I love vacations, don’t you? Getting away from the office for a few days is just the break a busy practice owner needs. I like vacations so much that throughout the years my wife and I would make plans to move to one of our favorite travel destinations and retire from the Florida rat race forever. Usually a few weeks back home sweet home would cure me of these urges.
But not this time. Several years ago we spent a glorious week in the Black Hills of South Dakota. Think Mount Rushmore. Buffalo. Pine forests. Six weeks later, we flew back to the mountains that had captured our hearts. In three days we’d purchased 27 acres of land 15 miles from the nearest paved road. Just like that, we were planning our dream retirement home and planning to leave the practice we’d built together for 25 years. Leaving was the most difficult decision I’d ever made. The hardest part? Knowing I was ending my daily encounters with my fine friends and colleagues.
Some of us dread retirement, while others anticipate it happily. But it’s inevitable for all of us unless we fall dead at the microscope. And no matter how we feel about it, selling a practice and ensuring its financial future can seem like a labor of Hercules. But don’t panic—it can be done. Here are the most important things my wife and I did to ensure a smooth and relatively pain-free transition away from practice.
1. Make a commitment
It’s important to set a retirement date, as this forms the framework for your process. My practice culture has always been deadline-driven and focused on efficient time management, which helped our transition program go smoothly. An effective ownership transition takes one to two years, so an exact date may seem hard to pin down, but set one anyway. We gave ourselves two years. Be firm but flexible; much of your exit planning will involve other people who need to plan as well.
Lesson learned: Deadlines play an important part in selling your practice. If you’re indecisive, you’ll have problems all along the way. Seek help for your commitment avoidance.
2. Call the experts
Talk to your accountant and lawyer early on, and stay in close contact with them so you can process legal and business documents as needed. These advisors can handle most of your needs during the sale.
Lesson learned: Contrary to common advice, my wife and I didn’t seek out veterinary-specific lawyers and accountants to help with our practice sale. Contracts and financial numbers are common to all businesses, so we found that working with our long-time advisors was easier than finding new help.
3. Find the perfect buyer
For many of us, this is the toughest step. When I thought about turning over the practice reins, I was mainly worried about the long-term security of my employees, clients, and patients. Yes, I knew a new owner would make a personal imprint on the practice and take it to new levels in the years ahead, but I also wanted my original clinic philosophy to guide the practice into the future. And it would be easiest to transfer this “shared morality” to someone who’d been part of the team for some time and was already well-accepted by staff and clients.
It turned out that one of my eager young associates was also an eager owner wannabe. We’d talked vaguely about her potentially buying the practice in her first job interview, so it was no surprise when she accepted my offer. If you’re not satisfied with selling to one of your associates, start looking for a buyer right away—it may take years to find “the one.” Selling to a stranger is quicker, but it leaves you with little input into the future of the practice.
Lesson learned: My colleagues say it’s becoming more difficult to find young doctors interested in owning clinics. I don’t really have a solution, but be aware of this potential problem.
4. Set the price of the practice
Our accountant appraised our practice, and my associate and I were satisfied with the results. The accountant used three different methods of valuation, and they closely matched, so we were confident we’d set a price that was fair to both buyer and seller.
Lesson learned: After investigating the valuation process, I disagree with the advice that’s repeated frequently in journals and at conferences. I think any competent accountant can value a veterinary practice for a very reasonable fee. Go ahead and send me hate mail (firstname.lastname@example.org).
5. Put it in writing
Once the valuation is finished, write it all up in a letter of intent that includes price, time frame for the transaction, payment terms, noncompete conditions, and so on. This document is a written “meeting of the minds” between you and your buyer, and it acts as a set of instructions for lawyers, accountants, and bankers throughout the transition. Everything is worth the paper it is—or isn’t—written on.
Lesson learned: This is such a simple method of avoiding misunderstandings that I’m astounded that it isn’t the first thing everyone does. Confusion is costly and best avoided with written communication.
6. Don’t keep secrets
As soon as my associate agreed to purchase the practice, we announced it to the staff. They immediately jumped into action and started reorganizing the clinic around the new owner-to-be. I was left in the dust—which was exactly right.
We also let clients know about my departure a year in advance. Being open and honest with clients allowed us to address their concerns about the transition and transfer care for chronic cases to another doctor. Did we lose some clients during the process? Sure. But hopefully fewer than if we’d tried to hide it from them. Plus, I got some cool going-away gifts.
Lesson learned: I would do it this way again. It does give clients time to consider moving to another practice, whereas fewer seem to leave if they’re surprised when they come in after the owner is gone. But openness with the team and clients makes the transition more manageable, especially from the staff’s point of view.
7. Find the right replacements
The practice will need someone to help cover your cases, so assist the new owner in her search for an associate. Let the new owner lead the interview and selection process because she’ll be the one working with the new doctor. For my new owner and me, this hiring process took more than a year. Though we often despaired, we finally found the perfect match and hired him on the spot.
Another important task: Pick the right office manager. As is the case in many veterinary practices, my spouse ran the business part of my practice for many years. Because she was retiring with me, we needed to replace her too. Hiring in-house was best—we promoted a long-term employee to office manager. Since she was already part of the practice culture, she excelled from the first day.
Lesson learned: In the end, the practice will live on because of the people you choose to replace you. Usually these people already work for you. Though everyone brings something different to the table, you need people who will keep the practice philosophy alive, or clients will become confused and leave in droves.
8. Train, train, train
We instituted a formal training program for the transition, complete with a syllabus and scheduled class times. Most of the classes involved the new owner, the new office manager, and myself. Other team members attended as needed. Over the course of a year, we covered every subject involved in running the business, from advertising to taxes. As other people learned how to run the practice, I became glaringly irrelevant—something I’d suspected for years. My success with the transition was evident when I was no longer invited to staff meetings. (Funny how the only available meeting time was on my day off.)
Lesson learned: Don’t procrastinate when instituting your training program. Some office chores occur only periodically through the fiscal year, so the new owner and the new office manager will need at least a year to do everything once. The sooner you start your training program, the better. The day after you leave isn’t the time for tough lessons.
9. Work yourself out of the rotation
The hardest part of the transition is letting go of the practice. But this is the time to turn over operations. Let your staff take care of the clients, and let the new owner make the big decisions while you do less and less every week. Keep quiet when you used to speak, and give the new team a chance to succeed without you. They will.
After the first six months of our training program, my wife and I went away to work on our new house for the summer. And the clinic thrived. Without me. How depressing.
Lesson learned: I understand why some people just find a buyer and walk away. But for my wife and me, it left too many questions about the future of our life’s work, so we went through a longer transition.
10. Clean house before you leave
If you have any problem clients or employees, get rid of them before you go. Look at things through your new owner’s eyes and remember that just because you’ve tolerated in-clinic terrorists for years, it doesn’t mean she should. Fire ’em on your way out the door.
The end … or is it?
So after a year’s worth of planning and work, my wife and I loaded up the wagons, waved goodbye to our staff and friends, and headed west into the sunset, never to be seen in these parts again.
Or so we thought. The economy, it turns out, had other ideas. See “The saga continues” in the Related Links below.