Veterinary Practices for Sale: 5 Questions to Ask Before You Commit

By First Financial Bank

It’s time. You’ve been working for someone else – and now you are ready to be your own boss, with your own practice. You might have even checked out a veterinary clinic for sale. But before you start imagining your name on the sign above the door, there are some answers you need. Here are five of the big questions to ask – and the answers you, your partners and your lenders need to know.

1. Why are these veterinary practices for sale?

There are many good reasons for a veterinarian to put a practice up for sale: she has decided to retire to tropical Hawaii and sell her practice in snowy Minnesota; he has accepted a full-time faculty position at a vet school; etc.

But there can also be many not so good reasons they are trying to sell:

Practice is stagnant or losing clients because of region’s decreasing population &/or economic depression
New low-cost or better marketed competition in the neighborhood is attracting any new client prospects
Incoming revenue is not sufficient to cover operating costs and/or needed infrastructure upgrades – etc.

Get at the real answer is crucial. If they were failing at the business of veterinary medicine, you need to understand why – and if you applied new or better approaches, can you turn it around.

2. What is the actual value of a practice?

There are several facets to estimating the value of a practice. There are common measures that are similar to small businesses in other industries: past performance; recurring revenue streams; fixed assets; gross/net revenue history; salary history for owner and staff; and, inventory. What sets it apart are elements such as:

Practice size – larger footprint (multi-vet and treatment area clinics), typically are of higher value.
Client-type – small animal or “pet” practices are potentially more valuable than large animal practices.
Location/market opportunity – an urban and/or heavily populated suburban area tends to have greater potential
Client retention rate – # of pet owners returning with same and/or additional pets for recurring care.

Know the numbers…

3. What’s the competitive landscape look like?

Annual revenue in the industry is growing year over year – but so is the competition. Exploring and analyzing the past, current and potential competition for the practice can help you identify whether a vet hospital for sale can survive and thrive with the right business savvy. You also need to assess what it will take to compete with marketing and outstanding care to succeed.

4. What is the practice doing well today – or could be improved?

Is the clinic infrastructure well-laid out for efficiency and workflow? Has it been well-maintained and have great equipment? Is there an office manager with great skills that would like to transition into a role with the new practice owner? A well-designed marketing plan in place that is leveraging the growing number of pet owners moving into the neighborhood? These types of things can all be good for you as the new owner – but only if they survive the transition.

But what you may also inherit could be the results of poor management or business practices: crumbling physical infrastructure or equipment; poorly negotiated contracts and leases that have an impact on the acquisition; and/or a bad reputation in the marketplace. You’ll need to determine which negatives can be negated – and which ones are beyond your hard work and skills.

5. Which veterinary clinic for sale is the best one for you?

This may be the most challenging question. Some of the things you’ll learn will clearly fall into a specific side of the pros and cons list. But others may be more subjective – especially if looking at equivalent practices in similar geographical areas. This is when you need your team of advisors: business partner; lawyer; tax advisor; accountant; and/or veterinary practice financial specialist to help you sift through the options.

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