Practice Transition Market Trends
By: Rod Johnston, MBA, CMA, Owner and Founder
Over the years, the market for practice transitions has changed. Sellers sell for different reasons than they did ten years ago. Buyers make their buying decisions much differently than they did ten years ago. And, the veterinary industry has changed in a number of ways over the years as well.
When we first started selling practices approximately 20 years ago, the primary reason veterinarians told us they were selling was because they were ready to retire. The average age of retirement back then for a veterinarian was 64 years old. The most recent survey by the American Veterinary Medical Association has the average retirement age for a veterinarian of 70. Veterinarians are selling for reasons besides the fact that it’s time to retire. More and more, we see veterinarians retiring for three primary reasons:
- Staffing challenges – Sellers are having to deal with a revolving door of staff. With the staffing shortage because of the covid shutdowns, staff members are being recruited by other offices. Staff members leave for a little more money to go to work at an office nearby.
- Stress – Veterinary practice owners are complaining that they are working longer hours and more days than they were five or ten years ago. This is due to shortage of not only staff, but also a shortage of veterinarians. Some practices have closed. Corporates are paying associates bonuses and higher salaries. This is causing associates to leave the mom and pop veterinary clinics to go work for more money at a corporate office. Owners are having to work six days per week to keep up with the demand for veterinary care. Pet ownership and consumer spending on pet care is also increasing.
- Compassion Fatigue – This is the psychological, physical and emotional impact of constantly caring for others, often through stress and trauma. Veterinarians are constantly caring for animals and their owners. Veterinarians often work long hours and 5 or 6 days per week. This gives them little to no time to take care of themselves. The result is the stress with no release takes its’ toll and causes compassion fatigue.
Practice Buyers have also evolved. Fifteen years ago, a potential buyer would sign a non-disclosure agreement, take a look at the practice numbers, and then visit the practice. They would typically then decide to move forward or not. It was pretty quick and simple. The buyers would be an associate who had been out of school for from 2 to 5 years. They would focus on the numbers and the location and might bring in an accountant to review the tax returns.
Buyers nowadays are not only those who have been out of school for a few years, there are also corporate’s looking at larger practices. There are more veterinarians moving from other states to buy practices as well. A potential buyer quite often has someone representing them. It may be a buyer’s representative or an accountant who does more than just look at the profit and loss of the practice. Buyers scrutinize not only the numbers, but the technology in the practice as well. Corporate’s do a complete physical on the practice.
Good practices in good locations still sell reasonably fast. Good practices are those that collect $700,000 or more with overhead below 70% and the practice technology and décor is up to date. Good locations are in populated areas that are desirable to the public in general. Metropolitan cities and practices within 30 minutes of these areas are good locations. Locations in other urban areas will also sell quicker than rural areas. Practices in rural locations do sell. They just take a little longer than normal.
Whether you’re thinking about selling, or thinking about buying a practice, we’re here to help. Contact one of Omni’s Transition Consultants to steer you in the right direction.