[5 Steps] - How Do I Sell My Veterinary Practice?
Animal lovers are a special breed of humans, so if you find it hard to sell a veterinary practice, you’re not alone.
The decision is challenging, whether you feel like the time has come or were forced to sell. And that’s why you would have a ton of questions about the process.
In this blog post, we'll help you understand the big picture of selling a vet practice and how to ensure that it's right for everyone involved.
TL;DR - How to Sell a Veterinary Practice
Are you ready to move on from your vet practice? We’ll discuss each required step in detail throughout this post. But here’s what it takes to sell with the least hassle and make the most money:
Value your veterinary practice.
Make your practice shine.
Tell your story.
Take time to find the right buyer.
Negotiate for the best outcome.
Are you looking for tailored advice on selling your veterinary practice? Get in touch with Exitwise, and we’ll help you build and manage your dream M&A (mergers and acquisitions) team. These expert investors, accountants, and lawyers will guide you to optimize your practice’s valuation, navigate legal complexities, and negotiate favorable terms.
How to Value a Veterinary Practice
How you value your veterinary practice determines the kind of deal you’ll get. So here’s what you need to do:
Start with the basics: Look at your annual revenue, profit margins, and growth trends.
Assess your assets: Analyze tangible assets (equipment, real estate, etc.) and intangible assets (staff expertise, brand reputation, etc.)
Use a multiplier: Apply an industry-standard multiplier to your EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) for a ballpark figure of your valuation.
Factor in the unique: Identify what makes your practice special, which could significantly impact its value.
Seek expert insight: A valuation expert can establish the actual value of your practice and help you leverage its unique qualities.
What Multiple of EBITDA Do Veterinary Practices Sell for?
EBITDA is your earnings before interest, taxes, depreciation, and amortization. Veterinary practices can sell for a range of multiples based on their EBITDA, typically between:
10-13x for smaller, single clinic units
18-20x for large, multi-unit platforms
A range of factors, such as location, size, profitability, and growth potential, influence the magic number.
Cozy neighborhood clinics are on the lower end, while bustling animal hospitals with a solid growth record snag higher multiples.
How Much Are Corporations Paying for Veterinary Practices?
Corporations seek vet practices with strong EBITDA margins. While they’re willing to pay a premium, the amount varies from a few hundred thousand to several million dollars. Financial performance, growth potential, and strategic fit within their portfolio dictate the numbers.
Often, the price tag includes a mix of upfront cash and potential future earnings based on the practice's continued performance.
So, if your clinic has net margins of 10-25%, a solid customer base, and a knack for growth, corporations may be willing to pay top dollar for it.
DID YOU KNOW?
Mars, Inc., the famous chocolate and animal food producer, is the largest holder of veterinary practices in the U.S. After its recent purchase of Veterinary Centers of America, it has over 2,000 clinics and 50,000 veterinary professionals.
Veterinary Practice Valuation Multiples
Veterinary practice valuation multiples reflect how much your practice could be worth. Appraisers can choose to set these multiples in relation to a few financial metrics, such as:
Revenue multiples: Sometimes, practices are valued based on a multiple of their annual revenue. This approach is helpful in rapidly growing practices where current profits might only partially reflect potential. Revenue multiples vary as follows:
1.6x-2.9x for general practice veterinarians
1.4x-2.7x for emergency clinics
2.2x-3.3x for exotic animal clinics
2.1x-3.3x for laboratory clinics
Profit multiples: Another angle is to examine profit, something buyers prefer because it reflects a practice’s actual profitability. The common metric for profit valuation is EBITDA, which we have already explained above. It ranges from 10x to 20x, depending on the practice's size.
The choice of multiples depends on the nature of your practice, its market, and what buyers are most interested in.
Is your practice thriving? Do you have a solid customer base and diversified services? Is it in a good location? All these show potential for long-term revenues, allowing you to command higher revenue multiples.
How to Maximize the Value of a Veterinary Practice
There are different ways to maximize the value of a veterinary practice, but the approach can vary based on your timeline.
Are you in a hurry to sell?
Consider the following pro tips to make your practice more appealing to potential buyers immediately:
Tidy up: First impressions matter. A clean, well-maintained facility can instantly boost appeal.
Organize financial records: Ensure your financial documentation is in order, clear, and readily available for prospective buyers.
Streamline operations: Quick operational efficiencies, like improving appointment scheduling or inventory management, can show immediate cost savings.
Promote high-margin services: Focus your marketing efforts on your most profitable services to boost short-term revenues.
Do you want to increase your practice’s value substantially?
Take more time to implement the following strategic, long-term measures:
Invest in technology: Upgrading to the latest veterinary tech can improve efficiency and patient care, making your practice more attractive in the long run.
Expand services: Developing new services or specialties can open additional revenue streams and attract a broader client base.
Build a strong team: Investing in your staff through training and creating a positive culture can improve service and reduce turnover, enhancing the practice's value over time.
With the right strategies, you can obtain a correct, maximized veterinary practice valuation. You can involve a merger and acquisition (M&A) advisor for additional support.
At Exitwise, we have a solid track record of supporting our clients in hiring the best M&A experts, proven by our success stories. Contact us, and we’ll help you write a similar story for your practice.
