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Make the Decision to Sell the Practice
Hands down, the most difficult decision that you must make of all the decisions you will need to face, is the decision as to whether or not you want to sell your practice in the first place. Regardless of whether you are at that point yet or not, there will come a time when you are ready to sell, making planning one of your most important tools.
The reasons most practitioners give for leaving their practice are:
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Change in Career due to the frustrations that come along with managing a practice (43%)
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Retirement (33%)
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Personal Reasons (24%)
Another important aspect of planning the sale of your veterinary practice is the focus on both short- and long-term goals. It is important to know what you would like to do next, and whether or not you have adequate finances to comfortably support yourself going forward.
Decide to Whom You Would Like to Sell the Practice
Today, practice value is based upon profitability. You should be sure to evaluate your practice every 3-5 years. This can also help to regularly identify areas of the practice that require more attention.
Short of the decision to sell the practice in the first place, the decision as to whom you should sell it to is most difficult. It is such a difficult decision to make because you have many options:
1. Close the Practice for Good
Though usually a non-issue for larger veterinary offices, small and/or poor offices sometimes have no value and it makes the most sense financially to “call it a day” and simply close down the practice.
2. Stay the Course
If you are not yet ready to sell, and you continue to conduct the regular activities of your practice, it may be in your best interest to invest in the maintenance and improvement of the facility so that when you are ready to sell, the property will be in good shape. This may include everything from making sure that the paint on the walls is not chipped, to replacing old and outdated equipment. It may also make it a nicer environment to work in for the duration that you remain there.
3. Sell Your Share to Partners
If you are looking to get out of the business, selling your share to your partner(s) may prove to be a smart decision. However, if you began at the same or similar time as your partner(s), there is a good possibility that they may not be interested because they too are looking to get out of the business.
4. Merge
For smaller veterinary practices, this is often a really smart decision. Not only can it save money and improve profitability, it can also improve the quality of practice life by maximizing equipment and staff.
5. Sell to Corporate
Again, this is a very viable option for smaller practices. However, often times a corporation will want the owner of the practice to stay on for another year or two. Many owners have a difficult time relinquishing power and becoming someone else’s employee/
6. Sell to an Associate
If your partner(s) are working within the same or similar time frame as you, and are also looking to soon bow out, a good alternative may be to sell the practice to an internal associate. Since both parties know one another, the risk to the seller is low and the benefit to the buyer is high.
7. Sell to Someone Who is Not a Doctor of Veterinary Medicine
Though this may not be a first thought for many, sometimes it may be the right situation to sell the practice to someone else besides a Doctor of Veterinary Medicine. However, while some states allow for this, others do not. Dependent upon your state’s statute, if you are interested in selling to a qualified entrepreneur, it would be smart to first speak with an attorney.
8. Sell on the Open Market
By far the most common method for selling a small practice, if you wish to sell on the open market, you can work with brokers who can help you to not only locate buyers, but can also help with the other aspects of the sale (finances, contracts/negotiations, etc.)
Decide Whether You Would Like to Sell or Hold the Real Estate
What some may not realize is that the business’s real estate does not automatically come with the purchase of a practice. Owners are able to decide whether they would like to sell the property along with the business, or if they would rather retain it. Though owners are usually advised to hold onto the property and sell the practice first, there are various reasons to choose either method:
1. Rental Income
If an owner decides to hold on to the real estate, for the time being, he or she can rent it out to someone else. Alternately, if someone is looking to make extra money on real estate, there are likely better options for return than a specialized facility, since the market for veterinary offices would be much smaller.
2. A Growing Investment
Though real estate generally appreciates over time, for more specialized facilities it does so at a much slower rate. This is why it may be beneficial to sell the property along with the business. By using a 1031 Exchange, the property can be sold and taxes can be deferred if the seller reinvests his or her gains back into real estate (so long as there is no gain or loss with the transaction). Because this can get a bit technical, it is best to consult with an accountant and/or tax attorney to ensure that you have a proper understanding and proceed properly.
3. More Attractive to Buyers
A benefit of selling only the practice
Remember that because there are so many options, it may be best to speak with an attorney in order to make the best decision for you and your practice. More information and understanding breeds better planning and will have a great impact on your experience. To learn more about the sale of your practice, call the LaMaster Law Firm at 269-760-1499 today!