Are you considering selling your veterinary practice? There are many steps involved with the sales process, and some of them can be quite challenging – especially when you consider the emotional nature of selling your life’s work.
In this blog post, we will discuss the seven essential steps in completing a successful vet practice sale:
Step 1 – Preparation
In preparation for the sale, you should whip your practice into tip-top condition: otherwise, it will not sell or as fast as it could have. So, start early planning so you can be sure about what to expect while selling your vet practice.
Here’s our recommendations:
- Get your records ready: This is a big one! If you haven’t done so already, now is the time to get them up to date and organized. It includes client information, clinic history, financial statements, and other important documents like tax returns, licenses, and permits.
- Get good professional advice: If you don’t already have a lawyer and an accountant on retainer for other matters, then now is the time to get one for this process too! They will be able to guide you on the right path.
- Spruce up your clinic: Your clinic should be immaculate before putting it up for sale so buyers can visualize how great it will look once they take over.
- Update your online presence: Your website and social media presence (if any) are among the most important marketing tools for any vet practice. It helps with online reputation management and provides a valuable first impression to potential clients and buyers alike. The website should feature clear calls-to-action, easily accessible information about your practice, staff, and services, and an easy way to schedule appointments or request further information.
Step 2: Practice Valuation
The next step to selling your veterinary practice is understanding the value of your business. It’s important to have an idea of what it’s worth before you begin the process of selling of your vet practice for two main reasons:
- It becomes almost impossible to set a fair price if you don’t know what your practice is worth. If you price your practice too low, you won’t attract serious buyers and might miss out on a good opportunity; if you price it too high, no one will buy it.
- You can use the valuation as leverage in negotiations with buyers offering less than market value for your business.
The valuation process can be either one or a combination of the following three approaches:
- Income approach: This method is based on the premise that a business will earn a rate of return similar to other investments with comparable risk and opportunities for growth.
- Marketing approach: This method compares your practice to others within the same geographic location and similar services offered. This method is often used when there is sufficient data to make a quick decision.
- The asset-based approach relies on the actual value of assets associated with the practice.
Step 3: Marketing: Attracting The Right Buyer
Finding buyers for a veterinary practice can be a time taking task, but with some effort and creativity, you can find the right buyer and sell your practice for more money.
To help you attract more buyers and sell your practice for top dollar, do these:
Create a buyer avatar: Create an imaginary buyer who is the ideal candidate for your practice. Without knowing your target audience, creating effective messaging that resonates with them and gets results is impossible.
Make yourself visible: Get the word out that you’re selling via email campaigns, social media, direct mail campaigns, and online advertising (if your budget allows). You can hire a professional if you prefer not to do it yourself.
This step ends with a buyer expressing interest in purchasing a practice through a Letter Of Intent (LOI).
A LOI is a legally non-enforceable document that outlines the potential terms of the sale. As is often the case, you may be required to sign a non-disclosure that forbids both parties from revealing details of the transaction.
Finally, it is not uncommon that the buyer, through their LOI, would place a demand that the seller refuse offers from other potential buyers.
Step 4 : Due Diligence
Purchasing a vet practice is a big deal. Sure, you have been running it for years, but there are parts of the sales process where you don’t know quite as much as your buyers. Additionally, there are facts about the buyer you don’t know that could be hiding under the surface.
To ensure that all of your bases are covered and to help protect yourself from future problems, it’s important to do due diligence before selling your practice.
For example, What is their history with clients? Do they have a great reputation in the community? What about their financial standing? It would be best if you answered these questions and similar during due diligence before signing the contract.
Step 5: Informing Staff About The Sale
When you’ve reached the final stages of your decision to sell, it’s the time to tell your staff about it. First, ensure that any important details have been ironed out and all questions have been answered before giving them the scoop. You don’t want them feeling blindsided by what could potentially be a stressful time for them. In addition, if any changes are being made (like new management), ensure this information is clear from day one, so there aren’t any surprises down the road when changes happen.
The best way to tell your staff is face-to-face. Sending an email or text message may likely cause confusion among employees who may not know how to interpret its cryptic message or lack thereof.
Be direct and honest with everyone involved: “I’ve decided I’m ready for a change,” or “I need some more freedom in my life.” Letting employees know what motivates (or doesn’t motivate) you as an individual can help them understand why you are selling.
It is vital to get key staff members onboard; otherwise, it may hamper the outcome of the sale because the buyer’s decision to buy may depend on keeping key staff members.
Step 6 : Contract Negotiation And Closing The Sale
It’s time to finalize the sale. Two crucial steps must be taken to meet this goal successfully:
Negotiate a fair price and structure of payment: The seller needs to negotiate a fair purchase price for their practice and payment terms.
Often, a seller wants cash up front, while the buyer may prefer financing through a mortgage or loan. Other options include paying for part of the purchase with cash and paying other parts over time or through accrued interest (with periodic payments based on monthly interest).
It is important to understand what your preferred method(s) will require from both parties so an appropriate contract can be drawn up before closing.
Finalize all paperwork: Once all negotiations have been completed and the seller is ready to sign, it’s time to finalize your paperwork, This includes contracts, purchase orders, warranties, etc. The best practice is to have both parties sign their respective agreements simultaneously, making it easier for both parties to review them together before making any final decisions on either side.
Typically, a sales contract would:
- Contain provisions regarding title transfer and escrow accounts.
- Describe the amount of earnest money required of the buyer.
- Identify any contingencies that may affect the closing date or price.
- List any liens on the property.
- Describe any restrictions on occupancy or use.
- Specify who bears responsibility for certain obligations under the contract, including delayed payments, taxes, insurance, repairs, and maintenance.
Step 7: Managing The After-Sale Transition
Now that you’ve successfully sold your practice, what happens next?
Well, it’s important to remember that managing the after-sale transition is just as vital to ensure a smooth transition for you and your clients.
Many practices would struggle with staff turnover following a sale, especially if their employees did not know about it or have input into the sales process (which is unfortunate). The stress of change can lead some employees to feel less motivated or even dislike their new boss. In some instances, the practice would need to ensure the staff members feel appreciated and valued by offering incentives to keep key employees through this transition.
In some cases, you could stay back to work for the new owner based on negotiations, it is important you keep this in mind.
The short story is this: If you are considering selling a veterinary practice, the seven steps mentioned in this post will get you moving in the right direction.