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Chapter 1

Veterinary Practice Trends


Running a veterinary practice can be a challenging task that requires a great deal of time, effort, and expertise. In today’s competitive environment, veterinary practices must stay up to date with the latest trends and technologies to remain efficient and profitable.

Here are some key trends that can help veterinary practices run efficiently.

Digitalization and Automation
Digitalization and automation have become increasingly important in veterinary practice management. Electronic medical records (EMR) have replaced paper-based records, and automated systems have
taken over administrative tasks such as appointment scheduling, billing, and inventory management.
This saves time, reduces errors, and allows for better data management, tracking, and analysis.


Telemedicine has gained popularity in veterinary medicine, particularly during the pandemic. It allows for remote consultations, follow-up appointments, and monitoring of patients, which can reduce the need for in-person visits and increase accessibility for pet owners.
Telemedicine can also help veterinarians reach a wider audience and expand their services beyond their physical location.


Specialization has become a trend in veterinary medicine as more veterinarians seek advanced training and certification in specific practice areas.
This results in better diagnosis, treatment, and management of complex cases, which can improve patient outcomes and increase client satisfaction. Specialization can also help veterinary practices stand out from their competitors and attract more clients.


Integration of Alternative Therapies
Specialization has become a trend in veterinary medicine as more veterinarians seek advanced training and certification in specific practice areas.
This results in better diagnosis, treatment, and management of complex cases, which can improve patient outcomes and increase client satisfaction.
Specialization can also help veterinary practices stand out from their competitors and attract more clients.


Client Communication and Engagement
Effective communication and client engagement is crucial for building and maintaining a successful veterinary practice. This includes regular follow-up after appointments, personalized communication and education, and mechanisms for clients to provide input and feedback.
By improving client engagement, veterinary practices can build trust and loyalty, leading to increased referrals and revenue.


Focus on Staff Training and Development
Investing in staff training and development is critical for running an efficient veterinary practice. This includes providing ongoing education and training on new technologies, treatments, and procedures, as well as leadership and communication skills.
By investing in staff development, practices can improve staff morale and productivity, reduce turnover, and provide better patient care.


Emphasis on Preventative Care
Preventative care has become increasingly important as it can help detect and manage health issues before they become more severe and costly to treat. This includes regular wellness exams, vaccinations, and parasite control.
By emphasizing preventative care, veterinary practices can improve patient outcomes, reduce healthcare costs, and increase client satisfaction.


Many trends and technologies can help veterinary practices run efficiently and effectively.

By embracing digitalization and automation, telemedicine, specialization, client communication and engagement, preventative care, alternative therapies, and staff training and development, you can improve patient outcomes, increase revenue, and stand out from your competitors.

(Download Video Transcript)


Chapter 2

Everything You Need to Know About Your Financial Statements

For veterinary practices to understand their financial position and make informed decisions, financial statements are crucial.

Let’s discuss the critical financial statements that veterinary practices should be familiar with, what to look for, and how to use them effectively.

Types of Financial Statements

Income Statement
The income statement shows the revenue, expenses, and net income of a veterinary practice over a specific period of time. It provides an overview of the practice’s profitability and is essential for evaluating financial performance.
Practices should look for consistent revenue growth and positive net income while monitoring the percentage of revenue spent on expenses such as payroll, rent, and supplies.


Balance Sheet
The balance sheet shows a snapshot of a practice’s assets, liabilities, and equity at a specific point in time. It provides a clear picture of the practice’s financial position and is essential for evaluating its financial health.
Practice owners should strive for a strong balance sheet with a healthy cash balance, manageable debt, and positive equity.


Cash Flow Statement
The cash flow statement shows the inflows and outflows of cash over a specific period of time. It provides an understanding of the practice’s liquidity and ability to generate cash.
Look for positive cash flow from operations and healthy cash reserves to cover unexpected expenses or investments.


What to Look for in Financial Statements

Revenue Growth

Revenue growth is a crucial metric to monitor for veterinary practices. Consistent revenue growth indicates a healthy practice and potential for future growth.

However, practices should also analyze revenue by category to identify areas where growth may be lagging or where there may be opportunities for improvement.


Net income is another key metric to monitor for veterinary practices. Positive net income indicates a profitable practice, while negative net income may indicate a need to re-evaluate expenses or pricing.

Practices should also analyze profitability by category to identify areas where expenses may be too high or where revenue may be too low.

Expense Management

Effective expense management is essential for maintaining profitability and financial health. Practices should monitor expenses by category and identify areas where costs can be reduced and efficiencies can be gained.

