As we step into 2025, the veterinary industry faces significant shifts that are redefining practice values and transitions. With an evolving market and changing expectations from both veterinarians and clients, understanding these trends is important for practice owners and prospective buyers alike. Practice values were trending up in the latter part of 2024, with several key factors likely to influence 2025 market trends:
Corporate Demand
We’re hearing that corporate buyers are expected to be very active early in the new year. With recapitalizations on the horizon, many will aim to acquire hospitals to accelerate growth. Their demand has historically driven up valuations, especially for profitable, well-established practices.
Independent Buyer Interest
Interest rates have been volatile in some markets, but as they decrease in the new year, independent buyers may find it more feasible to enter the market. A favorable lending environment could encourage more independent veterinarians to buy practices, adding further competition and potentially lifting valuations.
Another factor contributing to a potential uptick in the number of buyers is the perceived economic stability gained at the end of an election cycle. With the 2024 U.S. presidential election behind us, many independent buyers may feel more confident purchasing a practice, knowing where they stand fiscally as business owners.
Profitability Focus
With rising costs in labor, supplies, and operations, profitability is crucial. Practices that can manage expenses well and maintain strong profit margins will likely see higher valuations. Efficient operations, well-controlled overhead, and keeping fees on pace with inflation all make practices more attractive to buyers.
The economy is positioned for growth, which can offer significant opportunities. Practice owners must be ready to capitalize on this by carefully addressing key factors that can determine the success or failure of a transition.
Emphasis on Practice Health
Practices with stable and growing revenue streams, strong profitability, and efficient cost management will command higher valuations. Metrics like EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) are standard in assessing financial health and essential to keep an eye on as a manager or owner.
Staffing Challenges
The ongoing shortage of veterinary professionals may influence the value and transition of practices. Retention programs and supportive workplace cultures will play a critical role in sustaining a thriving practice. Just ensure retention efforts are not turning your profit upside down.
Exit Strategy
Regardless of your reason or timing, you should always be planning your exit. Exit planning allows practice owners to work on their practice instead of just in their practice—mitigating risks, growing and protecting their practice value, and preparing for their ultimate exit. A well-thought-out plan ensures a smooth transition for all stakeholders, including the owner, staff, clients, and the new buyer. As a practice owner, it is never too soon to prepare for your exit.
2025 is expected to be a favorable year for the veterinary industry. Knowing the elements that create value and understanding exactly what your market of buyers is looking for increases the chances that you will have a successful and profitable practice in the present and be financially secure in your future.