Choosing to become a veterinary practice owner is a significant milestone in any veterinarian’s career. The process is both an exciting opportunity and a complex undertaking. If you have decided that purchasing an existing practice is the best pathway to practice ownership, there are several factors to consider. In addition to thorough preparation, success hinges on having the right mindset, awareness of potential pitfalls, and a clear understanding of each step from decision to closing.
Use these dos and don’ts as a guide to help you educate yourself on the buying process and plan for every eventuality along the way.
1. Don’t rush the process.
Potential owners must have sufficient medical experience, typically a minimum of 2 or 3 years post graduation, both for personal success and to satisfy lender expectations. It’s critical that you build confidence and expertise in your clinical role before you can excel in a management one. You don’t want the stress of training in two different roles (doctor and owner) at once, and it will be difficult for a team (and clients) to respect an owner who has yet to achieve some level of clinical acumen. Likewise, lenders want to see demonstrated competence in both leadership and clinical work, as it indicates a readiness for the next career phase of ownership.
2. Do know what you want.
Buyers who determine the type and location of practice they want have a huge advantage when they are finally ready to purchase. They will quickly recognize a good opportunity and avoid losing out to another buyer who moves more quickly. Use this Practice Visit Checklist to help you evaluate opportunities that appear promising.
3. Don’t aim too low.
Many buyers think they can only afford to buy small practices. However, the debt payments come out of the practice profits, which also provide the buyer with a reasonable salary. If properly priced, the practice “pays for itself,” no matter if it is small or large. In reality, larger practices typically have better cash flow, which provides added “cushion” in rough times and usually a greater—and quicker—return on investment.
The most common reasons buyers resist purchasing large practices are psychological and relate to the large debt attached to the transaction. A debt of $1 million or greater can be scary, but with a solid understanding of the financial details and feasibility of the purchase, you can have confidence in taking the leap.
4. Do be realistic.
Many buyers try to hold out for the “perfect” practice. It is great to have a wish list but equally important to identify which items on it are negotiable. Many excellent practices have been passed over because they weren’t turnkey in the buyer’s mind. You can alter many aspects of a practice once you take the helm as owner, as long as the practice itself is a reasonably good fit for you (culture, location, sufficient cash flow, etc.).
5. Do assemble a team of experienced advisors.
Much the same as you chide your clients for acting as their own veterinarians, it is important to use professionals to assist in the purchase. This allows everyone to do what they do best. Once the type and geographic location of a practice are determined, hiring a broker or other acquisition consultant can save countless hours, as they will attempt to match a practice with a buyer’s needs.
Once you identify a practice, a lender needs to be added to your team. Having a lender that is familiar with—if not specific to—the veterinary industry is extremely helpful. As the transaction progresses, an attorney and accountant will be vital members of your team, as well.
All of the above advisors can and should work together to help bring the transaction to closing, each doing what he or she does best. This is not an area to forego if trying to save a few dollars, as it can prove very costly in the long run.
6. Do understand the financing.
There are several possible sources of financing, each appropriate depending on the situation. Some benefit one party more than another, but what’s important to know is that a buyer should proceed with the financing that makes the most sense for their personal needs and goals, as well as the success of the transaction. Furthermore, it’s important to know that just because one lender is not a fit for the buyer—or, the practice or transaction as a whole—does not mean the practice is not worth the asking price or that there is a blemish on the buyer’s financial history.
Common sources of financing include:
- Seller notes
- Asset-based lender
- Cash flow lender
- Conventional lender
- Small Business Administration (SBA)
- Loan broker
In veterinary acquisitions, buyers most frequently partner with a specialty lender with practice finance products. This type of cash flow lender has loans specific for veterinary practice acquisitions, and because they know and understand the profession, it is usually much easier for these lenders to approve a loan. No matter which type of lender you work with, it’s critical that you keep both your credit score and cash savings as high as possible. Cash and credit are KING!
7. Don’t rely on “rules of thumb” to determine value.
Every practice is unique. Value is driven by adjusted profit and then capitalized based on risk factors present for that particular investment. It is a complicated process requiring experience and understanding of both business valuations and the operation of a veterinary practice. You could easily end up paying way too much for a practice or forgo a stunning opportunity by relying on these ineffective methods. You are contemplating an investment of several hundred thousand, or even millions of, dollars. Please don’t shoot yourself in the foot. This is why you have a team of advisors—put them to work for you.
Buying a veterinary practice is a life-changing decision that requires more than just clinical skill—it demands business acumen, leadership, and resilience. With the right mindset, a dedicated team, and a strategic approach, practice ownership can be both professionally fulfilling and financially rewarding. Start early, ask questions, and lean on experienced advisors.
Are you considering (or open to exploring) practice ownership? Don’t miss our Hour with the Experts webinar, “Own Your Success: How to Navigate the Path to Practice Ownership” on Tuesday, July 29, at 7 p.m. EDT. Our panel of experts, led by David King, DVM, CVA, will provide a practical roadmap for prospective buyers, from initial considerations and selecting the right practice to financing. Plus, we’ll be joined by guest expert Alexandra Kohrs of Bank of America Practice Solutions. Register now!