Payroll is often the largest expense, so it’s important to monitor staffing levels and ensure that compensation is competitive but not excessive.

Debt Management

Debt can be a useful tool for veterinary practices to finance growth or make investments, but it can also be a burden if not managed effectively.

Monitor debt levels and ensure that they are manageable and not overly burdensome. It’s also important to monitor interest rates and refinancing opportunities to ensure that debt is being managed effectively.

Cash Reserves

Cash reserves are essential to weather unexpected expenses or investments. Practices should monitor their cash reserves and ensure they are adequate to cover short-term needs.

It’s also important to analyze cash flow from operations to ensure that cash reserves are replenished and that the practice does not rely too heavily on outside financing.

How to Use Financial Statements Effectively

Veterinary practices can compare their financial performance to industry standards or competitors to identify areas where they need to improve or where they are excelling.
Budgeting and Forecasting
Veterinary practices should create a budget and forecast future revenue and expenses to ensure that they are on track to meet their financial goals. This can help them make informed staffing, pricing, and investment decisions.
Performance Metrics
Monitoring performance metrics such as patient volume, average transaction value, and client retention will help ensure financial goals are being met. These metrics can also help identify areas where they need to improve or where they are excelling.

Financial statements are essential tools for veterinary practices to understand their financial position, identify areas for improvement, and make informed decisions about the future of their practice.

Veterinary practices should analyze their financial statements regularly, benchmark their performance, create budgets and forecasts, and monitor performance metrics to ensure that they are on track to meet their financial goals. By using financial statements effectively, veterinary practices can maintain a healthy and profitable business.



Chapter 3

Understanding the Financial Ratios to Measure

Veterinary practices can use financial ratios to benchmark their financial performance against industry standards or competitors.

Financial ratios are calculated by dividing one financial statement item by another to provide insight into the financial health and performance of a veterinary practice.

Here are some important financial ratios that veterinary practices can use to benchmark their financial performance:



Profit Margin Ratio

Indicates the percentage of revenue that is left over after all expenses are paid.

Net Income / Total Revenue

A higher profit margin ratio indicates that a veterinary practice is more efficient at controlling expenses and generating profits.

Return on Assets Ratio

Measures how effectively a veterinary practice is using its assets to generate revenue.

Net Income / Total Assets

A higher return on assets ratio indicates that a veterinary practice uses its assets more efficiently to generate revenue.

Current Ratio

Measures a veterinary practice’s ability to pay its short-term debts.

Current Assets / Current Liabilities

A higher current ratio indicates a veterinary practice has more than enough current assets to pay its current liabilities.

Debt-to-Equity Ratio

Shows the amount of debt a veterinary practice has compared to its equity. Total Liabilities / Total Equity A higher debt-to-equity ratio indicates a veterinary practice has more debt relative to its equity.

Total Liabilities / Total Equity

A higher debt-to-equity ratio indicates that a veterinary practice has more debt relative to its equity.

Accounts Receivable Turnover Ratio

Measures how quickly a veterinary practice collects its accounts receivable.

Total Revenue / Average Accounts Receivable

A higher accounts receivable turnover ratio indicates that a veterinary practice is collecting its accounts receivable more quickly.

Gross Profit Margin

Indicates the percentage of revenue that remains after the cost of goods sold is subtracted.

(Revenue - Cost of Goods Sold) / Revenue

A higher gross profit margin ratio indicates that a veterinary practice is generating more revenue after accounting for the cost of goods sold.

Operating Expense Ratio

Measures the percentage of revenue that is used to cover operating expenses.

Total Operating Expenses / Total Revenue

A lower operating expense ratio indicates that a veterinary practice is more efficient at controlling operating expenses.

Inventory Turnover Ratio

Shows how quickly a veterinary practice is selling its inventory.

Cost of Goods Sold / Average Inventory

A higher inventory turnover ratio indicates that a veterinary practice is selling its inventory more quickly.


Financial ratios are important tools that veterinary practices can use to benchmark their financial performance and identify areas for improvement. Veterinary practices can calculate financial ratios to monitor their profitability, efficiency, liquidity, and leverage.

By analyzing financial ratios regularly and benchmarking against industry standards or competitors, veterinary practices can make informed decisions about pricing, staffing, and investments to maintain a healthy and profitable business.



Chapter 4

Get Ready to Sell Your Vet Practice

Veterinary practice sales are a very hot commodity right now, so if you are thinking of selling, it’s time to prepare.

