Insurance for practice purchase FAQs

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There are many misconceptions about the role that insurance plays in your practice purchase. Often, buyers will be too busy with business plans, arranging finance, renovation or reinvestment to spend much time thinking about insurance…

When insurance is thought about during the purchase process, it is often dismissed as discretionary, optional and overly pessimistic…that is, until the buyer gets close to the finish line and realises that their finance provider and/or landlord may only approve your loan or tenancy if insurance cover has been arranged.

We asked the experts at Credabl finance and Experien Insurance Services (Experien), to give us clarity on what insurances a buyer may need to have in place to complete a practice purchase. 

Q1. What insurance/s would you typically need to have to get a bank loan to purchase a vet practice?

In many situations, a bank will want Life Insurance, Income Protection and/or Business insurance in place as a condition of the loan. The insurances required can vary on a deal-by-deal basis, e.g., a high loan-to-value ratio may trigger this.  Unfortunately, the risk of illness, injury and other perils may not be insignificant over a long period of time, and so the bank will want to know that insurance is there to protect the ability for the loan to be repaid, should this happen.  This would protect the borrower and the lender and, most importantly, your family and your investment.

If applicable, the bank will most likely:

want the insurance in place prior to the loan being settled and/or in the process of being established.
require ongoing confirmation that the insurance is in place and, in some situations, they may own the policy (with the borrower paying the premiums) to ensure any claims paid go to the intended purpose.
require to be named on the policy as a “interested party”, to give them adequate protection.

Q2. What insurance/s would you typically need to have in a commercial lease of a vet practice premises?

Landlords will usually request $20Mil of Public Liability and also Glass insurance as a minimum requirement, in order to approve a lease of their premises. Some may want comfort that there is also insurance for the contents (including the fit out). And, in single-tenanted buildings (e.g., a stand-alone house converted into a practice), the landlord may require the tenant to pay the cost of the building’s own insurance.

Since most practice sales are subject to the purchaser either purchasing or leasing the premises, and the premises lease is dependent upon insurance…it is a good idea to be looking into insurance for the premises with plenty of time up your sleave, so as not to hold up settlement of practice purchase.

Q3. If you are planning on buying the Real estate premises with the Vet Practice…,would you need additional insurance/s?

For lending purposes, you will need building insurance to cover the replacement value of the property. This is a figure typically stated in a valuation report. In other words, cover and purchase price are not necessarily correlated.

An exception to this will be if it is a body corporate, then it will automatically be included in the body corporate fee.

Q4 What information would you need to provide in order to get these insurances and how long will it take?

Depending on the type of insurance required, getting insurance can take as little as a couple of days to as much as a few weeks to set up.

Gathering the necessary information to apply for insurance can take time, for example:

life insurance policies may need a medical assessment
Premises lease – an insurer might need construction information for the property

The emotional decision to sell

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In order to effectively negotiate any deal, you need to be able to understand the person on the other side of the negotiation. You need to know what their fears and motivators are. Somehow though, buyers often misjudge the emotional journey that a seller is going through towards the end of their career.

Most buyers on the journey into ownership see a business solely as a source of increased wealth creation. A means to a financial goal. They think that when an owner decides to sell their practice at the end of their career, they must also be looking at the transaction as primarily financial in nature. They assume that the owner must have come to the decision to sell having achieved their financial goals and/or arriving at this juncture excited about the impending release of capital, responsibility and obligations.

In my experience, when a vet is coming to the end of their career and decides to sell their practice, the emotional journey that they are going through is usually much more complex and it is very rarely primarily a financial assessment that makes them proceed with the sale.

While a business owner will naturally always want a good price for the practice, the actual decision to sell at the end of a career usually has more to do with reallocation of time than financial capital.

Their age or health or an event (health of a friend or family member) “wakes them up” to the opportunity cost of time. There is a desire to reduce stress, get rid of the admin and compliance involved with ownership, have more holidays and spend more time with family (spouses, children, grandkids) on hobbies (golf, sailing, fishing, etc.) or travelling.

Even though they realise that it is the right time to start making the transition out of ownership, and even though they want to reallocate their time, it isn’t usually a decision that sits 100% comfortably with them.

