Selling your veterinary practice: What are intangible concerns?
When you start thinking about selling your veterinary practice, there are two major categories of interest to balance: tangible and intangible. “Tangible” refers to the financial return that you receive for your equity and the terms by which it is paid to you. “Intangible” refers to all of the other non-financial factors that need to be considered in the sale of your veterinary business. It is easy when talking to potential buyers for your practice to get tunnel vision towards one category or the other, but both are very important when trying to decide which buyer is best for your practice. Once you’re no longer the owner of your practice you no longer can control what happens there, so doing your due diligence on a prospective buyer before signing a purchase agreement is important. Here are a few categories of intangible areas of veterinary practice sales that every seller should pay attention to:
What is the buyer’s motivation?
Different buyers will have different reasons for being interested in purchasing your practice. Some buyers are simply interested in adding your practice as a static investment to a large portfolio of veterinary practices and may not be interested in giving your practice much or any individual attention after it is purchased. Other buyers may be looking to build up the valuation of your practice over a shorter period of time and flip it for a profit to another buyer in a few years, passing it along to someone else that you won’t be able to vet. Finally, the ideal buyer sees your practice as a long term vehicle to grow slowly and sustainably over time and to be a platform from which to provide excellent medical care to your community. Asking “why?” is an important question when trying to figure out how a potential buyer will treat your practice and your team members after they purchase it.
What is your buyer’s philosophy on quality of care?
First: Do they even have one? Some of the more aggressive consolidator-type veterinary corporations are so driven by the investment frenzy to acquire practices that they’ve lost (or never had) focus on what really matters: veterinary hospitals exist to provide excellent medical care to pets. When it comes to individual buyers, every veterinarian practices differently and you want to make sure that the future owner of your clinic will maintain similar standards of care as those that your clients have come to expect at your clinic. Finding the right match in clinical philosophy is important.
Will the buyer change any of the client-facing aspects of the practice?
Buyers may be looking to rebrand your hospital (especially “branded corporates” who want their name on the building!), change the client experience (potentially for the better...this doesn’t have to be a bad thing), or otherwise change the way that your practice looks, feels, or communicates with clients. A savvy buyer should be asking you what does and doesn’t work with your client base. You have a unique perspective and knowledge of the clients who have been coming to you for years and a smart buyer should be interested in learning from you!
What will happen to your key staff members?
As a practice owner, you likely feel at least some degree of loyalty and responsibility to the hardworking employees who helped you build your business into the sale-worthy practice that it is now. It is important to discuss the future of these employees prior to sale to ensure that the buyer understands who the business’ key employees are and why it is important to make sure that they continue to be retained and well-compensated.
What will your post-close relationship with the buyer be?
Different buyers will have different expectations for you post-close. Many buyers, especially corporate buyers, will expect you to sign a multi-year employment agreement with them that will turn you into an employee of the corporation for that period of time. This may leave you feeling helpless as changes are made (that you may disagree with) to your practice around you. Partnership-style acquisitions can mitigate this concern by leaving you with a degree of control or say in decision making during the years that you continue working before retirement.
Are corporate buyers bad? Are individual buyers good?
The answer is a lot more nuanced than broad labels suggest: Any buyer can be good or bad regardless of whether they’re “corporate” or an individual. Not all individual buyers are willing and able to do what is best for your practice. As you’re well aware as a practice owner, being a great veterinarian doesn’t mean that someone is a great business owner and vice versa. Not all veterinary corporations are cut from the same cloth either. There are many veterinarian-led corporate groups now that are dialed in with the needs, priorities, and responsibilities of veterinary hospitals and have the resources at their disposal to enact significant positive change that independently owned practices may not be able to achieve.
At AVP we care about aligning with your practice in more than just numbers. We’re committed to the practice of excellent quality of care and a philosophy that matters of medicine take precedence over matters of business. If you’d like to discuss your exit strategy options and how a partnership with AVP may align well with both your tangible and intangible goals, please don’t hesitate to reach out to me at bill@associatedveterinary.com