There are a lot of considerations and understanding the process will help you achieve the best results.

Some Questions to Get Started

When preparing to sell your veterinary practice, ask yourself...

It’s important to pick a tentative date of when you plan to sell your practice, so you always have that goal in mind.
Determine what you are selling. Is it just the practice? Is it a portion of the practice? Is real estate involved?
Currently, there are fewer buyers than sellers, so who will you sell to? Is it a current employee in your practice, or will they come from a different practice? Or are you looking at selling to a corporate buyer or a private equity firm?


How Much?
Is the practice worth the sales price it’s listed at?
What are the Next Steps?
Depending on where you are in the process and what your timeline is, determine what you should be doing now as well as the next steps.


What Are You Selling?

At a high level, most practice transitions fall under two broad categories:

Asset Acquisition
Equity Acquisition (aka stock sale)


When you sell your practice, it’s more attractive to the buyer that the transaction be structured as an asset sale. If they’re buying the assets, they’re starting their own entity and moving forward. What happened in the past stays in the past.

With a stock sale, they’re also buying any liabilities and inheriting anything that may have happened in the past.

There are Two Types of Assets in a Veterinary Practice:

Tangible Assets

These are assets you can touch, feel, and see (i.e., hard assets). Examples include:

Accounts Receivable

The value is assigned at closing based on actual collections. In some cases, the buyer will throw out extremely old receivables assuming that they’re uncollectible, so it’s important to keep your accounts receivable current.

Inventory and Supplies

These assets are usually determined at closing. Sometimes the buyer will want a manual account, or they will utilize whatever practice software you’re using as a starting point for the value they’re assigning to those items.


There are a few different ways to value equipment. It can either be appraised by a certified appraiser, appraised by a common agreeable method to fair market value, or it could be calculated based on assuming that most of the equipment should be straight-line depreciated over a set period with some percentage of value remaining at the end of that useful life (in most cases that value tends to be around 10%).

Leasehold Improvements

If leasehold improvements are to be sold, they tend to be valued over a longer time horizon – anywhere between 15 to 30 years with straight-line depreciation and some remaining salvage value.

Real Estate

If you own the building, have a certified commercial real estate appraiser put a value on your building and the real estate.


Intangible Assets

This is everything else in the practice. Examples include:

  • Goodwill
  • Covenant Not to Compete
  • Client List
  • Trade Name
  • Existing Contracts
  • Right to Earn Income Off of a Block of Patients in the Future

The value that can be assigned to these items and the calculable methods can range widely depending on the situation.

There are several factors that are commonly considered as part of the goodwill determination. These can include:

  • Physical location of the practice
  • The current status of the lease that is in place of the ability to restructure into a new lease
  • The actual physical condition of the facility
  • Current fee schedule
  • Current expense structure
  • Services offered


Common Payment Terms

Once the sales price is negotiated and both parties agree to the transaction, how will the money change hands?

Typically, there’s a portion paid at closing in cash and a portion that’s deferred over time.

Here are some examples:

  • Cash at closing for tangible assets
  • Accounts receivable can either be cash at closing or paid over the first 12 months as collected
  • Seller financing allows you to defer some of the gains into future years
  • Land contract if you’re selling a building
  • Goodwill is dependent on the financing source:
    • If you’re letting an employee buy-in, it might be structured as a deferred compensation arrangement
    • If you’re selling to a corporate or private equity buyer, there may be a portion of the valuation and the sale that will be deferred as equity in the new corporation.

Tax Allocation

When transitioning a veterinary practice, there are tax considerations to take into account with regards to the allocation of the sales price.

  • As the seller, you will want more allocated to goodwill because the long-term capital gains provide a more favorable tax treatment and rate.
  • The buyer will want more allocated to the tangible assets because there is an immediate write-off. Goodwill to a buyer is less favorable because that will need to be amortized over 15 years to get the full tax value.


Practice Valuation

To maximize the sales price you are offered for your veterinary practice, it’s important to have a formal valuation.

Yes, you could do the back-of-the-napkin calculation, but you will want someone to consider your specific facts and circumstances. It will be worth the price you’re paying for the valuation relative to the offer you are presented.

Revenue is still king as that is the most certain calculation and can be the least manipulated.

  • What are you bringing in?
  • What's the trend up or down?

Typically, the value of a practice is a factor of the revenue.

A lot of corporate or private equity sales are now factoring in EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). Basically, it’s taking all the subjective items out of the picture and determining what the owners’ compensation is in a year.