When a business owner calls their business “their baby”, it is because they have an emotional attachment to it. They have cultivated and nurtured the team and patient base over decades and generations, celebrated its successes, mourned its failures, seen it mature and grow. As with any longstanding emotional attachment, saying goodbye is not an easy time.
Selling is usually a big step into the unknown for the owner. As with any major change to the status quo, there is usually a sense of fear of what they will be trading the predictability of their current lives for. They often don’t know themselves anymore without the practice, and there is a very real concern of losing their sense of identity and relevance with the sale of their business. Retirement is something that is easier to phase into rather than jump into all at once.

As a buyer sitting across the negotiating table from a seller, you would be wise to be sensitive to the emotional journey that the seller is going through.

Be gentle with any critique of the practice while you negotiate. To the vendor, it is not just a Profit and Loss and asset list; it is the inner workings of their lives. The number of active patients isn’t just a number to the seller; it represents relationships that span decades and generations.
Recognise that just because a seller wants to sell, get rid of the burdens of ownership, and cut down their time at work…this doesn’t mean that they want to retire…at least, not straight away.
Assure the seller that they will be able to work in the practice post sale, if they so desire, and can phase out of the practice at a rate that they feel comfortable with (from 4, to 3, to 2 days a week, taking long holidays each year). This should be in the buyer’s interests too, as it will minimise patient attrition.
Assure the seller that you appreciate their experience, won’t treat them like a new grad, won’t micromanage them, and will give them the clinical independence and respect that they deserve.
If you can tell the seller that you want to keep the staff in their current roles and conditions, it will help put their mind at ease that their staff will be taken care of. Assure the vendor that you appreciate the special place that the practice is, and that you will do right by their legacy.

As a buyer, your challenge in negotiations is to emotionally put yourself in the vendor’s shoes. If you are able to show a vendor that you aren’t just the right fit financially, but that you are also the right choice of buyer from a compatibility viewpoint, you will find that you have a much greater chance of placing the winning bid.

Vet Premises Council Zoning FAQs

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There are a lot of misconceptions out there among vets who are buying practices, about the council zoning required for a vet practice. Can you put a surgery in a retail shop and start practicing? Can a vet practice operate in an area that is zoned “commercial”, or does it need special purpose zoning? What happens if your practice is operating under the wrong permit?

To provide some clarity in this regard, we thought we would answer some vet practice zoning FAQs.

Q1. What is council zoning?
A1. Councils divide land into different areas, or “zones.” The zoning of a piece of land determines how you can use it. An area zoned “residential” might only allow houses to be built on the land, while an area zoned “commercial” might allow retail stores and other businesses to be built there. Permitted uses for these zones can be found online, in each council’s planning scheme.

Q2. Can a vet practice operate in any area that is zoned “commercial”?
A2. Generally speaking, the answer is “No”. To operate a vet practice, you need two approvals – the first being a permitted use approval, and the second being an approval for the build or fitout.
If the premises is located in a retail or office building, you may also need the permission of the body corporate. There are many buildings that do not allow vet services to operate within the building, even though the zoning may permit it.

Q3. How can I work out what current zoning/usage approvals have been granted on my premises?
A3. You can:
• Call your local council and ask if there are any approvals on record for the establishment of the practice
• Ask the landlord/property or business vendor for copies of the approvals
• Explore the DA Search component of your local government website

Q4. What are existing use rights?
A4. Sometimes, a vet practice will predate the zoning ordinances of the council. When this happens, the practice will usually have an exemption from any newer zoning restrictions or compliance requirements.

Q5. If the zoning allows for a vet practice, can I operate the practice however I want?
A5. A Council zoning approval doesn’t just dictate the type of business that can be established on the site. It can also dictate other parts of the usage. For example:
• The hours of operation (it can say no trading in late evenings or weekends, for example)
• There are some zoning permits that dictate that a % of the premises has to be used for residential purposes.

Q5. How can the incorrect council zoning usage influence my practice sale?
A5. A large part of a practice’s goodwill is often tied to its ability to trade in its current location into the future.
A buyer’s lawyer is there to mitigate the buyer’s risk. As part of this risk mitigation, a buyer’s lawyer should check the council zoning to ensure that the practice can continue to trade as it has into the future. If it is discovered that the practice is operating in a way that is in contravention to the zoning permit, the lawyer will often advise their client to either adjust the terms (reduce the price) of the deal, or not to proceed with the purchase until the zoning is fixed.

