I recently got a call from an associate veterinarian who had been working in a big ER for several years. She loved the practice and planned to stay, even though it was being sold to a consolidator. As the group began to do its due diligence it was discovered she had been working for 14 years without an employment contract. The deadline for the closing was approaching and now she was being pressed to sign a backdated contract so the sale could finalize. She was uncomfortable doing so and that is when I got called. My next step was to call an attorney to help her. A girl has got to know her limitations!
But this event caused me to consider that many practices currently and in the future certainly plan to sell and they need to understand that large corporations do not like loose ends. I thought I would list some of the things practice owners should consider getting in order before deciding to place their practice on the market.
First is certainly profitability. EBIDTA is the main calculation you will want to have performed by your accountant. If you are unhappy with this figure it is time to review your financial data and find the gaps. Are your fees sufficient? Is your inventory under control? Are you running too much overtime because you are poorly staffed? Are your doctors not producing revenue relative to their pay and benefits?
Staff. Buyers want to purchase a great team. They want a strong manager, low staff turnover and experienced assistants or licensed technicians. Who you hire and how long they stay adds dollars to the practice price. Are you leveraging those licensed techs? Need to find good staff? Check out Hound.vet and join the community.
Reputation. Yep! Those reviews can translate into dollars if they are good and there are a lot of them. As frustrating as they can be when owners are “less than accurate” it is still vitally important to solicit feedback. You can utilize tools such as having #VitusVet automate satisfaction feedback from clients. Making a protocol to ask clients to give you reviews is a smart move.
Manuals, Job Descriptions and Contracts. Certainly, a large group will come in with their own employee manual but keep in mind that the goal is to buy a “trouble free” practice. Not one who has possible labor disputes. Having good employee records with documentation for disciplinary actions and following the state and federal labor laws to the tee will bode well for your sale.
Well maintained equipment. One of my friends who values practices speaks about going into a hospital where the centrifuge was balanced by having an ink pen stuffed under it to replace the missing leg. No one wants to buy junk. Having modern equipment and having it all running in tip top condition ups your value. Even though many buyers do not want to purchase your real estate, they do want to see that you maintain a clean, safe and up to date facility. Take down that harvest gold wallpaper and those brown wooden cabinets and have someone who is a professional decorate it and get it current.
Record keeping. This is one is HUGE. Have your financial records in order. This means following a chart of accounts recommended for veterinary hospitals and recording your expenses accurately. You may also want to stop paying your family who doesn’t really work there… or start to pay them if they do. Lots of small business owners “fudge” and purchase personal items through the hospital to use them as a business expense. Just realize that all those questionable costs are coming off profit and at 15 times multiples you are throwing away thousands of dollars in value.
Loans. If you are not planning to sell your real estate make sure your bank does not hold an “all asset” lien on your hospital assets and equipment. Depending on the set up of your equipment leases you may also need to understand that they will have to be paid off at sale and those lab quota agreements may be something that the new owners have no interest in continuing…so you may have to settle them too.
Inventory. Know what is on your shelves and what it is worth. Buyers will want an accurate inventory count and have no interest in purchasing expired products or a ridiculous amount of stock that sits for years before turning. Make sure you are following the DEA guidelines for controlled drugs. Have your logs in order. Do you know that you should have a notarized power of attorney for every technician who is filling controlled drug prescriptions under your DEA registrants name?
Marketing and tech. A modern practice with a stellar website, excellent social media feed and following add value. Have client convenience tools like a #VitusVet app, #VetShipRX, wellness plans or loyalty programs and track their success. Use team leveraging tools like Vetstoria for automating appointments or a telehealth provider for triage when you are booked weeks out. Use veterinary dictation tools like Talkatoo to speed charting for your doctors. All these things show you have a practice that is on the cutting edge…not one practicing the same way as it did in the 80’s.
Finally. Don’t wait to get your act together a year before you plan to sell. Plan at least 3 years out and consider that most buyers will want you to practice for at least one or two years after you sell. Sometimes this willingness to stay can also up your value to a buyer. You may want to have a practice valuation performed by a expert. I suggest you pick from the providers who are members of the Veterinary Valuation Council from Vetpartners.org.
The saddest calls I receive are the veterinary practice owners who think that a corporate group will certainly snatch them up at 15x multiples only to discover they have nothing of value to sell.
If you are interested in preparing your practice for future sale please reach out and I am happy to help. www.dboone2managevets.com