Here’s how to successfully sell your veterinary practice as well as ensure a happy handover to its new owners. By Merran White
Advance-plan your exit
To get the return on your practice you deserve takes “time, attention and planning—ideally, years before you sell”, says Yolanda Gerges, of Melbourne specialist consultancy The Peak Performance Practice. Most buyers look at your last three-to-five years, she says, so advance planning pays off. “Ask yourself, ‘Who’s most likely to buy my practice and do I have my ducks in a row to [achieve its] value?’.”
Of course, the value potential buyers see in your practice depends on their standpoint, Gerges notes. “A corporate may look for the proven track record of a ‘hands-off owner-as-manager’, efficient workflows, [and] other sources of revenue—or the potential for this”; a fellow vet may be more concerned about “good, solid staffing” and whether they have the skills to provide the services your existing practice does.
“Generally, when our clients come to sell, we find that those who have good systems in place and can prove their potential—solid new patient flow; service mix; good patient retention; healthy, active patient numbers; solid profit margins; growth year-on-year—have greater ‘saleability’,” she says.
Engage a professional
Dr David Ogden, who recently sold his suburban Sydney practice, says engaging a pro to help him sell was the smartest decision he made.
The broker, says Dr Ogden, helped with “all sorts of legal issues” and “pretty much handled everything”, including all negotiations.
Hiring a professional salesperson has many advantages, says Simon Palmer, managing director of Sydney-based Practice Sale Search. “There’s emotion involved when you’re selling ‘your life’s work’; an agent gives a buffer between buyer and seller, which allows for objectivity.
Gerges concurs a third-party intermediary “can diffuse the emotion and subjectivity—but be smart about whether they’re a good fit for your practice”, she says. “Your broker needs to be able to sell the inherent value in your practice, outside of [merely] assets, calculation of goodwill or a rule-of-thumb percentage of EBIT [earnings before interest and taxes].”
Keep things objective
Often, someone involved in the clinic will be keen to buy the business. In many ways this is a best-case scenario: it ensures continuity for staff and clients, and may mean you can time transfer of ownership to suit both parties.
An ‘in-house’ buyer will know your practice intimately—but will also be aware of any downside, and might feel entitled to ‘mate’s rates’. While it’s tempting to conduct the sale without outside help, working with professionals increases the likelihood of a win-win.
“What I’d remind anyone thinking of selling to someone they know is that a buyer offered ‘exclusivity’ is complacent, whereas one with competition has to put their best offer forward in a timely manner, or miss out,” says Palmer.
Don’t slacken off
If you’re ready to sell, it’s natural to want to work less—but this is the worst time to take it easy, cautions Palmer. “Don’t take it easy. Keep your effort and work hours up for that last year because anyone buying a vet practice is judging it on your last couple of years. It’s a shame to let fatigue compromise what you’ve built over decades.”
Put your ducks in a row
Before putting your practice on the market, help buyers see it in its best possible light. “Well-run, profitable businesses that have the compliance boxes ticked are the most attractive to acquirers,” says the Australian Veterinary Association (AVA) president Dr Paula Parker.
Key things prospective buyers look for, she says, include:
- Businesses that can demonstrate “consistent and sustainable profits [with] growth potential”;
- Those with good risk management—“when you acquire a business, you also acquire all the risks”;
- Those that “have all the ‘compliance’ boxes ticked”, especially regarding HR and workplace health and safety—“this can sometimes be boring, tedious work, but it can bring us massively unstuck if it isn’t done”;
- Businesses that have “depth in their teams, with committed and happy employees”.
Build a ‘due diligence pack’, comprising “financial statements, compliance records, information of the team, KPI performance, strategy and brand articulation documents and further detail on assets, particularly property and equipment”, Dr Parker advises. “Prospective buyers will look for information on your business to complete their due diligence.”
Adjust your expectations
Dr Ogden attributes his quick, successful sale to realistic expectations. “What a seller wants and what buyers are prepared to pay are two very different things and one of the biggest problems is that often, sellers overvalue their practices,” he says.
“I wasn’t greedy; all I needed was enough to walk away with. I knew roughly what the premises was worth, and had a ballpark figure for the business itself. And those two figures added together was exactly what I got.”
Have a transition plan
“Sometimes, prospective purchasers think they need the vendor on site for a smooth transition—and mostly that’s the case,” says Gerges. “However, if you’re ready and eager to get on with your next chapter, protracted time frames may not be a win-win”—in which case, it’s important to ensure your practice is “as turnkey as possible”.
Gerges lists the following:
- Having documented policies and procedures; handover checklists; transparent, organised and easy-to-access information—such as all your passwords and access details in one spot—in place;
- Introducing the new owner to key suppliers and resources;
- Facilitating a positive handover with your team and the new owner
Stay on to smooth the transition
Continuing to work part-time in the practice can help seal the deal. Most new owners are more than happy for you to retain a place in the practice, at least for the transition period.
“Most buyers like the seller to stay on, even if it’s a day a week,” says Palmer. “They want that continuity—and for the community to see that continuity.”
Know when to let go
“When the old owner stays on, they can become a hindrance without even knowing it; sometimes, old habits die hard,” Gerges explains. “In such a dynamic, staff can get confused or frustrated, as does the new owner. So be clear about job roles, preferably via written agreement.”
While Dr Ogden was happy his staff kept their jobs post-sale, he admits the transition was a challenge. “Initially, it was confronting to see the changes though most were long overdue,” he recalls. “But the whole point of me selling was to allow the place to survive.”