Examples of sales where we have seen this happen include:
– A practice operating in a residential conversion building that has approval for commercial use, but not a vet practice.
– A practice for sale on a premises that has zoning approval for a vet practice, however, it also prohibits Saturday trading…and 20% of the practice’s billings were being done on a Saturday.

Q6. What happens if my practice is operating in a way that isn’t allowed for within the original approval?
A6. Often, this can occur innocently enough, simply by the organic growth of a practice over time. In our experience, this can often be fixed in a few months by an application to the council. You may need advice from a town planner.
This is another reason why you may want to exit plan well in advance of when you wish to sell your practice.

Vet premises lease FAQs

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There are a lot of misconceptions out there among veterinarians who are buying practices, about the moving parts in a Vet premises lease. What is and isn’t negotiable? What is attractive to a landlord? What should and shouldn’t they ask for?

To provide some clarity in this regard, Practice Sale Search interviewed Tal Eloss, founder and director of 1Group Property Advisory. Tal and 1Group Property Advisory have extensive experience assisting and representing veterinary professionals with their property and practice-related acquisitions.

Q1. When comparing commercial rent in an area, do you do this only per square meter?
A1. The rental rate per square metre can vary greatly even within a small geographic area. A premium is usually paid for the follow attributes, which include but are not limited to:
• Inclusions (e.g., parking or signage rights)
• Exposure (a high-exposure spot commands a higher rent per square metre)
• Aspect (good natural light, a view)
• Quality of the building (e.g., new vs old)
• Position within the building (closer to entrance in a Shopping Centre, proximity to a desirable neighbour,
etc.)

Q2. Are Veterinary practices attractive tenants to landlords?
A2. Absolutely, healthcare tenants are extremely attractive to landlords for the following reasons:
• Firstly, their professional and financial standing, in addition to the investment they make to the subject premises, make veterinary practices extremely desirable and secure tenants.
• Secondly, and perhaps most importantly, a tenant who is a Vet-tenant adds value to the landlord’s asset. The value of a commercial premises is directly attributed not only to the rental yield, but also to the strength of the tenant.
For example, if two identical properties received the same rent, with one being rented to a kebab shop and the other being a vet, the site with the vet would achieve a higher valuation, as they are seen as a stronger, more stable and more secure tenant.

Q3. Do vet practice buyers have much scope to renegotiate a lease that is currently in place when they buy a practice?
A3. There seems to be a common misconception out there that practice owners have just as much power to negotiate premises leases at any stage of the practice’s existence at the site. This just isn’t the case.
A tenant will usually have the strongest negotiating position in lease negotiations when:

• a landlord has a vacant site to lease out; a vacant site can often place the landlord under financial stress, which may in turn lead to a stronger negotiating position. As mentioned above, Vets are highly sought-after tenants (see A2) and if the zoning of the property is appropriate a landlord should be considerably more negotiable to secure a vet, as opposed to another tenant.

• the seller of the business is also the owner of the real estate.
It is extremely important for a tenant to use this strong negotiating position to get a lease with favourable terms, pricing and incentives (in that order).

A tenant will have less strength in negotiations when:

– there is already a successful vet practice tenant in the facility near the end of lease term. While the tenant can threaten to relocate, the landlord is likely to know the significant cost of having to find another suitable site, fitting it out and the difficulty in relocating in general.

A tenant will have the weakest negotiating position in lease negotiations when:
– there is already a successful vet practice tenanted to the premises and the lease term has a few more years remaining. In this scenario, whilst the landlord should generally be happy to assign in line with the lease terms, they will be much less likely to want to renegotiate the terms of that lease unless they are able to achieve a better outcome.

Q4. Do the landlords need to accept the new tenants when a practice is sold?
A4. The vast majority of leases will contain an assignment clause, which compels a landlord to act reasonably if the assignment of an existing lease is requested. As long as the new prospective tenant is someone of good character and sound financial standing, they should meet this criteria; however, judging character and financial standing is subjective and the landlord does have some discretion with how they measure this (references, bond, statement of assets and liabilities and a business plan all could be employed to qualify a prospective tenant).

Why Get a Business Valuation?

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ValuVet has been valuing vet practices across Australia for over 25 years.
Many people feel that the only time to get a business valuation is when you are about to buy or sell a business. While this is a reason that many people come to use our services, there are actually many, many reasons that business valuations are needed.

Here are the top 10 reasons why people are requesting valuations be done on their business (note, these reasons are not in any particular order).

