Interview with Jim Martin, founder of ValuVet

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

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

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.

Running a successful business is not a sprint or a marathon…

There is a common saying that running a successful business and having a successful career is a “marathon, not a sprint”. The saying is meant to remind people to think long term, to pace themselves and have longevity in mind, rather than just short-term results.

At first, the metaphors of the sprint and the marathon may seem a fitting comparison for a business and/or career. They bring to mind images of results-focused individuals putting whatever they can into their respective races, to get the best result they can. People committing themselves to getting ahead and staying ahead of the competition.

However, when you look at the complete lifecycle of a business, the metaphor is flawed. A marathon or sprint implies a race where you are supposed to exhaust all your resources to get to an end point ahead of your competitors and, as such, it misses an important measure of a successful business and career. Surely one of the measures of a successful businessperson is whether they have built something that will carry on after they have gone…  something that is sellable?

Famous successful businesspeople (Ray Krok with McDonalds, Steve Jobs with Apple, Bill Gates with Microsoft, Ingvar Kamprad with Ikea, etc., etc.) are seen as such, not just because of what they were able to build themselves, but also because they were able to build something that was more than them alone. They were able to exit, and the business survived and thrived after their exit.

In this respect, if we are going to compare running a successful business with a running race, it is much more like a relay race than a sprint or a marathon.

For those unfamiliar with the relay, it is a race where several runners from the same team take turns running. Each runner runs their interval of the race to the best of their ability; at the end of each runner’s race, they need to pass a small rod—the ‘baton’—to the next runner, without slowing down, giving the main responsibility for the race to someone else from that point forward.

Having a successful business and career involves being focussed both on your individual race and being able to ‘pass the baton’.

Your individual race is incredibly important. As a vet, the measure of this will be your ability to gather a large and loyal client base and run a profitable practice for many years, with a good reputation for ethical and quality clinical work.

Working out how to “pass the baton” successfully in a business means having an exit plan, so that you are able to sell your practice at the end of your time on the track. Without this, you will miss out on a significant financial component of your career and your business/practice’s legacy will end with you.

When a business owner understands this, they start to shift their business game plan and the way they approach practice decision making, recognising the larger strategy of building towards a handover event. For example:

  • Ensuring that the lease on your premises has more years than you will need, so that the person that comes after you will be secure.
  • Maintaining and reinvesting in your practice fit-out and equipment, so that it lasts beyond your time there.
  • Understanding that your time in practice is not about depleting all of your resources to squeeze the most out of your time on the track, but instead pacing yourself and recognising the impact of fatigue, so that you can pass the baton while still in full stride, rather than when you (and your business) have started to slow down. This enables you and the person you are handing over to get the full reward for the gains that you made in your race.
  • Acknowledgement that a good handover often requires the two runners to be running at the same time side by side, to affect a smooth handover without slowing down. As a business owner this usually means agreeing to work for a period post sale alongside the buyer, to ensure maximum client retention.
  • Understanding that “passing the baton” in business is not just a financial transaction, but also about compatibility. The relationship between a buyer and seller should not be an adversarial one, where each is trying to squeeze more out of the deal at the other’s expense. The bigger picture common goal for both parties is the ongoing strength of the practice and, while a sale is a negotiation of price and terms, it needs to be done with this foundation. For example:
    • A vendor choosing between two possible buyers needs to take compatibility into account. An extra $10K in sale price will not adequately compensate a practice owner for the heartache of having sold their practice (and handing over staff and clients) to an unethical or clinically incompetent buyer.
    • A buyer squeezing an extra $10k-$20k out of a seller at the expense of the ongoing relationship of the vendor compromises what is being bought and sold and makes no sense at all.

Confidentiality Agreement FAQS

By Simon Palmer and Harry Nicolaidis

If you are looking at buying a veterinary practice, it is likely that you will be asked to sign a Confidentiality Agreement or Non-Disclosure Agreement at some stage. 

There are a lot of misconceptions about these agreements, what they mean and if they are enforceable. In this article, we address some of the frequently asked questions that arise from these agreements.

  1. Why are confidentiality agreements necessary in a practice sale transaction?

During a practice sale, it is likely that a seller will share information with a buyer that they would not like shared in a wider context.