Be careful with EBITDA and its multiples to value a practice because sometimes the value is not that simple.

(Download Video Transcript)

Presale Planning

To prepare to sell your veterinary practice, ask yourself these questions:

  • Does your practice have increasing revenue and profitability?
  • Are your financial statements and records clean? Are they ready for a third party’s interpretation, scrutiny, and due diligence?
  • Do you understand your profit centers?
  • Is your lease favorable or is it about to expire?

Selling your practice is a lot like selling your home. Taking the time to spruce it up will help you maximize the value upon sale.

Prepare your practice for sale three years before you want to transition.

Why three years?

Three years is the minimum time period that potential buyers will look back upon to review production, financial, and profitability trends.

Trends are essential to establishing your practice’s value or price. Upward trends in production and profitability can often command higher values in the marketplace.

Next Steps

Consider your specific situation, timeline, and goals to ensure a successful transaction. Evaluate your options and consult with your trusted advisors.

Planning, strategy, and analysis will give you the best sales price and comfort level with this vital business transition.



Chapter 5

Veterinary Practice Valuations

Having a current valuation of your veterinary practice will help you negotiate from a position of strength.

Understanding the valuation process from start to finish will help you lay out a game plan to improve the value of your practice before it’s time to sell.

How Do I Find Out What My Practice is Worth?

Generally, there are two ways to value a veterinary practice:

Rule of Thumb
This method is a brief measurement, typically based on a specific part of the practice’s operations, such as revenue or EBITDA. It’s just numbers with no analysis.
Valuation Analysis
This evaluates a practice’s positive and negative elements and puts a value on the business using those considerations. It adds credibility and substance and is much more than just assigning a number for what you want for your practice.


What is Involved in a Valuation Analysis?

There are three approaches to a valuation analysis:

Net Asset Approach

Focuses on the practice’s net asset value, or the fair market value of its total assets minus its total liabilities, to determine what it would cost to recreate the practice. Intangible assets are also included in the analysis.

An element of goodwill is also factored in as the costs for intellectual property and the customer base can be significant.

Income Approach

Involves valuing a practice based on the cash flow it’s generating.

The value is determined by forecasting future cash flows, discounting those cash flows back to the present using a discount rate, and then summing the present value of each cash flow.

Market Approach

Values a practice based on the market value of other practices of similar size and revenue.

A practice valuation will also take into consideration the last five years of historical financial results. Historical data is used to understand the performance of the practice.

A business valuation is forward-looking, but you’re using historical data to try to predict the future. How the practice is trending and how it compares to other practices in the market will impact its value.

Other factors considered in a valuation include:

  • Revenue growth
  • Profits of the practice
  • Services offered
  • Compensation of the veterinarians
  • Number of employees and what they do
  • Equipment used in the practice (including aging)
  • Rent (related party or third party)
  • Product sales and cost of products

Normalizing Activity Modeling

A normalization adjustment is a modification made to a practice’s financial statements to reflect ongoing business operations and financial performance more accurately.

These adjustments better reflect the practice’s sustainable, long-term cash flows, which are used to determine the present value of future cash flows, and, ultimately the practice’s value.

Examples are compensation adjustments, rent adjustments, and one-time expense adjustments.


Current Valuation Trends

There are two types of veterinary practice buyers:

Corporate Buyer (also known as a Strategic Buyer)
Typically, a corporate buyer may be a private equity group that accumulates businesses in a similar industry. They purchase small to medium-sized businesses and then work to increase their value.
By owning several businesses, they have more buying power and the ability to generate larger profits.


Private Buyer
This is essentially a veterinarian buying another veterinarian’s practice. In this transaction the buyer maintains all the overhead, so they don’t have the buying power a corporate buyer would. Therefore, the offer you might receive from a private buyer will be less.


A corporate buyer multiple usually drives vet practice multiples on the higher side. These market multiples tend to be in the range of 0.9 to 1.5 times revenue.

Be careful with market multiples because it can matter how many vets you have, your revenue level, your locations, etc. Many variables will determine whether your multiple is on the higher or the lower side.

Regarding EBITDA, the trend has been multiples in the range of four to eight times EBITDA. Again, your actual multiple will depend on market conditions and practice characteristics.

Valuations as Part of Your Succession Plan

Succession planning is a complex strategy, and the practice’s value is just one component. How you transition your practice will impact the timing of your valuation.

If you are selling outright, transferring to family, or gifting your business, it is imperative you have a current valuation. If you have partners or shareholders, you have a fiduciary responsibility to increase the value of your practice for maximum profit at the time of sale.