1. To set a price when selling a practice
Some people who are selling their practice will set a price themselves and base their appraisal upon:
– their (often misunderstood or misapplied) understanding of articles they read online about valuation techniques or
– what a friend in the industry said that they received, for what sounds like a similar practice (buyers and sellers are often unreliable narrators of their own transactions and the metrics of their practice) or
– what they need to pay off loans and achieve for their lifestyle post sale.

A vendor valuing their own practice gives the perception of being emotionally compromised, and it often leads to disastrous results. It could mean that they either miss out on substantial value (if they undervalue) or price themselves out of a sale entirely (if they overvalue).

Getting a professional appraisal done:
– allows a level of objectivity in the appraisal, as it is done by an independent industry professional
– means that the valuation is based upon known comparatives
– gives the buyer and their banks a structured approach for how the value was arrived at.

2. To do exit planning
Getting an appraisal several years before selling allows the seller to identify weaknesses in the practice that could affect the achievable price if it were to be listed for sale, and do some course correction if necessary, in order to get a better result.

3. To plan for retirement
Many people are relying upon the sale of their practice to help fund their retirement. If you are in this category, getting a sense of what your practice is worth should help you get a sense of when you can afford to retire.

4. To do business planning
Even if you don’t plan on selling, getting a regular valuation is a great way to measure business improvement and create a strategic roadmap to create value going forward, and shape the future growth of the company.

5. For partnership buy-outs
Partnerships don’t always work out. If a part-owner decides they want out of a partnership, an independent business valuation will usually be required to arrive at a fair settlement of ownership interest.

6. For succession planning/internal divestment
If your exit plan involves a partial or complete internal sale to an employee in the practice, the price will usually be set via an objective, independent business valuation. Internal sales may be planned years in advance, and getting an appraisal done early can help all parties understand the size of the pending transaction better and prepare for it.

7. In order to price a practice for purchase
If your career strategy includes buying a practice or merging with another practice, a business valuation will help you determine if the price you are being asked to pay is a fair one.

8. In order to fund other purchases
If you are looking to borrow money for any reason, you may need to secure the loan against your assets. If you are ever looking to secure a loan against your business, your financier may need an objective valuation to be done.

9. For insurance reasons
Business owners will sometimes pursue a valuation to determine a value necessary to cover their business’s value if something were to happen to them. If something happens, the insurance could pay out the value to the owner’s family to continue the owner’s role or buy themselves out of the owner’s role.

10. For Divorce.
If a business owner is going through a divorce, an appraisal is usually needed for an equitable division of assets.

Don’t become a boiling frog in business ownership

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There is an urban myth that if a frog is suddenly put into a pot of boiling water, it will jump out and save itself from impending death. But, if the frog is put into lukewarm water, with the temperature rising slowly, the frog will keep trying to adjust and climatise…until it’s too late.

Whether the urban legend is accurate or not, the term “boiling frog syndrome” is often used as a business metaphor to describe the slow, stealthy creep of compromise and complacency, and the failure to act against a problematic situation that will increase in severity, until reaching catastrophic proportions.

The business ownership equivalent of the “Boiling Frog” syndrome is observed more commonly in vet practice ownership than you would think, especially towards the end of a veterinarian’s career. Many once-successful business owners have become mediocre or poor business owners, only because compromises occurred so gradually and incrementally, that they either went unnoticed or they were small enough to make the rectifications that were needed more difficult than getting used to the new normal.

For example, If I told successful business owners that in 5 years their business would have 30% less turnover… most would either start to make drastic changes in the way that they operate, or they would sell now, before the lower revenue compromised the value of the practice.

However, in my experience, if the business reduces its revenue by 6% on a compounding basis for 5 years, there will be a creeping attempt by the business owner to normalise the shrinkage. They give excuses as to why the reduction is temporary (part of an industry-wide trend or business cycle, or ‘business is tough in this area just now’), or by choice (if I worked as hard as I used to, the business would be back in a second). This is the equivalent of the frog treading water that is slowly being heated up, hoping that the heat will eventually go away or that they will grow to be comfortable. 

Below are some other examples of small, incremental compromises that can creep into a business, which can severely compromise its value if not caught in time:

  • Staff pay rises above industry norms.
  • Being reluctant to increase prices, even though the costs of production (wages, rent, consumables) are all going up every year.
  • Paying for marketing that is not bringing in a proper return on investment.