This confidential information might include the financials of the practice, the details of its marketing efforts, payroll information about the staff, etc.

For the seller to feel comfortable about sharing this information, the purchaser needs to agree to treat these disclosures confidentially.

  • Does signing a confidentiality agreement mean that you cannot share the information with your spouse or advisors?

Buying a business will almost never be completed without the buyer discussing information regarding the deal with spouses and advisers (bank, accountant, lawyer).

A confidentiality agreement usually has provisions to reflect that the confidential information may be used and shared in specific circumstances. That is, shared with their necessary advisors (bank, accountant, lawyer, business partner, etc.), for the purposes of considering a specific opportunity. If they don’t, then the buyer should either seek an amendment or get a separate NDA for their spouse and advisors.

  • What happens if the confidential information that you have received becomes public knowledge – are you still bound by the agreement?

Typically, a confidentiality agreement will have exclusions for information that is or becomes publicly available or generally known to the public.

  • Is a confidentiality agreement only in place to protect the seller?

In a business sale transaction, confidentiality agreements are usually in place to protect the seller alone.

However, there are many reasons that a buyer will also want a confidentiality agreement in place.

A vet looking at a veterinary practice to buy may be reluctant for their current boss to find out that they are looking, as there may be an implication that they intend to stop working at their current job to pursue the purchase. 

For this reason, every Practice Sale Search practice for sale also includes a separate confidentiality agreement from the seller, to give a buyer peace of mind that the buyer’s identity will be treated confidentially.

  • Is there a difference between a confidentiality agreement and a Non-Disclosure Agreement (NDA)?

In a business sale interaction, there is unlikely to be any material difference between a confidentiality agreement and a Non-Disclosure Agreement. Irrespective of what they are called, both have the effect of protecting confidential information provided by one party to another.

  • I have heard that NDAs and Confidentiality agreements cannot be enforced. Is this true?

This is incorrect; significant penalties can absolutely be incurred if people misuse or inappropriately disclose information provided under a confidentiality agreement.

However, I think this question misses the point of these agreements.

The principal purpose of putting a confidentiality agreement in place is to guide appropriate behaviour. The fact that it creates legally enforceable obligations is ancillary to that purpose.

If you are sharing sensitive information, you would want a confidentiality agreement for four reasons.

  1. First and foremost, it is a written acknowledgement from the recipient that they recognise that the information received is commercially sensitive.
  2. Secondly, you want acknowledgement that the information should not be shared. unnecessarily, should be kept securely and that unauthorised disclosure could cause harm.
  3. Thirdly, you want it to act as a deterrent in place for people who would otherwise be careless by disclosing this sensitive information.
  4. Finally, so that if there is unauthorised disclosure or misuse of this confidential information such that a loss flows from it, there is a legal pathway to appropriate compensation and recourse for that loss.

Hopefully the first three points will mean that the confidential information is secure and the fourth point – recourse- is rarely if ever necessary.

Why the Staff will Stay

It is quite common for practice owners to be fearful of how the staff will react if they learn that their practice is for sale.

While it is, of course, always possible that a practice could experience some staff attrition when it changes hands, it is, in fact, extremely rare.

Believing that the staff will quit when they hear that the practice is being sold is to believe that the only reason that the staff is there is because you are the owner, that your ownership is somehow so good that no one could fill your shoes and that staff will believe that they are better off leaving, rather than even trying to work for the new owner. This way of thinking is perhaps a little narcissistic.

As good a boss as you are, you can rest easy as there is probably a multitude of reasons why your staff work for you and will stay when you sell. For example:

  1. Financial

Simply put, for most people, quitting your job usually represents more financial risk than staying.

Chances are that your staff are working for you, not for a love of the job or for a love of the business owner, but out of some financial necessity. While it may be the right time and financial conditions for the owner to retire or try something different, it would be a huge coincidence for your staff to reach that same juncture at exactly the same time.

  1. Staff who stay maintain their current salary.

There are no promises that they will get the same or better terms elsewhere.