The succession of a practice has many moving parts. Business interests will be allocated, the company’s value determined, and many complex tax issues taken into consideration.

As you assemble your succession plan, you must include your financial and legal advisors and a qualified valuation professional.



Chapter 6

Developing a Strategy to Sell Your Practice

Now that you have your practice valuation, what’s the next step? This is where the analysis and preparation become essential.

Understanding the Valuation Results - Were They What You Expected?

The valuation report of your veterinary practice is not just a number. It’s important to invest time into analyzing the results. Discuss it in detail with the valuation expert who compiled the report. Is it what you expected?

If it’s not what you expected, find out why. Take a deeper dive into what you need to do in the short-term and long-term to increase the valuation so you can negotiate from a position of strength.

What are the Trends in Your Practice?

  • Do you have consistently growing revenue in the last three to five years?
  • Have you had a gap in staffing?
  • Have you recently added new procedures?
  • Have you increased your fees to fair market value?

Know your story so that if a potential buyer doesn’t see a steady climb or there are barriers to success, you are prepared during the due diligence phase.


What Can You Do to Increase Your Value?

So, you didn't get the valuation number you were hoping for.

These potential adjustments may help increase that number:

Fee Schedule

Are you appropriately charging for the services you provide? Make sure your fees are in line with the market. It’s crucial from a practice management and profitability standpoint as well as for your valuation.

Even a simple 5% increase could have a potential return of hundreds of thousands of dollars in valuation in the future.

Services Offered

Is it time to expand your service offerings? Determine if there is a new service you can offer that could possibly increase your revenue and profitability.


Based upon the valuation you received, do you need to extend your exit timeline?

Evaluate whether you need to adjust your timeline back, accelerate it forward, or keep the original timeline.


Are you at capacity or are you able to remodel or expand to potentially bring in more revenue?

If you are on a long exit timeline and have extra cash, invest in your practice to make it more attractive to potential buyers.


Do you have the right people in the right seat? Evaluate your staffing and make some modifications, if necessary, to put your practice in a better position.

Real Estate

Improve the curb appeal to attract potential buyers. Look at your clinic’s aesthetics (including the outside, waiting room, exam rooms, and even employee break room) to see if there are modifications you can make to increase the value of your practice.

Investment in Technology

When deciding whether to invest in a new piece of technology or equipment, make sure it enhances patient care and experience, generates additional revenue, and leads to greater efficiency.

Also invest in tech utilization by providing your staff with education and certification in certain procedures. These are investments worth making in the long term to improve the top line and ultimately the value of your practice.

Clean Financial Statements

Multiple people will be reviewing your financial statements, so clean them up and get your books in order.

Clearly format and delineate your top line, overhead, associate and owner compensation, etc. Control your overhead and make sure your financial statements provide an accurate picture of how the future owner will be able to efficiently operate the practice.

Benchmark against other practices to see how your practice compares in regard to cash flow and equity. If your balance sheet shows you aren’t flush with cash, determine why and rectify it so it isn’t looked at negatively by potential buyers.


Determining the Right Time to Sell

When is the right time to sell your veterinary practice? One year? Three years? Five years? Every practice is different, so choose the timeline that is best for your own unique situation.

Your timeline can be influenced by how many of the adjustments previously discussed still need to be implemented, as well as how those changes affect your valuation.

It also depends on your short and long-term goals. Based on the valuation you received, will you be able to live the lifestyle you desire in retirement? Or will you need to continue to work (whether it’s full-time or part-time, or completely changing careers) to close that gap?

What Comes Next?

After you receive your valuation and have determined your timeline, what's next?

Prepare for Due Diligence

Potential buyers will review everything in your practice – all your financials, legal documents, records, production, etc. They will also evaluate everything that goes into your practice such as equipment, inventory, and supplies.

A potential buyer will want to know everything about your practice before they buy.

Get Your Lease in Order

Even if you own the real estate and rent to yourself, it should be at fair market value.

A potential buyer will expect to pay the same amount in rent so make sure the lease is in good order.

Implement a Buy-Sell Agreement

If you’re not selling the entire practice and only bringing on an associate, make sure you implement a buy/sell agreement.

In short, the buy/sell agreement details how a veterinarian enters the practice as well as how a veterinarian exits the practice at some point in the future.

Assemble Your Team of Experts

Have your broker, accountant, consultant, attorney, and banker ready to help when you need them. Their expertise will be an invaluable asset for you in the long run.