Sometimes, an owner operator’s final years in business ownership are marked by a trend of incremental compromises like these, which compound over a few years. If the owner doesn’t have the resources (time, energy, capital) or desire to turn this around, they become like a frog in pot of water that is slowly being heated up.

When this happens, the timing of the business owner’s exit is paramount, not just to the financial wellbeing of their business, but also to themselves post sale.

It is important to realise that in the “Boiling Frog Syndrome”, the frog was not killed because of the boiling water. The frog was killed because it didn’t jump out in time.

5 reasons why smart business owners sell strong businesses

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One of the first questions that a buyer will ask when a business is for sale is “Why are they selling?”.

When the business is strong and the vendors seem young and healthy, buyers will often show some incredulity and/or suspicion about why it is for sale.

There seems to be a misconception out there that a successful business owner will only ever buy, grow and accumulate businesses. That when they decide to sell a business, it can only be if they are retiring, sick or if there is something wrong with the business that the buyer cannot see yet…

This is an incredibly narrow and pessimistic view of what it is to be a successful business owner.

Successful businesspeople sell their businesses for many reasons that have nothing to do with the underlying prospects of the actual business being sold. Any successful business owner should consider selling any business when they realise that one of the following has occurred:

1. If they realise that their time and/or resources is better spent elsewhere.

One of the things that makes a person or company successful in business is that they seem to understand the inherent opportunity cost of their time and resources.

Every business owner has limited/finite time and resources and needs to decide where to allocate them. Not every business opportunity operates at the same ratio of time/effort to profit/return. Some businesses are more time hungry and require more effort than others.

When a successful business owner is selling a business, it is often because they could allocate those resources to another business that they already have (that needs more attention or investment) or to another business that they wish to buy.

This doesn’t mean that the business they are selling is not good. The business may be an excellent business, but just isn’t a good fit for their circumstances and their business holdings/portfolio at the time.

2. If they realise that the business is worth more to someone else than it is to them.

The current owner lacks the skill, time or inclination to reach the full potential of the business, for example, referring out any surgical procedures that aren’t simple and routine. This business would be worth far more to another owner with a surgical interest.

3. If they realise that they have extended beyond their ceiling of complexity.         

Business owners that become successful often feel they now can replicate the formula with a second location or business, then a third. Many (most) will grow until they hit their ceiling of complexity.

For many, their ceiling of complexity will be their ability and capacity to delegate, manage, hire, inspire and keep good staff. Their initial business did well because it had 100% of the owner’s attention and time. Once they reach their ceiling of complexity each additional business they have:

  • has diminishing returns because the owner’s attention and time will be diluted and there is no one onsite with an ownership mentality AND/OR
  • Starts to diminish:
    •  the performance of the original business/es
    • Their relationships with their family and friends
    • Their mental health

If someone is good at juggling and you hand them one more ball than they are used to, they don’t just drop the extra ball…they start to drop all of them. If the business owners in this category cannot raise their ceiling of complexity, they are better off selling the additional business and consolidating their holdings to a point that they are comfortable with.

4. If they realise that their business would be worth less in the future under their ownership.

A business owner’s final years are usually less productive than the years that preceded them. These business owners tend to prioritise lifestyle (as they should) and work less hours per week, weeks per year.

If a business owner starts to see a decline in the turnover and profit of a business that they own, and don’t have a plan or inclination to reinvest time and energy into it, it would make sense to sell now, before the value decreases further. If they want to continue to work, they should do so as an employee/contractor in their old business.

5. If they only bought the business to build up and sell.

There are two main ways to make money out of business ownership:

  1. Profit. What the business makes after all expenses are paid, including the principal’s salary.
  2. Capital growth realisation. Buy low, build up and sell. A good example of this business model is with property developers.

Some practice owners fall into this third category. They have no interest in buying a business and running it for the rest of their careers. They want to buy something cheap, with potential, fix it up, show buyers that the growth is sustainable and sell it for a profit.

Interview with Jim Martin, founder of ValuVet

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Who started ValuVet?

Where and how did it all start?

We thought it might be a good idea to go back to the beginning. We were lucky that ValuVet’s founder, Dr Jim Martin, agreed to come out of retirement (at 86 years old) to be interviewed about his career and to tell us about the early years of ValuVet. Enjoy!

