As we talk to buyers and sellers, we continually clear up misconceptions around the buying and selling of veterinary practices. In this short article we tackle four buyer-side and four seller-side myths surrounding the practice transition process and provide our experience-based rebuttal.
First up, buyer myths:
- Myth: “I can’t get financing because I have too much school debt.”Rebuttal: Buying a practice allows you to pay off that debt – the practice will generate cash to pay off your school debt and any loan for the practice.
- Myth: “I will have to work 60 hours/week.”Rebuttal: New practice owners typically work 40-43 hours/week.
- Myth: “I need more experience.”Rebuttal: Trust in your education and training – you know more than you think you do. Typically, a veterinarian is ready to purchase a practice three years after graduation.
- Myth: “I don’t have any business experience.”
Rebuttal: You will learn along the way with the help of mentors and staff. People don’t have experience when they have a baby, but they do it and it all works out in the long run.
Next, on to seller myths:
- Myth: “My practice would be great for a married couple to own as a team.”Rebuttal: While there are some married veterinarian teams, it is a small pool of buyers. In addition, many married couples do not want to work together for a variety of reasons ranging from financial (e.g., not having their family 100% dependent on one source of income) to relationship (e.g., not being able to ‘leave the job behind’).
- Myth: “I lost an associate and so my gross is down this year. Can’t my practice value be based on last year’s gross?”Rebuttal: Fluctuations in business value are common but you can’t cherry pick a time period to use for the business value. For example, the stock market goes up and down daily but the only price you get for a stock when you sell it is the current price. A sound financial analysis of a practice considers three years, so not having an associate for an extended period will impact the value of your business, but the impact can be tempered by time.
- Myth: “I have heard that corporate buyers will pay me more than gross, even for practices less than $1M.”Rebuttal: Corporate buyers are typically interested in larger practices, and they don’t always pay more than gross. Corporate buyers look at facts and figures and base their offers on sound financial analysis of individual practices, but also consider how bad they want the practice in their portfolio. General rules of thumb can lead to incorrect expectations.
- Myth: “The buyer should assume the cost for my leased equipment because they will be able to use it and make money from it.”Rebuttal: Typically, leased equipment is paid off by the seller at the transition, but it is possible for a buyer to assume equipment leases. If the buyer assumes any leases, especially lab equipment and reagent leases, there is an increase in practice expenses which may result in a lower selling price for the practice.
Buying or selling a practice is a significant life event and being knowledgeable about the process is important. An experienced practice broker can help you separate fact from fiction as you navigate the process.
Kurt D. Liljeberg, DVM
Total Practice Solutions Group – Great Lakes
Address: 33166 Lake Road | Avon Lake, OH 44012
Office: 440-933-4522
Fax: 866-813-3639
Cell: 440-670-6777
Email: [email protected]