Understanding the Tax Impacts

Buyers and sellers have different tax treatments depending on the type of asset.

On the buyer’s side, inventory, supplies, accounts receivable, and equipment are available for immediate write-off (the equipment could also be depreciated for 5-7 years). Then the goodwill would be amortized over 15 years.
On the seller’s side, the same inventory, supplies, accounts receivable, and equipment would be taxed at your ordinary income tax rate when sold. Goodwill, on the other hand, would be taxed at the long-term capital gains rate of 15%.


Once the buyer and seller agree on how to allocate the purchase price to the various asset classes, Form 8594 (an asset acquisition statement) is required to be filed with the IRS.

It’s important that both the buyer and seller report the exact same amounts on the form. If there is any discrepancy, you will receive an IRS tax notice.

If you own the real estate and want to keep it instead of selling it to the new owner, there are additional tax implications you need to consider. By retaining the real estate, you can defer the tax on the sales proceeds and instead use the future cash flow towards your retirement.

You could also consider a land contract or seller financing if the buyer is unable to obtain financing through a bank or if the current interest rate is too high. Offering the buyer an installment sale for 5-10 years will provide you with consistent income each year.

Whichever way the transaction is structured, make sure your future options are spelled out. Keep in mind it’s not just a sales price. Consider the allocation and payment terms to maximize the return you receive from selling your veterinary practice.


Don't Wait to Start Tax Planning

It’s never too early to start tax planning so consult with your advisor.

Here are some items to consider:

Protective Estimates

To protect yourself from having to pay a huge tax bill, look at what you paid on your prior year’s tax return. You should pay in at least 110% of that amount.

As long as you pay in that 110%, any balance you have on your return you can pay in April and there will be no underpayment interest penalties.

Donor-Advised Fund

This relates directly to charitable contributions. In this situation, you can contribute a lump sum into a donor-advised fund and then you have the ability to give to your charities of choice over the course of a few years.

The advantage is the money that you put in is fully deductible in that year. This will allow your itemized deductions to far exceed the standard deduction in that year.

Timing the Sale

Are you looking to sell before year-end? Could you feasibly wait until January 2nd? If you sell before year-end, the taxes are due in April of the upcoming year.

However, if you wait until January 2nd, those same taxes are not due until April of the following year.

Maximize Pre-Tax Retirement Plan Contributions

If you have a SIMPLE plan or a 401(k) plan, make sure you’re maximizing all available pre-tax retirement plan contributions.

If you have a profit-sharing component to your 401(k) plan, the money you contribute to that component not only benefits you, but also your employees.


Choosing a Private or Corporate Sale

When deciding whether to structure the transaction as a private or corporate sale, gather all the facts.

Are You Selling 100% of the Entity?

Or are you expanding an ownership group?

What's Your Geographic Location?

What is occurring in your marketplace can dictate whether it will be a corporate or private equity sale.

What's the Size of Your Practice?

One size does not fit all, but generally, solo practices with one owner and less than $1 million of revenue are not as attractive to corporate buyers.

If this describes your practice, then what are your options?

What's Your Preference?

Unless your timeline is short, determine your ideal scenario. Do you prefer to keep it a locally owned practice and maintain its culture? Or are you okay with it becoming a corporate entity?

Are There Willing and Able Associates You Can Sell To?

Are there any looking to buy and become owners of their own practice?

Is There a Local Competitor Looking to Expand?

It doesn’t matter what relationship you’ve had with them in the past. If they are willing to give you fair market value, it might be worth entertaining that offer.

What is Your Timeline?

What are your goals? What is your financial outlook? If you sell to a corporate buyer, they will want you to work in the practice for an indefinite period of time to maximize their return. Are you willing to do that?

If you just want to be out of your practice, you’re going to have to give up some of the purchase price. If you’re willing to work, the purchase price will be more because the buyer will make the profits while you’re the associate.

Are You Willing to Take Less Money to Facilitate an Internal or Local Sale?

If you want to keep your practice locally owned, are you willing to potentially receive less for your practice than a corporate group would offer?

Let the Market Know You are Ready to Sell

Now it’s time to get the word out that your practice is for sale. Follow these steps:

Consult with Your Trusted Advisors

Present your situation to them and get their thoughts on your best options.

Talk to Your Advisors

They’re the ones talking to other practices in your market. They know what’s going on, and they know who’s buying and who’s selling.

Connect with Your Networks

Membership associations and social networks are great ways to find interested buyers.