Tell us a little about your career

I graduated in 1962 and was bonded to the QLD govt for 5 years. They sent me to Charleville, where I was the only vet for most of the time. I loved it, but when I was done, I wanted to go into private practice. I moved to Coonabarabran for 3 years, then set up my own practice in Dubbo from 1971-1983. While I was there, the practice expanded at an exponential rate. I went from 85% large to 85% small animals.

In 1982 I put my practice on the market. I went to a bible college for 12 months after I sold. I moved to Sydney with my family and started assembling anaesthetic machines in my garage, so I sent out newsletters to vets telling them about it. Eventually I developed it into a business selling anaesthetic machines. I opened a factory in Sydney, and it kept growing. The company was called Easy Veterinary Equipment, we had a staff of 28. I bought in 2 partners and engineers. We expanded to use computerised machinery, and ended up getting into the medical market as well.

So, how did you go from selling machinery to valuing vet practices?

In 1996 I sold Easy Veterinary Equipment to my partners. I didn’t know what I would do next. I had been the largest manufacturer of veterinary equipment and I had great contacts from it. I wanted to maintain a close contact with the veterinary profession, I just loved it.

Then, by chance, that same year, a practice asked me to value their practice and I did. The people I did the report for were very happy with what I’d done, and from that I picked up some more clients. I started reading about Vet practice valuations in the US and I got an accountant to work with me.

I started sending out 6 newsletters a year in the mail and it quickly became a full-time job. After a few years I had to enlist the support of Tony Thelander to assist and, after another 4-5 years, had David MacPhail and finally Hugh White helping as well.

Over the 10-year period that I ran ValuVet, I performed in the vicinity of 500 practice appraisals.

That is how ValuVet got started. The whole thing was an accident, it all just happened.

ValuVet seems to have always been run by vets (first you, then Tony Thelander and now Paolo and Anne Lencione). Do you think being a vet gave you an advantage or extra insight into vet practices when you were valuing them?

I did feel that having run large and small animal practices myself and having experienced some of the stresses of a busy practice helped me, as a vet, identify with many of the reasons why vets had their practices valued, and appreciate which factors contributed most to practice value.

When did you retire?

In 2006, I turned 70. I had started working less, but eventually at 70 I was too tired and stopped. I said to Tony Thelander, “either you buy it or I will put it on the open market”. I helped for a little while afterwards.

How did you fill your time after retirement?

I went to live in Queenstown at our place there for 6 months of the year, we loved it. I would have retired there, but my wife had health issues and we needed the professional help in Sydney. We then moved to Orange in NSW and we love it here. We have been here for 10 years. I grow roses, fruit trees, it’s amazing.

I got more involved with my church over the years; we run Alpha courses, about the Christian faith. I completely left the veterinary world behind, except I play golf with a few vets 3 times a week. We have a beautiful golf course in Orange. I am 86 this year, the golf keeps me fit and alive.

Interview with Tony Thelander

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Tony Thelander has been a prominent figure in the Australian veterinary industry for more than 40 years. Starting out as a veterinarian, he has taken on multiple roles in both the business and management side of being a vet. We asked him to share some advice, from what he has learned over the last four decades from both a career and business perspective. 

Q1. Tell us a little about your Veterinary career.

  • I graduated from University of Queensland in 1970.  My first job was with a well-known Brisbane small animal practitioner who turned out to be a very good mentor. After two years, I became a partner in a practice at Chermside (which is where I stayed until I sold the practice in 2007). 
  • In 1997 I completed an MBA. I saw the need to run veterinary practices (mine included) more professionally as a business.
  • I became friendly with Dr Jim Martin who seemed to be exhibiting his veterinary equipment at every veterinary conference I attended. Jim had started a veterinary practice valuation company called ValuVet in 1996 and he asked me to accompany him on one of his practice visits. I ended up buying the company in 2006 and running it for the next 15 years.
  • I sold my practice in Chermside in 2007 to concentrate on the consulting work with ValuVet – I balanced work at Valuvet with regular locum work
  • I sold ValuVet in 2018 and I continue to do regular locum work to this day

Q2. With your background and experience in running practices and valuing them, what 4 things do you think that owners commonly get wrong?

