I have been in private practice for 31 years. I started my veterinary practice from scratch 21 years ago as a sole owner. Like many veterinarians new to practice ownership, I put all my blood, sweat, and tears into my “professional baby.” The first year was spent seeing patients Monday through Saturday, and playing janitor on Sunday because I had no money to pay someone to keep the hospital clean to my standards. I did my own bookkeeping, marketing (what little I knew how to do), managing, and strategic planning, while trying to grow the practice. After practicing alone for seven years, I was able to afford an associate veterinarian. About nine years in, I was fortunate enough to buy land and build a free-standing building—I received bank financing three months prior to the 2008 recession. The first year in the new building was financially tight, but the new facility allowed the practice to grow into a four-doctor practice by the time I started to consider the possibility of selling.
I started preparing for a practice sale around five years prior to selling. Although my net profit was respectable, I knew it was not where I wanted it to be. So, I hired a consulting group—Blue Heron Consulting—to help me put measures in place for sustainable growth. That was a game changer for me. The other game changer, believe it or not, was COVID. I had taken on my practice manager as a minority partner about four years prior to COVID. She and I took great pains to keep the doors open and our staff employed. We never turned away a client, and as a result, the practice grew by 50% in 2020. We were exhausted trying to run a business while keeping our staff and clients safe, and we decided to consider looking for a buyer in the fall of 2020. To help with the process, we hired a lawyer with years of experience in veterinary practice sale transactions.
Considering a corporate buyer
I always thought I would sell to an associate veterinarian, or veterinarians, when I was ready to retire, and like many practice owners, I was jaded about selling to a corporation. But, we decided to consider selling to a corporation because we knew a private buyer would not be able to offer what corporations were offering. My previous blog—Finding the Right Buyer for Your Veterinary Practice—cautioned about chasing the money, but the veterinary landscape has changed dramatically for practice owners in recent years. The vast number of corporate buyers has made the competition fierce, and companies are able to offer higher wages and benefits for employees, not to mention more robust career development opportunities for veterinarians and support staff, which appealed to us. We were genuinely concerned about ensuring our team was well taken care of when we were no longer in the practice.
Choosing the right buyer
I had four companies in mind—I had existing relationships with three—and our lawyer recommended contacting four additional companies. He and I reached out to them, and started the arduous process of sending three years of data to the potential buyers. We started this process in the first quarter of 2021, once the 2020 books were reconciled, and we started receiving letters of intent (LOIs) in the spring of 2021. The first offer came in about where our lawyer expected, which was higher than we could have dreamed. Ironically, that first offer ended up being the lowest. We received other offers that were incredibly attractive financially, however, they included joint ventures that did not interest us. Some also wanted me to continue working for three years after the sale, and my ideal scenario was one year with the ability to cut my work week by 50%.
After many conversations with our lawyer, and thanks to his ability to help us sift through the offers, we signed an LOI in July 2021 with the goal of closing in September. Our lawyer handled all negotiations once we received the buy-sell agreement and my employment contract. One of the agreement’s most attractive aspects was our ability to take a percentage of the sale price in equity shares of the company. We felt this was a worthwhile investment because we believed in their business model and success up to that point in time. We also liked the fact that they allowed us to gift a small part or our equity shares to our two associate veterinarians. It was important to me that our veterinarians were able to invest in the company for which they would be working.
Sealing the deal
After more than two months of negotiations, we closed the deal on September 28, 2021. As with any business transaction, there have been some hiccups along the way; however, the transition has been fairly uneventful. The staff has not had any complaints, and they have taken advantage of new training opportunities. More importantly, we have been able to maintain our culture and autonomy with medical care, and the company recently helped me find a new veterinarian to hire, which was invaluable in the current climate. Overall, I have been happy with the entire process and don’t have seller’s remorse.
Selling the real estate vs. renting it out
On a side note, I owned my building and originally thought about keeping the real estate for rental income. Because we received more than I ever could have imagined for the practice, I did not feel the need to keep the real estate, and I sold the building to a different company. Had I kept the real estate, it would have taken 15 years of rental income to realize the income I received for the building’s sale. I encourage all practice owners who own their building to put pencil to paper and decide if it makes sense to keep the real estate, instead of selling.
Want a fulfilling, stress-free buyer’s experience that you can feel good about? Contact Inspire Veterinary Partners to learn more about how a healthy buyer’s journey should look.