Do you intend to sell your veterinary practice and still feel consumed by the many complexities involved? Perhaps you dread making costly mistakes when selling your veterinary practice. Selling a veterinary practice is both a financial and an emotional decision.
It is frightening to figure out the right move forward when all these years of dedication to building up a trusted clinic have created an emotionally hard moment. To make it easier for you to transition as comfortably and painlessly as possible, identify potential pitfalls that sellers fall into and more importantly, the best way to avoid them.
Here are some of the top mistakes to avoid in selling a veterinary practice, thereby assisting in a stress-free and successful transition:
Failing to Plan Ahead
Most veterinarians commit the second biggest mistake in failing to plan well ahead of selling. Selling a practice is an elaborate process that is time-consuming and requires preparation and strategy. Most owners have no such practices and wait until they need to retire or burn out, by which time the process has already been hurried and not well planned.
Start planning for 2 to 5 years before selling your practice to establish its value and maintain organized financial records. Understanding how to sell my veterinary practice during this planning period allows you to create changes that make your practice more attractive to potential buyers. The sooner you consult a business advisor, the better prepared you will be to maximize the value of your practice.
Overestimation of the Value of Your Practice
Veterinarians tend to overvalue their practices because they become emotionally attached to them or lack a clear understanding of market conditions. Your practice has value to you, but it doesn’t hold the same value in the market. Overpricing your practice can leave it sitting on the shelf for months without selling, discouraging potential buyers and extending the sale process.
To avoid this mistake, it’s crucial to learn how to value a veterinary practice accurately. Engaging an objective valuation from a professional appraiser who understands the veterinary industry is essential. These experts consider numerous factors, including location, equipment, patient volume, and financial health, to establish a realistic price in the market. With an accurate valuation, you’re more likely to sell your practice quickly and at a reasonable price.
Not Preparing Financial Documents
Analyze every financial record from profit-and-loss statements, and tax returns, to cash flow projections. Ensure your records are clear and well-organized. The most common pitfall here is that veterinary owners do not maintain their records in a properly organized fashion, which causes delays or even loss of interest from the buyer.
Ensure that your accounting records are clear, accurate, and up to date. You can hire an experienced CPA specializing in veterinary practice accounts to clean up the books and ensure transparency for the buyer. Clean books not only built trust with potential buyers but also made the sale process easier.
Overlooking Staff Transition
Preparing the sale for your staff is another common error. Employees can become insecure or uncertain about their jobs as soon as they hear about the sale. If not managed appropriately or if concerns are ignored, it may lead to many walkouts from staff members, thereby devaluing your practice.
Involving your staff in the transition plan can be very helpful. Let them know what’s happening and listen to their concerns before they appear. This makes your practice more attractive to buyers, as you have an established team known for running the clinic smoothly and efficiently.
Ignoring the Importance of Staff Transition
Selling a veterinary practice involves all those legal intricacies, from the negotiation of contracts to possible liabilities; so many veterinarians try to do everything by themselves, getting either lawyers’ costly fees or in post-sale disputes that were not negotiated.
Hire a veterinary practice sales lawyer to handle your contracts and negotiations, ensuring you have someone who will guide you through the legal jargon of the sale. He or she will help you avoid pitfalls at law and protect your interests.
Choosing the Wrong Buyer
Another major mistake is selling the practice to the first interested buyer without proper vetting. The consequences can be downstream problems in terms of operations, dissatisfaction of staff members, or even the creation of a dissolved reputation of the practice.
Take your time when deciding who to sell your practice to. Whether it is a corporate acquisition or an individual veterinarian, determine who shares your practice’s values, vision, and culture. This will ensure continued success and make for a less painful transition for your employees and clients.
Not Considering Tax Implications
Selling a veterinary practice is something that many people overlook when it comes to tax implications. If you are not taxed, you can end up with less money than you would have imagined. You could end up with a much smaller share of the sale proceeds than you planned. Sellers will be liable for huge capital gains taxes and other liabilities if not properly tax planned.
Consult with a tax advisor so you understand fully the implications of taxes on selling. But you can think of some creative ways to structure the sale so that you minimize your tax burden. For example, the difference in the amount of tax might make all the difference by having the purchase price distributed among assets such as equipment, goodwill, and non-compete agreements.
Loss of Focus on Day-to-day Operations
As the sale approaches, veterinarians often get so caught up in the selling process that they lose focus on their daily operations. This can lower performance, reduce revenue, and impact staff morale, all of which can significantly affect the value of the practice.
Try to keep things as normal and uninterrupted as possible throughout the selling process. The purchaser will be looking for a healthy, thriving practice. Any decline in performance could raise doubts and lead to a lower offer. Sell some aspects of the process to professionals, if possible, so you can focus on delivering quality care to your patients.
Failure to Promote the Practice Properly
Such veterinarians are likely to sell their practice less effectively, hence limiting the number of potential buyers. Listing with only one broker or not using multiple advertising channels may mean missing some of the best buyers.
Work with professionals who specialize in marketing veterinary practices. Consider advertising through industry networks, local communities, and online platforms to reach a bigger audience. Visibility in your practice increases the chances of selling to the right person at the right price.
Conclusion
Selling your veterinary practice is a decision that must not be taken lightly and executed carefully and with proper preparation. Avoiding these pitfalls can bring out the highest dollar value from your practice, and ensure a seamless transition, and thus a good outcome for your later life. Proper planning, professional guidance, and perseverance will make this process as smooth and successful as possible.
FAQs
How long should I plan before selling my veterinary practice?
Ideally, you should start planning 2 to 5 years before the sale to maximize your practice’s value and ensure a smooth transition.
What is the biggest mistake veterinarians make when selling their practice?
One of the biggest mistakes is failing to plan, leading to rushed decisions and missed opportunities to increase the practice’s value.
How can I accurately value my veterinary practice?
It’s best to hire a professional appraiser who specializes in veterinary practices to get a fair and objective valuation.