How to Sell a Veterinary Practice
The steps to a successful vet clinic sale are not always obvious. It's a mix of doing the right things at the right time and putting heart into it.
Below, you’ll see a breakdown of the process and discover what it takes to hand in the keys with confidence and pride.
Step 1: Get Your Value Right
Start by figuring out what your veterinary practice is worth.
Aside from the money you make, think about what makes your place unique. Is it your loyal customers, top-notch equipment, or a skilled team?
Then, go beyond the obvious. For instance, your practice’s location could be a goldmine if it’s in a rapidly growing community or underserved area.
Also, consider your practice's online presence and reputation. A solid online review profile or an engaged social media following can significantly enhance value.
Considering all these, you can estimate your veterinary practice’s value using a valuation calculator.
Step 2: Make Your Practice Shine
Buyers love to see clean records and a well-run office. It shows them you’re serious. So, make sure everything looks good and is in order. Clean up the clinic and organize finances.
Instead of worrying about major renovations or expensive upgrades, you can try some smaller, strategic investments like:
Upgrading your waiting room furniture
Improving lighting to boost the overall ambiance
Revamping your website to be more user-friendly and upload faster
Asking an accountant with experience in veterinary practice sales to review or prepare your financials.
Step 3: Tell People Why Your Practice Rocks
When you’re ready to sell, tell buyers why your practice is worth their investment. Highlight what’s unique and try to appeal to buyers looking for a business with heart and soul, not only good numbers.
Do you offer a particular service? Are you known in the community for something extraordinary? Make sure your ads or listings showcase these stories. Use photos, testimonials, or short videos to make your practice stand out among the standard sales listings.
Step 4: Find the Right Buyer
As much as you want to find someone who cares about your practice and will keep your legacy going, you mustn’t sell yourself short. Use your network, or maybe get help from a pro to find the type of buyer you’re most interested in.
Tip: Consider buyers outside the traditional veterinary circle, like business-savvy individuals passionate about animal care. They can bring fresh perspectives and might be more interested in maintaining your legacy rather than making quick changes for profit.
Step 5: Talk Terms Smoothly
When you’re ready to negotiate, think hard about what matters to you. Is it the practice’s reputation for excellent care? Is it making sure your team is okay? Knowing your top priorities helps you strike a deal that feels right.
Expect the process to involve negotiation, but do your best to avoid the delays that could kill your sale. You’ll discuss price, keeping your staff, and maybe how the practice’s name lives on.
Having a good lawyer by your side will make this step go smoothly. An experienced lawyer can make sure the deal respects what you care about.
Common Pitfalls to Avoid While Selling a Vet Clinic
The devil is in the details. Beyond setting a price and finding a buyer, some subtleties can make or break the deal.
Here are five common pitfalls to avoid if you want to seal the deal successfully and with your peace of mind intact:
Undervaluing your practice: Not fully assessing the worth of your practice, including intangible assets like client relationships and brand reputation, can lead to setting the price too low.
Not organizing your financial records: Disorganized financial statements can deter buyers or lead to lower offers.
Neglecting the clinic’s appearance: A cluttered, outdated facility can turn potential buyers off before they even consider the financials.
Ignoring staff concerns: Not involving or reassuring your team about the sale process can lead to unrest and a drop in service quality, which can spook buyers.
Rushing the process: Hasty decisions or trying to sell too quickly can lead to missed opportunities for better offers or terms. Potential buyers may also question your rush, wondering if you’re using a hasty sale to hide potential underlying issues with your clinic.
Frequently Asked Questions
Before going all in with selling your veterinary practice, check out the answers to the following frequently asked questions:
What Documents Are Needed to Sell a Veterinary Practice?
You'll need financial statements, tax returns, lease agreements, and employee records to sell a veterinary practice. Also, prepare an inventory list and any existing client contracts, and use a selling checklist as a guide.
What Are the Legal Considerations When Selling a Veterinary Practice?
Legal considerations include ensuring compliance with local and state veterinary regulations and transferring or terminating the lease and contracts. Confidentiality agreements to protect client and business information are also necessary.
What Role Do Brokers Play in Selling a Veterinary Practice?
Brokers can offer valuable expertise in valuing your practice, marketing it to potential buyers, and negotiating terms. They act as intermediaries, facilitating the sale process.
How Can I Ensure a Smooth Transition after Selling My Veterinary Practice?
To ensure a smooth transition, you should establish a detailed handover plan with the buyer, including a period of training or consulting. Communicate openly about the coming changes with everyone involved, notifying clients and actively supporting your old team and new owner during the transition period.
What Tax Implications Should I Be Aware of When Selling a Veterinary Practice?
When selling your practice, be aware of capital gains tax on the sale price versus the book value. Consulting with a tax advisor can help minimize tax liabilities and ensure compliance.
Conclusion
By now, you’ve learned you must make your practice shine, accurately value it, and create an outstanding listing to generate attractive offers.
That’s a tall order that requires multiple skills. To avoid making mistakes that might cost you dearly, you should find the right people to guide you through the sale process and support you in making the most of it.
At Exitwise, we’ve been down this road countless times. Connect with us, and we’ll help interview, hire, and manage your M&A dream team to sell your veterinary practice under the best terms.