The major areas of practice management that owners miss when trying to build their practices are (in order)

  1. Missed or low fees – as a profession, we simply do not charge enough for the high-quality service we provide. 
  2. We fail to re-invest in our businesses, leaving us to offer our clients and our patients an often sub-optimal service. 
  3. Through lack of skill or otherwise, we do not look after our staff as well as we should, thus creating all sorts of HR problems for the practice owner, and branding our profession as a poorly paid, high-stress workplace. One could say that the consequence of problem #1 (low fees) has a direct bearing on #2 and #3.
  4. Practice management has emerged as an essential part of running a business –there is a need in today’s business environment for larger practices to employ a ‘practice manager’ to allow the veterinary practice owner to practice their trade.

Q3. Why did you sell the practice?

I had always hoped that one day, my practice would provide for my retirement. The closer I came to the end of my full-time practicing career, the more I began to focus on the ‘bottom line’ of the business – in other words, I became a better business manager. My ambition (as it was for my ValuVet clients) was to sell my business on my terms and at a time of my choosing. I have no real regrets in selling my practice – I think I went out at the top of my skills and have been able to enjoy my after-practice time thus far. 

Q4. Tell us about life post-sale

My wife Ros and I have been fortunate to spend time travelling the world, participating in our children’s and grandchildren’s lives and activities (I have become a rowing coach at my grandsons’ school). In the quiet times, I am able to help a couple of my practice-owning colleagues out by locuming and training their staff in veterinary dentistry.  I am also a mentor to young veterinarians starting out in their careers.  Is this retirement?  Probably not, but to me it is fulfilling and flexible enough for me to pursue life at a pace of my choosing – I consider myself fortunate to still have so many options in life without the burden of owning and running a business.

Q5. From its beginning and to this day, ValuVet has always been owned and run by veterinarians.  What advantages do you think this gives ValuVet in valuations?

My clinical expertise assisted me enormously in communicating with my colleagues when I visited them with my ValuVet hat on. Understanding exactly how equipment is used, the complexity of different tasks and having first-hand knowledge of the operations of a practice creates a depth of understanding that an accountant or general valuer cannot match.  As a veterinarian I was able to greatly minimise the assumptions that non-veterinary valuers are required to make when valuing veterinary practices.  A practicing veterinarian observing from the outside can easily identify and uncover a practice’s risks, opportunities and strengths and at the same time, understanding our clients’ needs – I believe this has always been a core strength and is what differentiates ValuVet from other veterinary valuers.

Q6. Looking back at your career what Career Advice do you have for Vets starting out?

  1. Become involved in your professional association – you get back far more than you ever put in! Membership in Veterinary professional associations helped to keep me stimulated and interested in what was happening in our profession. It also led to my:
    • becoming a founding director of Provet Supplies (yes, it was started here in Brisbane in 1982 with five Queensland veterinarians as directors) and the first Animal Emergency Centre in Brisbane. 
    • becoming a hospital inspector for the ASAV hospital accreditation scheme for 10 years.
    • holding leadership positions in my chosen professional associations, becoming an external examiner for final year veterinary students at my own University, building two accredited hospitals and to have a second career as a veterinary business consultant – all of which I enjoyed immensely.
  1. Develop a hobby or an external interest as you go – don’t wait till you retire to do it.
  2. Build your network of friends and colleagues as you go – they will be there to grow old with you when you retire.
  3. Maintain your professional skills and your business right to the end.
  4. I am amazed at how time flies, so don’t waste time with the wrong people in life and take your opportunities as they come along. 

From veterinarians to veterinary accountants: An interview with Paolo and Anne Lencioni

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While most people reading this will have worked with Paolo and Anne Lencioni, not many people know their story.

How did two South African vets end up market leaders in veterinary practice accounting and valuing in Australia?

We recently sat down with them to ask them about their journey, their extremely varied and colourful professional history, working through multiple degrees, professions and countries and the unique perspective this gives them in the veterinary industry.

Q: Where did you start your veterinary careers?
P & A: We both studied veterinary science in South Africa, but we never worked there. Two days after graduating, in 1995, we left and went on a working holiday to the UK, from which we never returned.

Q: Where did you meet?
P & A: We were in the same class at vet school. We were put together in anatomy class to share a box of bones for the first part of the course, which detailed every bone in all the species. The box contained about 100 bones from 3 species (dogs, cattle and horses).

Q: What made you leave being a vet behind and move into accounting and valuing?
P & A: Leaving veterinary was not a planned event. We opened our own start-up practice and realised that with our vet course, we were very lacking in certain skills: Business, software/IT, tax and accounting.
Anne enrolled for an MBA through Edinburgh university and Paolo enrolled in a City and Guilds computer programming diploma. After completing these, we both enrolled into accounting as we thought that it would provide us with the necessary skills.
We did all of the above while we owned and worked at our practice and completed our studies by correspondence/distance learning, graduating in 2006.


