Becoming a veterinarian can be a lucrative career, provided that you master the business terrain. While it is crucial to have the proper education and obtain the necessary license, there are a number of important considerations involved. This article of a brief discussion of the steps you should take when buying into a veterinary practice.
Identify an Established Practice
Unless you’re launching a new practice in an underserved community, the best way to gain entry to the veterinary field is to become an associate of a veterinarian looking to retire or buy into an established practice. This is because the costs associated with launching a new practice — securing space and buying equipment — can be prohibitive, and establishing a new client base from the ground up can be a lengthy process. By acquiring an existing practice, you will have access to income and cash flows that are vital for steering the business through the transition.
Do Your Homework
Once you have a practice in mind, it is crucial to conduct proper due diligence. This includes reviewing the necessary financial statements and tax returns (at least 3 years), checking the veterinarian’s complaint history, if any, as well as claims against the practice such as liens, unpaid back taxes, bills, lawsuits, and any other potential liabilities.
Structuring the Deal
The sale and purchase of a veterinary practice is typically initiated with a term sheet or a non binding letter of intent. The first consideration is the purchase price, which depends on whether you are only buying the practice, or both the practice and the real estate. It is important to remember that the seller’s price will be based not only on the assets, but goodwill as well. Goodwill includes intangible assets such as the practice’s client base, employees, and reputation. Meanwhile, the tangible assets are comprised of the equipment, inventory, furniture, as well as the premise and land if you are also buying the real estate.
While the purchase price in the primary deal term, the payment terms are also crucial. This is typically a combination of cash, promissory note, and earn-out — payments made over time based on the practice’s post-closing performance. Another important consideration is whether the deal will be structured as an asset sale or a stock sale.
Because buying a veterinary practice is a significant investment, you must be able to prepare for and secure financing. Obviously, qualifying for a loan requires having a good credit rating, but it is also important to work with a lender who has expertise in the veterinary space. The lender will consider your personal finances, as well as those of the target practice and loans, may be based on either cash flow of the practice or collateral — a percentage of the tangible assets.
Talk to An Attorney
Given the complexities involved in buying a veterinary practice, you are well advised to consult with an attorney that provides legal services to veterinary practice. An adept attorney can negotiate the deal terms, conduct due diligence, prepare the transaction documents, and assist with arranging financing. By engaging the services of LaMaster Law, PLLC, you will have confidence knowing that your best interests will always come first.