Scout’s Motto: “Be Prepared” applies to Veterinary Practice Owners
The average baby boomer today is approximately 63 years of age and in 7 years, all baby boomers will be over the age of 60. Obviously, this has implications on the number of veterinary practice owners exiting their business.
Baby boomers are unique and unlike Generation Xers who value time, Traditionalists who value community/family and Millennials who value individuality, Baby Boomers value “success”.
Baby boomers are also known for their 60-hour work week.
These two attributes – working hard and being successful – should also play a role in how baby boomers approach their exit. “Be Prepared” and your exit will be successful. Preparation will also ensure exiting owners will cope well with life after the 60-hour work week.
The Exit Planning Institute (www.exit-planning-institute.org) estimates 50% of business exits are involuntary meaning they are unplanned and/or unexpected.
If you are fortunate, you will experience an unplanned exit because you received an offer for your practice you did not expect; if you do receive an offer, we would advise that you not accept the first offer without seeking professional advice as it is likely not the ONLY offer available nor is it likely to be the best offer.
However, the reality is most involuntary exits are due to death, disability, divorce or disputes.
How can practice owners avoid regret and prepare for the unexpected exit?
The Exit Planning Institute (EPI) has a proven process for business owners to follow to help ensure a successful exit. Engaging in an exit planning process also ensures owners are better prepared for an unplanned exit at any time.
The Exit Planning Institutes’ Value Acceleration Process is grounded in ACTION. It creates a roadmap to success in three areas that are integral to a successful business exit.
- Maximizing Business Value
- Personal Financial Planning
- Life after Business Planning
The Value Acceleration Process focuses on value growth across all areas and aligns your i) business, ii) personal finance, and iii) personal goals for life after business.
It takes what can be a complicated and often overwhelming, 3-5 year business strategy and turns it into a manageable 90-day process. The process also answers the question, “What can I do in the next 90 days to move in the direction of my long-term exit strategy?“
Repeating the 90-day cycle leads to continuous improvement.
The Value Acceleration Process involves 3 phases.
- Discover – this phase focuses on exploring where you are currently in your business and personal life and what actions are needed for you to get to where you want to be in the future.
- Prepare – in this phase you are implementing the action plan
- Decide – with more information, you are now better prepared to decide on selling or keeping the business
The first step in the Discover Phase is to have your business valued by a qualified business valuator with experience in the veterinary industry. Owners need to know the value of their business today and what the potential value could be, should they act and make improvements based on what they learn in the valuation.
If you focus on value first, income and revenue will follow. If you focus solely on revenue and/or income, value does not necessarily follow.
Value considers the risk of continuing to be able to generate revenue and income in the future – THIS IS IMPORTANT.
When you go through a business valuation process, you identify business risks affecting your future revenue/income stream. Once you identify the risks, you can create action items to de-risk your business.
A business valuation also identifies the value drivers that can be acted upon to improve value and in turn, improve revenue and income.
Success in exiting a business and avoiding regret involves more than just maximizing value and price. It also involves personal financial and emotional success after the sale.
What is the owner’s financial requirement post-sale to support and maintain the planned lifestyle? There are some practices that don’t sell; is the owner still able to exit and enjoy the same lifestyle as when owning the business? If the practice is sellable, is the current value enough to support the owner post-sale? Engaging the services of a qualified wealth management professional can assist owners in analyzing their current financial status and future needs to ensure the next chapter of their life is as enjoyable and successful as possible.
Also, it can be an emotional shock to go from being an integral part of a vibrant business to waking up in the morning and wondering how you are going to fill the day. It may sound appealing but the reality of a life without purpose can be devastating. Some exiting business owners struggle with self-worth issues after a sale. Days needs to be filled with meaningful experiences whether it is with family/friends, philanthropic endeavors, hobbies, another business, etc.
The next step in the Exit Planning Institute’s Discover Phase is to analyze your weaknesses and areas for improvement that result from the assessment of your business value, financial goals and personal goals. Pick 3-5 items pertaining to your business value and 3-5 items pertaining to your personal financial goals and your plans to fill your time after the sale. Create an action plan around these items.
Once your action plan is made, you are ready to move to the Prepare stage to begin implementing the action plan – de-risk your business, work on value drivers, implement plans to ensure you can meet your post-sale financial needs, and prepare for the emotional part!
The process results in a more informed owner who can then decide whether to exit or keep the business and repeat another 90 day cycle.
Baden-Powell’s Scout’s motto: “Be Prepared” has served the test of time. He wanted to equip young people with the ability to act quickly during an emergency. He wanted them to be physically ready for challenges that face them, and he wanted their minds to be ready as well. The same principles apply to practice owners exiting their business. Are you prepared?
About the Author: Elizabeth Bellavance DVM MBA is a Certified Exit Planning Advisor® with the Exit Planning Institute and is Simmons & Associates’ Canadian representative.