Consider Local Competitors

Don’t discount them – they may be looking to expand their footprint in your community.

Reach Out to Veterinary Schools

Vet schools provide networks for their alumni looking to get into a certain community or practice. Connect with the vet schools to get a pipeline established.

Consider a Broker to Help Sell Your Veterinary Practice

A broker will take a large portion of the sale as a commission. Only consider using a broker as a last resort.

Next Steps

What should you do now?

  • Evaluate Your Options

  • Discuss With Your Team of Trusted Advisors

  • Set Your Ideal Timeline

  • Start Entertaining Offers or Make Adjustments to Your Practice Accordingly

  • Get Ready for Due Diligence

Chapter 7

Understanding the Sales Process

You have identified the buyer of your veterinary practice, so what’s next? Understanding the in-depth sales process is imperative for a successful transaction.

Letter of Intent/Terms Sheet - Time to Entertain Offers

Once due diligence is complete, the first important document to review is the letter of intent (LOI) or terms sheet.

If you are selling to a private equity group or corporate entity, you will receive a formal letter of intent
If it's a private sale to an associate or a competitor, you will receive a terms sheet
Regardless of which type you receive, both outline the important factors in the sales transaction

How Many Offers Should You Obtain?

If you plan to sell to a corporate buyer, the ideal number to secure is five offers at most, paring it down to two or three, eventually getting to the point of signing one.

Feel free to entertain as many as you want initially, but remember you must perform due diligence on them all. The sooner you can narrow down the offers, the better it will be for you and for the buyer.


What Does the LOI/Terms Sheet Entail?

The LOI/terms sheet details the sales transaction’s what, when, and how. The components include:

  • Price and valuation, and whether the offer is in cash, equity, and/or future earnings potential. (Remember: Cash is always king, so narrow your focus on it.)
  • Payment terms and structure of the transaction.
  • Included vs. excluded items.
  • Contingencies – Beware of:
    • EBITDA Thresholds - The buyer will right-size your overhead and determine the one-year return on investment. Several things can go wrong to get to that bottom line, so beware, as that’s a challenging number to control.
    • Revenue Goals/Benchmarks - This is a much better goal to control, especially if revenue has been trending solid for many years. It’s predictable, but a corporate entity will likely raise fees, increasing revenue.
    • Equity - A portion of the sale might be structured as stock, so ultimately, you’re investing in the new company. Be cautious because it’s similar to buying any other stock – risks are involved.
  • Employment Agreement/Terms - More than likely, you will work in the new practice for a time, so the LOI will detail the terms of your employment. How long will you be employed? How are you compensated? What are your benefits? What are your responsibilities? Make sure these details are crystal clear.
  • Real Estate Terms - If you own the building, you should retain the real estate for future cash flow into retirement. Ensure your rent is at fair market value to ensure your tenants stay. An empty building can’t provide you with passive income.


Some additional key points regarding the letter of intent include:


The LOI is not a contract – it’s non-binding. There will be considerable due diligence so if something is discovered and you realize it won’t be a good fit, you can easily walk away.


Once you sign, you cannot entertain other offers and negotiate behind the scenes. It’s exclusive on the sides of both parties until the contract is signed.


One of the most important steps is to ask for references. Ask to speak to a practice owner who has sold to that company in the past.

The longer the time frame from when the sale occurred the better because you can uncover, for example, if the incentives and equity they offer are worthwhile.

Due Diligence

The potential buyer will look at your practice inside and out. All of your documents and everything about your practice – past, present, and future – will be scrutinized, so be ready for whatever the due diligence process throws at you.

The Buyer Has Been Identified and the LOI/Term Sheet is Signed...Now What?

Any time there is a contract (including an LOI), several factors are involved, including:

  • Employment agreement, including time horizon
  • Non-compete agreement
  • Included and excluded items in the sale (i.e., equipment, existing inventory, real estate, leasehold improvements, etc.)
  • Timing of cash received and future incentives/equity investment
  • Opportunity for negotiation
  • Tax allocation

Evaluate and understand the contract before you sign. Involve your attorneys at the appropriate time to ensure you maximize the success of this important transaction.

Tax Allocation

When selling your practice, there are tax considerations regarding the allocation of the sales price. How the sales price is allocated between the different assets of your practice will determine how the sales proceeds are taxed and how much cash ultimately goes into your pocket.

Typically, as part of every sale, tangible items are being purchased such as equipment, inventory, and existing supplies. These types of items tend to be considered ordinary income, meaning they’re taxed at normal tax rates.