We moved to Australia at the end of 2005. Once we got here, we thought it would make sense if we exposed ourselves to working as accountants rather than as vets, just to see what it was like. After doing this for a few years we could see that there was a demand for a niche accounting firm that focused specifically on vet business. We thought about buying an existing accounting firm and changing it over slowly, but then decided to just do a start-up. The business grew reasonably quickly, and valuation work became part of the service because it was something a lot of our clients needed.

Q: Is there anything you miss about being a vet?
P & A: Because we are very involved with vet practices, their challenges, problems and even their standards of care, we don’t really feel like we have left the profession. We are both animal lovers and dealing directly with animals is probably the thing we don’t do as much and miss. Anne makes up for this by rescuing dogs and keeping them in the office with us all the time.

Q: What brought you to Australia?
P & A: The move to Australia was a lifestyle choice. The UK was never intended to be a long-term thing and after 11 years there we decided to travel a bit and look around for somewhere better to live. Australia won by miles, we could not find anywhere better.
Even after completing the first stage of our North American Vet board exams, we still decided that Australia was a better place.

Q: Were you both equally motivated to make the career and geographic changes, or was one of you more enthusiastic than the other?
P & A: We are lucky that we seem to agree very quickly on the big decisions. So we jointly made the decision to sell the practice and move to Australia. We also both agreed that Australia was the first choice over and above the other places we had been to and shortlisted. With regards to the career moves, we also decided jointly to do it, as there seemed little point in one of us studying all weekend and the other sitting around doing nothing – we had always studied together at vet school anyway so this was not so different.

Q: You’ve worked in the vet industry in several countries – I realise that it’s been a number of years, but what struck you as different about the Australian industry when you got here?
P & A: I think the main difference is that practices in Australia focus more on servicing a lower number of clients better. In South Africa and the UK practices tend to have shorter consulting times and a higher volume of clients. The rest is essentially the same.

Q: If you still have connections with the industry overseas, what do you think the Australian vet industry could learn from the overseas vet industries that you worked in and what should they be learning from us?
P & A: We don’t think there is anything specifically better or worse about practices in Australia vs practices in the UK. What does exist in all countries are practices that are well run and practices that are run badly. I think that the profession needs to learn from each other, focusing on what well-run practices do. And one of the things that well run practices do is that they are run as a business and the partners/owners have an interest in business. This does not mean that they care for their patients less and don’t like being vets, in fact they care about their patients more – but they make calculated financial and strategic decisions on buying better equipment, supplying better facilities, recruiting better staff, managing their staff better and paying their staff better.
Perhaps something to learn from this is that the veterinary curriculum is lacking in any courses that lead prospective vets to understanding business, and it would be a good idea to introduce some form of formal business training into the veterinary courses.

Q: ValuVet has an interesting background as the only valuation company that has always been run and operated by vets (first founded in 1996 by Jim Martin, then run by Tony Thelander 2006-2018 and now by you). What ‘edge’ or advantage do you think this has given ValuVet over general accountants when valuing a vet practice?
P & A: It’s very difficult for a generalist accountant to know what a business is worth if they don’t know what the market for that industry looks like. Whilst the greatest part of a valuation is objective and looks at very specific financial parameters, the final part of establishing a value requires industry knowledge. And this is why Valuvet has succeeded, because there has always been veterinary-specific knowledge present. For example, how can you say a coffee shop is worth the same as a veterinary practice if they make the same profit? You can’t, because the risks are completely different and the current economy may be treating one industry better than the other. Also, the way clients are ‘bonded’ in a veterinary practice where the business knows their names, addresses, mobile numbers and usually the names of their entire family, is very different from a coffee shop where none of this is necessarily known. For these reasons, an accountant who works on a lot of coffee shops and restaurants can value coffee shops and an accountant who works on a lot of vet practices can value vet businesses. As a rule of thumb, we would say that if an accountant does fewer than 10 valuations for a particular business type a year, then they probably don’t get enough exposure to know what the market looks like for that business. So “how many veterinary practices have you valued in the last year?”  is a good question to ask any accountant/valuer before you pay them to do a valuation.