27 May Planning Your Exit Strategy – Preparing You and Your Practice for Sale
Selling a veterinary practice is often the largest financial transaction made during a vet’s lifetime and involves much more than just setting a price.
Helping owners develop and execute a well-thought exit strategy in advance of the anticipated time of sale is an integral aspect of the professional relationship Vet Dynamics have with our clients. Our goal is to help you transfer a practice of maximum value at a price that is fair and equitable to both the buyer and seller and ensure the ongoing viability. Ideally a 3 year preparation period is needed.
3 years before putting your practice on the market:
- Make quality time to write down your personal and financial goals; develop a timeline; consider life after practice and how long you are willing to stay involved.
- Have a baseline practice goodwill valuation performed by Vet Dynamics. Final value will be a combination of revenue and profitability.
- Identify areas where improvements can be made in turnover, profit and in saleability.
- Work with your Vet Dynamics consultant to create an exit strategy – this is different to a growth and sustain strategy.
- Manage for revenue and earnings growth over the next 3 years.
- Consider potential practice buyers – local practices, corporates, joint venture, succession. They all offer different purchase and follow on models that you will need to consider.
- Take an active role in the practice; build a management team and begin delegating management responsibilities to key staff.
2 years before putting your practice on the market invest in practice infrastructure:
- Clean facility thoroughly, repair cosmetic damages, paint, landscape, etc.
- Upgrade practice to current standards (imaging, computer management system, etc.)
- Bring employee contracts up to date with latest legislation. Be aware of any onerous or restrictive clauses
- Secure assignable, non-compete agreements with associates.
- Ensure any facility lease has a life of at least 5 years, is renewable, and transferable. Overseas, corporate and absent landlords can be particularly difficult to negotiate with – you will need plenty of time.
- Check equipment leases for duration and for pre-payment penalties (usually, short payment leases are paid-off at closing and long-term leases can be transferred). Consider buying, rather than leasing, any equipment needed now.
- Make sure there are no environmental concerns (buried gas tanks, X-ray chemicals, etc.).
- Resolve any real estate planning and zoning compliance issues which might impact transfer.
- Consider incorporation to a Limited Company if not already done so – this can have considerable tax advantages but timing is important.
1 year before putting your practice on the market
- Examine your own financial needs following the sale. Work with a financial planner to ensure you can afford to sell at this time.
- Order a commercial real estate appraisal for sale and rental, survey and review zoning compliance.
- Prepare practice records and collect for ready access for buyer’s review — financials, contracts, employee records, leases, etc.
- Compile inventory and equipment lists and valuations.
- Have Vet Dynamics review your practice and current market conditions.
Maximum financial value comes from high turnover and good profitability. However ease of transfer and good business systems will improve the final figure and reduce the stress of sale.
The Sale Process
Once a sale has been agreed the sales process can usually be concluded over an 8 – 12 week period.
1. Preliminary Review
Your veterinary practice and the purchaser will get to know each other and the strengths and benefits you both offer.
- Initial discussion
- Review hospital profile & financials
- Establish a timeline
You’ll receive a Letter of Intent/ Purchase Proposal that includes:
- Purchase price
- Terms of lease
- Your employment arrangement
- Creative deal options
3. Due Diligence
The purchaser will visit your veterinary clinic and collect the information necessary for ensuring a smooth transition after the purchase is complete.
- Establish goals and priorities
- Collect Due Diligence documentation
- Look at historical data
- Make transition plan
The Purchaser will provide agreements for your legal representatives, set a closing date and complete the wire transfer.
- Purchase agreement
- Lease agreement
- Employment agreements
- Deal stipulations
For the first month, it’s vital that the vets and staff maintain their normal routines and schedules.
- Retain practice manager
- Provide training as necessary
- Transfer accounts
- Enroll staff into benefits program
- Integrate a computer network
For further information about any aspect of your exit strategy call us at Vet Dynamics for impartial advice Tel: 01793 435333