Byron Farquer, DVM, AVA ~ Simmons Pacific | Simmons Southwest
My neighbor, a kindly older gentleman, freely shares advice every once in awhile when we find ourselves across the fence from each other in our respective pastures. His comments are often insightful reminding me of the neighbor, Mr. Wilson, in the hit TV show, Tool Time with Tim Allen. He recently pondered the upcoming election remarking many small businesses seem to be sitting on the fence regarding employment and expansion since there doesn’t seem to be a clear direction or plan for US economic policy from Congress or the President. That got me thinking about veterinary practice owners I’ve talked to who are considering selling their practices. There has been a lot of Fence Sitting in the past three years (since the economic collapse in late 2008). Amazingly buyer demand for practices is higher now than previous years, as many buyers seek employment security through ownership and financial rewards not available to associates. That desire seems fueled rather than extinguished by the recent dismal economy. It’s created quite the supply and demand issue. In hot geographies, including very desirable locations within urban areas, practices are selling in weeks rather than months. And herein lays the problem.
Numerous owners have delayed retirement or career redirection as a result of lower revenues, weakening profits and diminished retirement accounts. I’ve heard a similar theme in comments from potential sellers “Better to keep the machine that makes some money, then sell it later when things rebound”. And that can be a sound strategy IF you are going to own and operate the practice in a growth and expansion mode rather than a status quo mode so commonly observed with owners wanting to exit rather than continue owning long term. The problem stems from running the practice in a non-decisive or passive business-as-usual approach. This economy isn’t going to recover quickly, and its feared consumer spending habits may have been altered long term as they lick their wounds and vow to bar exuberant spending habits exhibited as recently as 5 years ago. Practice value follows practice profits, and the value doesn’t bounce back in a single year of good performance. It takes a number of strong positive years in a row for a practice’s value to return to pre-economic collapse level. In a tough economy that means working the business smarter AND harder which isn’t appealing to many wanting to exit ownership. You might be best served moving forward with ownership transition now rather later if you don’t see yourself committing 110% effort continuously over the next 36 months. For retirees, age continues to be a primary and unstoppable influence.
There is nothing wrong with holding on to your practice a bit longer, and selling it when the practice and the economy have recovered. Be assured it requires big changes in revenue and profit to previous levels, not simply the passing of time. In the absence of continuous and strong physical and mental efforts by the owner most practices can’t rebound quickly, and a few may not for years. If you want to keep your practice, then do so. Love it, work it hard, and build it back to its pre-2009 performance level. For others who can’t or won’t give 110% effort, selling now might be the best choice. Will Rogers said “Even if you are on the right track, you’ll get run over if you just sit there”. I’ve often said “Inactivity brings forth an abundance of disappointing results”. My neighbor would simply say “It’s time to get off the fence and do something”. No matter which quote moves you, let it move you forward with a plan and a pathway.
Download a PDF of this article here: Fence Sitting – Byron Farquer, DVM, AVA