  • Staff who stay maintain their current leave entitlement accruals.
  • Staff who quit could lose their long service leave entitlements (depending upon the state that you are in, how long you have worked for the practice and your reason you are leaving).
  • Sick leave (now called personal/carer’s leave) is accrued at a rate of 10 days per year (For full time, pro rata for part time) and these days are cumulative. Any outstanding sick/personal/carers leave that an employee has on resignation is forfeited and not paid out. For long-term staff, this can be a huge amount to just give up.
  • Convenience

People are often geographically restricted by where they can work. It usually needs to be within a certain distance from where they live and their kids go to school. It is rare that there will be an equivalent or better position, with equivalent or better pay available at the time, within the geographical limits of where they will consider.

  • Respect and job competence

Staying at their current location means a transference of respect from their old boss and team to the new boss. They can continue to work in an environment where they are proficient with the tools/software that are available, how to use them and where everything is kept. They know the strengths and weaknesses of the team, whom they can count on for assistance and whom they can’t. They are familiar with the equipment in the office, the patients, reps, suppliers, neighbouring businesses.

Starting at a new practice will mean “earning their stripes” from scratch, proving their worth and starting to earn the trust of their new boss and team, while at the same time learning how to do their job in a new environment, with new procedures, new tools, new unknown team-mates and, as a result, with compromised competence, at least initially.

In short, if your staff are currently happy with their jobs, leaving it would usually mean less financial security and losing leave entitlements, to work in a position that may not be as convenient and that they will most likely be less competent at.

Why would they put themselves through such an ordeal just because you are selling?

The truth of it is, that if your practice is for sale, most staff will be far more fearful of leaving their job than they are of the new owner.

Practice ownership: Should you Buy or Set up?

Once a Vet has decided that they want to be their own boss and own a vet practice, the next question that they face is “should I buy an existing practice or set one up from scratch?”

Regularly, Practice Sale Search will be selling a small practice, where the potential buyer will argue that, for the same money, they could set up the practice of their dreams in a great location, with brand new equipment of their choosing.

Their assessment is no doubt true. Setting up from scratch allows the owner to create an ideal work environment for themselves, in that they can choose the location, design, fit-out, equipment and staff. Buying a practice, on the other hand, means owning someone else’s choices, which can mean compromises.

However, while owning a practice in your ideal location, fit-out perfectly in your favourite colours, newly equipped with your favourite brands, may sound hard to beat…there are some significant advantages of buying a practice that you should consider.

1. Established customer base and cashflow
Often, most importantly, a practice that you are buying with an established customer base has a more predictable and immediate cash flow that you can count on. If the vendor stays on post sale (even part time) and you manage the transition properly, there is no reason not to expect the vast majority of the clients will stay. This gives you a cashflow foundation to maintain and build upon (with all your extra energy, skills and ideas, including increased open hours, clinical range, etc.).

On the other hand, a practice that starts from scratch has expenses (loan repayments, rent, staff wages, etc.) and no clients. This in turn means that a practice starting from scratch has a foundation of stress and a desperate need for effective marketing just to get to a financial break-even.

There is a famous business saying that it costs 5 times more to get a new client than to keep an existing one. There is no doubt that acquiring customers for any business can be an expensive, unpredictable process and retaining them is a lot easier and a lot less costly, if you have decent levels of customer service.

2. Opportunity cost of your time
If you are transitioning from being a contractor in someone else’s practice to starting up your own, you need to worry about the opportunity cost of your time.

Starting a practice from scratch means trading productive and remunerative time working at someone else’s practice (with no business overheads to cover) for unproductive and non-remunerative time (with large overheads to cover).
If you buy a practice, on the other hand, the opportunity cost is very different. Buying a practice should mean that any time that you are transferring from your previous place of work is well spent and well remunerated.

3. Softer landing into ownership
Setting up a practice from scratch means learning and building systems and procedures for the operations of your business from scratch. You need to establish protocols for HR (job descriptions, rostering and payroll), IT, sterilisation, ordering supplies, marketing and relationships with suppliers. All this at a time of heightened stress, when you are getting used to a new level of debt, understanding the KPIs of your business and hoping that clients will discover your practice.

