5 things that can go wrong in a veterinary practice sale

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5 things that can go wrong in a veterinary practice sale

In years of evaluating no-value, low-value veterinary hospitals and practice sales that have fallen through, I've seen my share of these problems. Don't make them yours.
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Apr 23, 2017

Protect your financial interest, people! Whether you're finagling your practice exit plan or buying into a practice, here are some typical problems that scuttle a good deal. (Shutterstock.com)

As you contemplate your exit plan now or in the distant future, do yourself a favor and avoid these mistakes that can haunt a profitable and stable transition for a veterinary practice:

Ignoring price problems

When one person is buying from another, probably the biggest sticking point is price. You can sort it out with reasonable expectations on both sides and the advice of a qualified veterinary financial professional, but, I'll tell you, not every buyer or seller is reasonable. If you can’t get to where you see eye to eye on this, you won’t have a deal.

Fighting over future work

If the practice seller wants to work more hours or for more years than the buyer wants or needs, that can hurt things. Practice owners who want to sell but still, deep down, want to try to run everything even though they don't own it—that's a problem. Spell out in clear language in the sale documents or an employment agreement how much a practice owner might stay on as an associate and what role they'll play.

Roaring over the real estate

Sometimes the practice owner owns the real estate, and the buyer expects they'll be able to buy it down the line. Put that in the documents. If the seller wants to own the real estate forever, that can be a challenge.

"Wink, wink" deal-making with financials

Some practice owners spend a few years—or a lot of years—counting some personal expenses as business expenses or not reporting all their revenue, which brings down the taxable income on the books. I've seen practices with $100,000 in personal expenses run through the practice books. These practice owners then try to convince buyers there's a lot more cash flow in the practice than it looks like. Keep your books straight, people; this is an easy way to lose a buyer’s trust. If potential sellers don’t believe your financials, they may not believe anything else you say.

Skipping the details

Don’t forget to put together a buy/sell agreement (with your attorney’s guidance.) This document spells out what happens in case of a split among owners or in the event of death or disability. Details will include how the practice shares will be valued when someone wants to leave the partnership and what options the shareholder has (or doesn’t have) in selling. And what if a current co-owner dies or becomes disabled and can’t practice? Better to set this up from the start instead of fighting about it during a tragedy or when you all hate each other.

Karen E. Felsted, CPA, MS, DVM, CVPM, CVA, has spent more than 15 years working as a financial and operational consultant to veterinary practices and the animal health industry and is a frequent contributor to dvm360.com. She also spent three years with the National Commission on Veterinary Economic Issues as CEO and is a frequent speaker at the CVC conference.