get a formula for a good transition market.  There’s high demand for good practices.  Interest rates are low.  Practice values are above normal ranges.  If you are thinking about selling within the next 3 to 5 years, it would be prudent to sit down with your financial advisor, broker, or other advisor to take a look at your situation.  Timing can be everything and good markets don’t last forever.  We would be happy to buy you a cup of coffee and discuss your situation and help put a plan in place to make sure you are in the best position for when it’s time to transition. Contact us today! 877-866-6053.

Freshen up your practice – Buyers like to see a fresh, clean and somewhat updated practice.  That does not mean you need to do a complete remodel and spend a $100,000.  It does mean you need to take a look at your flooring and your walls.  If you have large holes in your wall or your flooring was leftover linoleum from World War II, you should fix the holes and put in new flooring.  Talk to your landlord, sometimes they will help with the cost.  If you have equipment that is held together by the “fix everything” duct tape, contact your local equipment rep and have it fixed.

Update your technology – We run into an occasional practice owner that considers indoor plumbing as new technology.  If you are in that category, or if you have not done any technology updates since Richard Nixon was president, you should look into digital x-rays and other technology that will not only appeal to buyers but will help you increase your production in the practice.  Contact your equipment rep for the latest and great technology.

Financial Review – Have a meeting with your financial planner or advisor to see where you currently stand with your retirement portfolio.  This will help determine how soon you can possibly retire, how much more you may need to put away to retire and/or how much you need to get out of your practice sale in order to retire. 

Practice Valuation – You should get a valuation done on your practice.  This will help your financial planner and you see where you stand with your entire portfolio.  Some doctors rely heavily on their practice sale to be a piece of their retirement nest-egg, so if you don’t know what your practice may be worth, you don’t know what size of nest-egg you have.  Call Omni for a free snapshot valuation. 

Clean up your books – If you have been aggressive in running expenses and other items through payroll, you should work on making sure the books are clean.   If you have multiple practices, but run all of your income and expenses through one tax id number, you should ensure you can separate the income and expenses of both practices.   Meet with your CPA to analyze your numbers and see if you are in line with industry averages.

Grow your practice – One of the worst things you can do is take your foot off of the gas pedal.  If you want to maximize the value of your practice, keep production at least level with prior years.  A growing practice sells quicker and easier than a dying practice.   If you don’t know how to grow your practice and make it more sellable, contact a consultant, or have a practice assessment done.

These are just a few items that you can do to help prepare your practice for a sale.  If you work on these items now and over the next 3 years, you will maximize your practice value, enlarge your pool of potential buyers and be able to sell your practice quicker.  ​

1.  Assess your equipment.  Upgraded practices sell faster.  If you are more than five years away from retirement, I recommend a few upgrades such as recover your chairs if needed and freshen up the paint.  If you want to sell in less than five years, stick to the paint and carpet because you will not get the tax benefit of major upgrades.
2. Clean up your accounts receivable.  Reimburse patient credits, collect old accounts and keep the A/R current.
3. If you have an associate, make sure you have an associate agreement with a non-compete.
4. If you have an employment agreement with your corporation and you are a C-Corporation, you may need to terminate yourself a few years before retiring.  Consult your tax accountant.
5. Consult your financial advisor and tax accountant.  How much do you need to retire?  How much do you have?  What are the tax consequences?
6. Get a practice valuation to see what proceeds you will get from the sale.
7. Be realistic in the time it takes to sell.  In remote areas, it can take a year or two.  Metro areas, much less.
8. Keep your production up as you near retirement.  I see veterinarians slow down all the time in their last few years.  Work the same number of days.
9. Assess your staff.  Do you have too many staff?  Do you have one that should have been let go seven years ago?
10. Have a practice assessment performed by a qualified consultant.  Many will do it for free or a small fee.  This may help show you some areas to improve over the next few years.

By focusing on these items in the coming years as you near retirement, you will avoid having your practice production and the price of your practice go down in your later years.  Call me for a free consultation.  I would be happy to take a look at your practice and give you my thoughts.  Or, if you are thinking about transition right now, I have a database of buyers looking in your area. 877-866-6053 ext. 2.