Last updated on December 22nd, 2023
Whether you are five years or 35 years away from retirement, understanding the long-term options for your business should guide the strategies and actions you take today.
No doubt, the most lucrative opportunities rest with selling to corporate consolidators. It’s estimated that about 25% of veterinary practices are now owned by a corporation, with momentum expected to continue in the years ahead. These corporations are learning how to maximize profitability of practices, with systems, processes, policies, purchasing, and more.
Consolidators have also learned where their biggest earning potential lay.
So, they target practices in large urban areas with more than two veterinarians on staff. Emergency services practices are among the most popular. Strong financials, brand, client base, reputation, and more all come into play, as do updated facilities, systems, lab equipment, and staff. (Let’s not forget state regulations. New York is one of several states prohibiting corporations from practicing veterinary medicine. To make a sale, a licensed veterinary owner needs to continue working and managing the medical side of the business.)
In recent years, it wasn’t uncommon to hear about corporate consolidators offering 10x to 15x (and sometimes even 20x) a practice’s value. It appears that these offers may have reached their peak and are coming in lower, but still higher than what you can get from a private buyer. However, this option is not available to everyone. If you find that your practice does not meet the criteria corporate consolidators are looking for, you still have options.
While corporate consolidators have definitely changed the landscape, there are still veterinarians who want to run their own business and be their own boss. With a severe talent shortage and pipeline, this pool of interested purchasers is smaller than in the past and they can’t offer the same multiples as large corporations.
Although the traditional process of selling a practice to an up-and-coming vet can be cost-prohibitive, especially when you consider student loan debt and the current economic environment, there are creative ways to structure customized sales to benefit both the buyer and the seller. (RBT CPA professionals can provide more details based on your specific practice and situation.)
One other option to consider: a merger.
While another veterinary practice in the area may have been your competitor for years, a potential merger can lead to more options for your exit strategy. With economies of scale, you can improve your financials, productivity, and purchasing power. A larger practice may be more attractive to recruits. You have more options for selling out to the partnership or an up-and-comer. This could also be the step that puts you on a corporate consolidator’s radar.
Regardless of where you are in your journey, it’s never too early to start exploring and planning for your exit strategy. If you need advice or assistance with your existing strategy, any aspect of operating a business, or accounting, tax, and audit needs, please remember RBT CPAs is here to help. Give us a call to learn what we can do for you and your business.
RBT CPAs is proud to say 100% of its work is prepared in America. Our company does not offshore work, so you always know who is handling your confidential financial data.