By Carly Watson Tobler, Vice President, Simmons Southeast
According to an August 2022 poll by Retirement Living, 73% of Americans feel that they have not saved enough for retirement. As a veterinary practice owner, you may be thinking that retirement savings isn’t as important for you because you have a thriving practice to sell, the proceeds of which will fund your comfortable retirement.
But will they? How can you be sure?
First, it is important to understand that your practice probably won’t sell overnight. The time it will take to sell your practice depends on a number of factors. Location, facility condition, equipment, practice size, profitability, and other criteria will determine whether your practice sells in a few months or several years. One of the most difficult challenges for a veterinary practice broker is to inform a practice owner hoping to retire imminently that their practice will not sell for what they expected. If only they had known the true market value of the practice a few years earlier, the practice owner and management could have taken meaningful steps to improve the practice’s bottom line and value. Don’t wait until you are ready to sell your practice to discover its value and salability.
Five Steps to Take Now to Begin Building Your Exit Strategy
As a veterinary practice owner, you can take action right now to ensure your eventual practice sale will provide a comfortable retirement or a springboard into the next exciting adventure in your professional life. Here are five steps you can take right now to position yourself for a more lucrative sale when you are ready to exit your practice.
1. Establish a credible baseline for what your practice is worth today.
A practice valuation from an experienced veterinary practice appraiser and broker is your first step to creating an effective exit strategy. It is advised that a baseline valuation is done a minimum of two years prior to listing the practice for sale. In addition to establishing a baseline for what your practice would be worth if you were to try to sell today, your appraisal should identify specific areas for improvement that will impact your eventual sale price.
2. Increase your fees to keep pace with market changes.
Are your fees keeping up with the cost of doing business? If not, it is critical that you evaluate your fees and do a market comparison with other nearby practices. If you haven’t done so in the last year, consider increasing fees now and create a schedule for regular fee increases in the future. Fees should be monitored and adjusted every 6-12 months as the cost of inventory and other expenses shift. As with any thriving business, ever-increasing costs must be passed along to the consumer to maintain a healthy profitability.
3. Get control of your practice’s expenses.
The financial cost of uncontrolled expenses can wreak havoc on a veterinary practice’s profitability over time. By tightening the reins on your practice expenses, you can retain more of the money you and your team are working hard to earn and set yourself up for a better return on your investment when you sell the practice. Profitability is the primary factor of determining practice value, so maintaining a healthy bottom line will deliver a higher value. Enhanced profitability is also available for your personal enjoyment during your term as a practice owner.
4. Make necessary capital investments.
The chipped paint, cracked linoleum, and outdated equipment may not bother you, but they could be deterrents for a potential buyer. Rather than having to make large capital expenditures right before you sell or having to lower your eventual sale price, it will be far less painful to make modifications and improvements gradually over time. Not only will your practice be more attractive to potential buyers, you and your staff will enjoy the upgrades while you still practice.
5. Work to retain a strong team.
Having a long-serving, competent staff can be extremely attractive to potential buyers. If you are not already doing so, take action to ensure that your staff feels appreciated, valued, and respected. Consider strategies to minimize turnover, even if it means investing more in staff wages and benefits. Be mindful that increases in staff expense should be offset by fee increases to maintain healthy profitability.
The sale of your practice should be a time to celebrate your hard work and accomplishments. By creating and implementing an effective exit strategy, your practice sale can be a celebration that provides wealth for you and your heirs.