Buying a practice means inheriting systems and procedures that can just roll over as a starting point to build upon. Sure, some of the procedures in place may not be ideal and need some tweaks, but this can happen incrementally over time. If a new owner buys a practice, it should come as some relief that it is possible to ‘hit the ground running’ and they don’t need to create every operational aspect of owning a practice from scratch.

Conclusion

If you have decided that you want to get into vet practice ownership and you are trying to decide between buying and setting up, it would be a good idea to review your criteria for success.

If your main criteria for success when getting into practice ownership is convenience of location, the aesthetic and having ideal equipment, then setting up a practice from scratch may well be the best way to go.
If, however, your criteria for success includes:
• reducing the time spent getting your practice going
• reducing financial risk and stress or
• having a more predictable cash flow
… you can’t beat practice purchase as a pathway to ownership.

INDUSTRY UPDATE AUGUST 2021

While COVID-19 lockdowns and their economic impact ravage the country, I think that it may be a good time that we in the vet industry take pause and reflect on how much better insulated our business is from our neighbouring cafes, restaurants and retail shops. We are considered an essential service, allowing us to remain operating throughout lockdowns and restrictions. Both pet ownership and spending per animal have increased significantly over the past 18 months during the pandemic, and it shows no signs of slowing down. We have had uncommon business continuity and indeed many practices have experienced a boom that is unlikely to subside when the virus does.

While our industry is experiencing some extremely frustrating issues (like the current workforce shortage), we can take solace in the fact that Vet practices are proving to be one of the most robust small businesses in the economy during this pandemic.  We are the envy of many at this difficult time.

We have seen some strong months at ValuVet lately, with many requests for valuations coming in pre and post end of financial year.

As always, if you would like an appraisal of your practice, or want to discuss the process/timelines or virtues of getting a valuation done, please feel free to reach out to us at info@valuvet.com.au

Stock Valuation FAQs

When a practice is valued, it is often for goodwill and equipment, “plus stock”. That is to say, the stock levels will be determined closer to settlement and an amount added to the valuation to compensate the vendor for the stock that will be onsite at the date of transfer.

There are a lot of Frequently Asked Questions (FAQs) and misconceptions about how stock is treated in a valuation.

We have gathered these FAQs and asked Anne and Paolo Lencioni of ValuVet for their view of best practice in this regard.

Q1. How does a purchaser know how much to prepare to pay at the date of sale, when the amount of stock is a moving target? Should the vendor give the purchaser an estimate of this value in early discussions about the sale?

Generally, stock doesn’t vary a lot from year to year, unless the practice is showing good growth. The seller should be able to give an indicative figure for stock during sale discussions, so that a buyer is prepared. A final stock take should be done at time of settlement and the result should not be drastically different from the figure previously given. 

Q2. When stock is appraised for the sale, is it at retail price or the price that they bought it for? (If they bought it at a discount, is this discount passed on?)

The stock should be appraised using the price the practice paid to wholesaler. That is to say…yes, any discount paid by the practice should be passed on to the buyer.

Q3. How often should a practice value their stock?

There is no right answer here. It is a very time consuming and non-revenue producing exercise. I would say it is still necessary and worthwhile to perform once a year.
Unfortunately, many vet clinics rarely do regular or accurate stocktakes and a practice sale is probably the only time most practices do stocktake really well.
Sometimes their accountants simply leave the stock as zero when doing their end of financial year accounts, which can cause huge tax problems down the track when the client eventually does a stocktake – a 30k sudden write up of stock in one year can generate approximately $10k in tax!

Q4. Is there a Goldilocks level of stock that owners should try to have in their cupboards at the point of sale – i.e., one-two months?

There should be no need to change stock levels due to sale.

Q5. Is all stock paid for by the buyer, regardless of age or likelihood of use? I.e., does a buyer pay for stock close to expiry or niche stock (jumbo sized gloves)?

There should be no out-of-date and limited short-dated stock included in the sale. Stock should have at least a month before expiry. If a buyer is reluctant to agree to take over some (niche) stock items, then this should be discussed in advance of contracts and agreed. If given enough notice, the seller can try to reduce levels of certain stock prior to sale.

