Most people recognize that practice ownership is not for everyone. There is a unique mold for the veterinarians driven to own their businesses and all the responsibilities, joys and challenges that come with it. At the end of that run, though, the time comes to pass on your creation to the next person – with the hope of realizing a return on everything that you built. Who are today’s typical buyers?
Our observations indicate that the largest group of buyers is those veterinarians who graduated 2-8 years ago. The seemingly most significant element in this group is that when they consider a purchase, they put an emphasis on the balance between practice ownership and their personal quality of life. There is another, smaller group of buyers that includes current owners who are looking to purchase additional practices. This is often driven by the idea of merging the practice with his/her established practice.
The national and regional corporations are also acquiring practices, but they are choosing very deliberately, typically focusing on a small practice that can be merged into their existing practice or the practice that typically grosses more than $1 million. There is also a small contingency of partnership buyers who want to share ownership so that their individual quality of life can be protected.
So what are these buyers looking for? Naturally, they want it all!
They want a financially successful (in the upper bracket of average transaction fees and profits relative to the national average), small animal/exotics only practice. The practice profitability should be due to high fees, affluent location, and clients agreeing to thorough diagnostic workups, rather than high volume. Solo and multi-doctor practices are both fine, but multi-doctor (2 or more) may be necessary to provide them enough income and their time off.
The practice should be in a free standing building that requires only a reasonable percentage of the practice revenue to pay the mortgage. The building should have enough space without having to remodel in order to add another doctor if growth occurs.
The practice should be located where associates are willing to live and are not in short supply. The location should have a reasonable cost of living relative to the profits of the practice. There needs to be an emergency clinic and/or specialists nearby – and plenty of outdoor activities in the area would be a plus.
Although this appears to be a fairytale description, it was made from an actual buyer request. It serves as further evidence of the changing dynamics of today’s buyers and the pressures applied to those practices that contain little if any of the requested characteristics found on the list.
So what does this mean to you?
If you are an owner, the key element to successfully finding a buyer and transitioning the practice will be preparing for your exit 2-5 years before you sell. The advance planning allows you the time to improve your practice – perhaps not matching the list above, maximizing the practice strengths that a buyer finds most attractive. A keen awareness of the current and future market conditions can guide your planning!
-by Dave Gerber, DVM, Simmons & Associates Northwest. For further information, contact Dr. Gerber at (800) 846-0062.