In most cases, you can only sell your practice once so if you want maximise the return on your investment you need to make it easy for buyers to see opportunity in buying your practice. Most practices we value are for sale (either to an incoming partner of as an open sale) so the following are issues that we commonly encounter:
- Start early enough! 3 – 5 years can be a good lead time for setting up a practice for sale. Sadly we encounter practices that are just not ready to sell (even though the owners are) – to sell in the current situation would be to almost ‘give the practice away’. Given a practice
development plan (part of our service) and a bit of time to make some changes, it is possible to make a huge difference to the practice value and often for very little outlay. It makes good sense to get your practice valued (it is never a wasted exercise) as soon as you have decided to sell because if the value is less than you were counting on, at least you will have a benchmark
and hopefully the time available to improve on it.
- Keep accurate and well-presented financial records. A lot of vets do their own book keeping and with rare exception, this can always be done more professionally and accurately by outsourcing to a qualified person who is able to communicate with and keep your accountant
happy. When selling a practice or for ongoing financial monitoring, it helps if your accountant can present your books with at least a 2 year comparison.
- If you are putting money in your back pocket (it’s tempting not to if it’s your own business) then stop immediately. When valuing a practice we can only account for the money on the books, not what might be going elsewhere. Apart from being illegal, there is no good business reason why you will profit in the end from redirecting practice funds.
- Vets are chronic under-chargers for their services and in most cases it is the practice principal who holds the practice back on this one. If you have not done so recently, participate in a fee survey (I am happy to recommend MPV as being well constructed, informative and statistically sound). This will at least give you some idea what you are missing out on and give you an opportunity to selectively adjust your fees to a more competitive level.
- HR issues will affect staff morale, productivity and ultimately the value of the business. If you have existing staff issues, it is best to sort those out before handing the practice on. The new owner will not be impressed if he or she has to inherit problems that hold the practice back – they may quickly come to the conclusion that they have paid too much for the
- Keep some KPIs (key performance indicators) on your practice activities and performance – it places the vendor in a much stronger position with regards to justifying a ‘price’ for the business if you can exhibit practice growth over a number of key practice areas. If I were purchasing a practice, at the very least, I would want to know how many ‘active clients’ had visited the
practice in the last 12 months; how many invoices were written and what the practice turnover (ex GST) was for the same year period. Practices that show negative growth will be marked down of course but much less so if good records are kept, so the source of the problem
can be identified.
- Be transparent with staff once you have decided to sell – the truth always comes out eventually (often with a certain amount of mis-information, thus creating morale problems) and it is far better to control the situation with the right information and at the same time reassuring
your team that you will do everything to ensure the continuity of their jobs after the sale. In my experience, most practice purchasers do not want to ‘rock the boat’ when then take over and provided there are no HR issues left unsolved or staffing inefficiencies that need correcting for the business to operate profitably, they are only too happy to go forward with the existing staff.
- You will get the best price for your practice if the business is able to operate without you. In other words, there should be sufficient practice management systems in place that the practice literally runs itself. Very few practices ever reach this level (some do) but you need to manage the practice like a business and be prepared to delegate various duties to appropriate staff members or outsource if you have to. The best test for this is to go on a decent holiday and see if the practice income is maintained.
ValuVet can perform an assessment on your practice to identify areas of weakness that need to be fixed in order to maximise practice profitability before sale. Most practice owners put a lifetime of hard work into running their practice and for many, it forms a goodly part of their superannuation so there is nothing wrong with maximising that investment when the time comes – it is your right to do so.