Beware of strangers offering candy: Why sellers need to take a cautious approach with a new veterinary aggregator

Every year, some great practices will come to us asking what we know about a new veterinary aggregator that is marketing itself or approaching veterinary practices directly.

New aggregators come and go every year and generally have the same few things in common:

  • They will have a glossy executive summary brochure, showing a group of impressive-looking people on the board who have been successful in business in other industries.
  • There will be usually one or two (token) representatives on the board with some veterinary industry experience.
  • In their correspondence and conversations with you, they will come across as very ambitious, talking about how fast they will acquire practices, saying that they are already in advanced negotiations with some great practices.
  • They will say something to the effect that their (slightly) unique model and experience in other industries will act as a “disruptor” to the industry.
  • They will say there will be an advantage to you getting in early and being among the first to come on board. Their offer to you will be for a “limited time only”.

When our clients ask us our opinion on these new aggregators, we usually ask the following questions:

1. Will they buy 1 practice or are they wanting to buy 20?

Most veterinary corporate wannabes have no interest in owning a single practice – they want to own many. So, when they put down an offer on one practice, they have no intention of following through on that offer unless they meet a critical mass.

To sign up to sell to any aggregator, you would receive a Term Sheet/Heads of Agreement that would lock you in to several months of exclusivity (where you reject any buyer that you are currently in discussions with and cannot talk to another would-be buyer), while they do their legal contracts, financials and other due diligence on your practice. This is reasonable, as there is considerable cost involved in corporate due diligence and it would be unfair for them to outlay this cost, only to find that you were not serious about their offer in the first place.

The difference with a new aggregator is that they don’t just use this exclusivity period to do due diligence. They also use it to keep practices like you in a holding pattern while they try to get other practices to buy, in order to reach the threshold they need to make this interesting for them.

You may find that you enter a Term Sheet with a new corporate with honorable intentions, only for that the deal not to go ahead because they couldn’t get enough practices on board. By the time you are released from your exclusivity commitment and reach out to the other suitors that you were considering earlier (before you signed with the new aggregator), you could find that they are gone, either because they spent their money elsewhere or because they are annoyed that they were your second choice.

If you are considering whether to sign a term sheet with a new veterinary aggregator, be confident that either:

  1. They will buy one practice at a time OR
  2. They will reach the critical mass of committed practices they need in order for them to buy any, OR
  3. That you have time up your sleeve and aren’t counting on the sale in any real way financially or lifestyle-wise in the near future.

2. If they do buy your practice… what is waiting for you on the other side?

When you sell a practice to any aggregator, it usually comes with post-sale work commitments that you have to make. These commitments are made easier by promises that they will take the burdens of ownership off your shoulders, allowing you to focus on your clinical practice post sale. Generally, there will be offers of IT, HR, marketing support, payroll and corporate discounts on consumables. There will be an expert at head office that you can call for help when there is a staffing issue, or to help get you back up and running when equipment breaks.

Selling a practice to an existing aggregator means that there is a track record of acquisitions and there will be a back office that is well versed in veterinary practice ownership issues and how to resolve them. An existing veterinary aggregator should be able to give you some referral sources of practices that they have bought and the contact details of those practices’ principal veterinarians, such that you make sure that the promises are well founded and that the aggregator is reasonable to deal with.

Selling to an untested, new aggregator gives you no such assurances. They could be (and sometimes are) building the plane while they are flying it.

If you are thinking of selling to a new aggregator, it is very important to get clarity on what will be waiting for you on the other side. Ask them how they will handle the support that they are offering? When are they going to be building their support team and do they have any thoughts on the composition and experience their team will have? Any serious aggregator will have a straight answer for you and will not leave this as an afterthought with vague placating answers.

Conclusion

It is very easy to be attracted to something shiny, only to find out that it was a mirage when you reach out to hold it…

The point of this article is not that you should never consider selling your practice to a new aggregator.

Some new aggregators (one out of four or five in our experience) will become legitimate entities and will progress to actually buying and owning practices.

These aggregators may present a great option to sell where no others exist.

However, this still leaves a significant percentage that will not amount to much. If you are entertaining an offer from a new veterinary corporate, extra caution needs to be shown and additional questions need to be asked.