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What’s it worth? Selling your practice may not be as


easy as you think, especially if you pur- chased your practice some time ago. “For many owners looking to sell, their


only point of reference is when they pur- chased their practice. It is a very differ- ent process now,” said David McCormick, DVM, MBA, of Simmons & Associates, a veterinary practice broker. “Both sides have teams of advisers to help guide them through the process, plus the lenders, the real estate folks, etc.... It is no longer a ‘spit in the handshake’ transaction.” The first thing you will need to sell


your practice is a good estimate of its value. Ackerman says the National Com- mission on Veterinary Economic Issues (NCVEI) profitability estimator (which is free to AAHA members at ncvei.org) is a very good rough calculator of prac- tice profitability after normalization of expenses. He also recommends owners read the “No-Lo Practice” brochure from VetPartners (which can be downloaded for free at vetpartners.org). A no- or low-profitability practice does


not have value, except for the real estate, Ackerman said. In Structuring an Associate Buy-In,


List writes that “A practice’s value is not a single number. Rather it is a range of values…. Unfortunately, valuations just can’t be reduced to a formula that consis- tently yields reasonable results. No two practices are identical. That means the value of a practice is not a single figure, but a range of reasonable values at that point in time.” “The number-one thing I’d tell an


owner who wanted to sell is to get a practice appraisal by a veterinary practice appraiser,” McCormick said. “Business value is tied to the return on owning (i.e., the profits), which can be quite different even among practices with the same rev- enues. The determined value could be 30% of revenue or 80% of revenue, or anything in between (or higher, although this is less common).” “If a practitioner wants to know the value of his/her practice, he/she should


Trends magazine, April 2012


have it appraised by a veterinary practice appraiser,” he said. “Otherwise, it is a guess that could be wrong. There is another benefit of a veteri-


nary practice appraisal, McCormick said. “It’s a powerful diagnostic tool for diag- nosing practice financial health. If the value is low, then the profits are low. If the profits are low, the solution lies in the expenses and the revenues. Because of the financial analysis involved in the appraisal process, the appraiser can help develop a treatment plan to work on the identified issues.” There is more to selling your practice


than profitability. Demand is there for practices in places in which people like to live, Ackerman said. “A $100,000 prac- tice in a nice location will be perceived at a higher valuation. Some of the valu- ation is subjective. It takes into account location desirability and the relationships you have.” You are selling more than a building


and equipment when you sell your prac- tice. Buyers are also buying goodwill, which Ackerman defines as “the ongoing ability to generate profitability above fair market salaries.”


Do it yourself or broker? Joe Wright, DVM, sold his two-doctor


(one full-time and one part-time) prac- tice in Shelby, N.C. last year. He did not believe in using a broker. When a poten- tial buyer approached him through a bro- ker, however, he decided to give it a try. Now, he says the best advice he can give an owner who wants to sell is to find a good broker. “The first time I tried to [sell], I tried


to do it on my own and the deal fell through,” Wright said. “Sellers always think their practice is worth more, and buyers always think it’s worth less. A third party needs to come in. Having someone do third-party negotiations even with people who are positively inclined toward each other is helpful because the broker can sometimes tell the owner something he needs to hear that might not come off as well if it came from the


The first thing you will need to sell your practice is a good estimate of its value.


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