Selling Your Practice in the Rise of Corporate Medicine
Whether you're ready to sell your practice or thinking about your future exit strategy, these tips on how to think about the selling process can save you a lot of trouble later.
There’s a lot to think about when you’re selling a practice. How do you determine your best options? How can you make your practice more attractive to buyers, corporate or private?
Dr. Charlotte Lacroix, a veterinarian herself, works with Veterinary Business Advisors to help sellers and buyers come together in the most efficient and easy way possible. In this Quick Cup of Knowledge, she talks with Dr. Natalie Marks about the rise of corporate medicine as well as the advantages and disadvantages of selling your practice to a corporate buyer.
The Rise of Corporate Medicine
Recently, the number of corporations owning veterinary practices as exponentially increased. Think Banfield, VCA, Mars, Community Vet Clinics/VIP Pet Care, etc. This isn’t necessarily a good or a bad thing, but it is something to consider when planning an exit strategy.
Luckily, Dr. Lacroix and teams like hers have good relationships with many of these large corporations, can anticipate what corporations are looking for, and can give veterinary practice owners practical knowledge in preparation to sell.
Should I sell my practice to a corporate or a private buyer?
The answer to this question depends less on the type of buyer and more on how your practice runs and what is most important to you.
No matter who you sell to, things are going to change. Because corporations don’t have boots on the ground, they usually don’t have a strong family-feel at the practice. If that’s important to you, you’ll want to consider a private owner who is committed to creating that atmosphere. On the flip side, corporations won’t micromanage you, especially if your practice is successful.
Corporations provide infrastructure and take care of the business management side of things (accounting, marketing, etc.). If you’d rather focus on your work as a veterinarian than worry about keeping the books, a corporation could be the right choice for you. Keep in mind that staff members involved in the business management part of the practice will most likely be internalized in the transition.
A private buyer, on the other hand, will be more involved in the day-to-day happenings in the practice. If you plan to stay on at the practice, you may see a lot of changes being made by the new owner. They won’t be bringing in a strong infrastructure, but they may have a different way of doing things.
How can I make my practice look more attractive to buyers?
The first step in getting potential buyers interested in your practice, according to Dr. Lacroix, is getting your financials in order. The way some practices keep their books can be confusing. Imagine being a surgeon who finds that the spleen is in the abdomen one day, in the chest cavity the next day, and the ear canal the next. It would make things quite a bit harder for you. Put it all in one place and easy to follow.
Corporations calculate how much they're willing to pay for a practice based on expenses subtracted from the gross revenue to get the net revenue. Then, they multiply that by a multiple based on many factors.
Usually, Dr. Lacroix says that practices are offered a multiple anywhere from 1.5 to 3. She advises not to worry too much about that multiple, because it could be based simply on the corporation's interest in that geographic location. That's why approaching multiple corporations is a good idea—one corporation may offer more than another corporation would for a practice with the same financials.
The next step in assuring a smoother transition is to preemptively disclose pitfalls or complications. For example, are you using someone else’s parking lot for your team or clients? If sellers find that out after the deal is done, they’ll feel deceived. Upholding these standards of integrity and honesty is best as part of any exit strategy.
Stay in the Know!
For practice owners who want to learn more about practice management, come to Annual Conference in 2020 to hear more from professionals like Dr. Lacroix.