On the other hand, intangible components (such as goodwill, non-compete, and brand name) might be assigned value. These items tend to be capital in nature and have a longer time horizon.

Buyers and sellers have very different goals when allocating the purchase price to different assets.

From a Buyer's Perspective
They want to allocate more to accounts receivable and supplies to receive the immediate write-off to free up cash flow in practice.


From a Seller's Perspective
You will want the bulk of the purchase price to go toward the capital section of taxation. For every dollar you can allocate towards goodwill, it will be taxed at the preferable long-term capital gains rate. Try not to allocate towards assets that are treated as ordinary income because you will pay income tax at the highest rate on your return.


Pre- and Post-Closing Expenses

Leading up to the actual closing of the deal and after, you will need to get a handle on what expenses you have left as you wind down your practice. Determine who will track expenses, how things will flow, and who will pay for what. Discuss this in advance with the buyer.

Keeping good records is crucial to help justify and track these expenses over the pre-and post-closing period. Make sure you have a plan and are collaborating closely with the buyer to determine who will shoulder most of these duties.

Ultimately you want to be clear on expectations, roles, and operational duties. There are a lot of moving pieces, and you certainly don’t want anything to fall through the cracks. Payroll deposits, tax filings, vendor payments, and other tasks continue through the sale, so ensure you’re in close discussions with your buyer and have a plan for the future.

Assemble Your Team

For your veterinary practice transition to be successful, you need an experienced team on your side.

An attorney will ensure you understand the transaction’s legalities.
Financial Advisor
A financial advisor can assist you from a financial aspect, including what to do with the cash proceeds from the sale, what to invest in, and helping you live the lifestyle you desire.
A CPA with veterinary expertise can provide valuable advice every step of the way, especially regarding the sale’s tax implications and tax strategies.

Of utmost importance is to have a plan with all of your different advisors and make sure you see it through to the finish line – for your peace of mind and the best outcomes.

Seller Financing

Typically, most veterinary practice purchases are financed by commercial banks. However, as the seller, you can finance the transaction yourself through seller financing.

In this situation, the sales price is paid off over time, typically at a lower interest rate than what could be offered from a commercial lending institution.

The benefit of seller financing is that it can get you a guaranteed rate of return, which might be attractive depending on your overall financial situation. Talk with your financial advisor about this scenario as there could be some additional risk with this type of deal.

If real estate is part of the deal, you could also consider a land contract as an aspect of the sale for another source of revenue from the transaction.


Getting to the Finish Line - Post-Closing Considerations

As you near the actual sale of your veterinary practice, ensure you get the seal of approval from your advisors before you sign the documents.

This includes your tax advisor, attorney, and financial advisor. Get a good sense of what the transaction means for you operationally and from a personal finance perspective.

Get peace of mind knowing you and your practice are in good hands. Understand some of the incentives and earnouts, if they’re part of the deal. What does that mean for you? What might those targets be in the future? What are they really worth?

Understand what your equity investment means. Sometimes that investment might be a great place to have your money versus any other investment medium.

Other times that equity might be worth zero someday. Talk with your financial advisor on how to proceed because every practice structures its equity differently.

Make sure you understand your employment agreement, especially the compensation component.

  • What is actually built into that compensation?
  • What will your role be in the new practice?

Knowing the time commitment and whether it’s something you desire is going to be necessary.

Final Thoughts

  • Maximize the after-tax cash portion of the sale and other achievable incentives.
  • Rely on your team of trusted advisors during the entire sales process. Make sure your bankers, attorneys, accountants, and consultants give their seal of approval on the various components of the sale from their expertise.
  • Make sure you have a plan, and you follow through on that plan. Everyone should know their roles and responsibilities. Communication between buyer, seller, and everyone involved in your operation is key.



Chapter 8

How SVA Can Help

Whether you are reaching the point of retirement or transitioning to another stage in your career, together we will assist you on your path to success and peace of mind.

From practice valuation to consultation regarding contract terms, your personal financial goals and objectives are our number one priority as we provide full and professional assistance along the journey.


To get top dollar for your practice, you need to ensure that it is at maximum profitability. SVA can help you determine that by evaluating a few key areas:

Are Your Fees Competitive? How Does Your Office Benchmark Against Best Practices in Productivity? Are Your Receivables Up to Date?


Whatever stage you’re at in the selling process, we’re here to help as your trusted financial advisor. Contact SVA today and learn how our team can help you.

Contact SVA


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Madison, WI 53717
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Colorado Springs, CO 80920
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