Dispelling Myths about How to Sell a Veterinary Practice

Caveat Emptor

Many practice owners have erroneous beliefs about the process of selling their veterinary practice to a corporation, including:

On Practice Value:

“My practice is worth what it is worth” – your veterinary hospital is worth an amount that needs to be discovered through a process.  What this price discovery yields is likely to be very different from what an expert may predict based on your veterinary practice's gross revenue, cash flow of EBITDA.  All else equal, the better the sale process, the more likely you will obtain a premium purchase price.

On Buyers:

"All corporate buyers are similar, including in the value they will conclude for my practice.”  They are very different, both as partners for your practice and in how they see the value of your practice

"They seem nice. I can trust them without executing documents that legally protect my interests.”  They may be very nice, but their interests are typically diametrically opposed to yours.

"Any of the good buyers for my practice has already reached out to me.” There are about 40 private equity-backed corporate consolidators in the veterinary services market.  The odds that the best potential buyer of your practice is among the sub-set that have contacted you are low.  When it's time to sell, you should cast the widest net possible.

"The buyer will give me a fair price and fair contractual terms.”  Any buyer will give you only what they feel that they need to in order to get you to say “yes.” It is up to you and your advisors to raise that bar for them by reducing their risk of buying your practice and increasing the competition they face to do so.

On Financial Advisors (business brokers, strategic financial advisors):

“They all offer basically the same type and a similar quality of service and, thus, will get me a similar result.”  This widely held belief is not remotely true.

Some advisors may actually be representing the buyer’s interests at least as much as your interests. Various advisors vary greatly in experience, expertise and competency. The end results for you will vary greatly amongst various financial advisors, so do your homework. Be sure to ask about track records and experience.

“No broker or advisor is deserving of so much of my hard-earned money.”  Some advisors are not worth spending any money on. Other advisors are worth spending a small fortune on.

On Attorneys:

”My attorney knows me and my practice best, so he/she will do the best job at helping me sell my practice” – The only thing that really matters is does the attorney representing you have a great deal of experience in veterinary practice sales – neither business sales or “veterinary work" are sufficient – it must be veterinary practice sales.

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"An attorney that has a lot of veterinary clients will do a great job on a practice sale” – see above

Going it Alone:

If you choose to “go it alone” and sell your practice to a corporate party without an advisor, such as a broker, you may find that your team is ill-prepared to provide the benefits of an intermediary.

Almost all buyers are adept at making often-lofty pitches about teamwork and shared values to practice owners. Fact is, the sale of a practice is a negotiation with elements of a zero-sum game. If you go into one of these transactions short-handed you are leaving success to the good will of the buyer.  

Many veterinary practice owners are ill-equipped to assess quality in a broker, or financial advisor. Meanwhile, the fact that practice owners can sell directly to any number of corporate consolidators makes using your family accountant or lawyer, or doing it yourself more feasible.

While the idea of saving on brokerage fees is a seductive one, it has led many veterinary practices sellers to sell their practices for far less than they are worth.  It is easy to sell your practice, but difficult to capture the full value you have created.