Whether you're 20 years or two years from retiring, you want to map which exit you'll take. Without a definite route, you could end up miles off course, forced to drive longer than you hoped or caught in a messy pileup. And if you get in the car with no plan about where you're going, pinpointing your end destination becomes impossible.
So start mapping your route—sooner rather than later. If you want to retire in two years and you haven't started, then the cliché "better late than never" applies. If you have years to plot and plan, that's great. Start now. Some exits take longer to reach than others, and you'll have plenty of time to make the necessary arrangements for your road trip to one of these five exit strategies.
1 SELLING TO YOUR ASSOCIATE
This route is preferable for most owners for several reasons. First, the potential buyer is likely a long-term associate—someone you like and respect and who shares your views and work ethic. And because you've built a good relationship with your associate, you'll feel reasonably secure that he or she can successfully take over the reins.
The road to this exit takes years to navigate. To get started and maintain your path, you need to:
- find the right associate
- train and mentor him or her
- pay your associate well
- consider selling your associate a part interest, even before you might be ready.
Selling a part interest. You may need to solidify your succession plan by selling a part interest to your associate, with the written promise to sell the remainder later. Before pursuing this path, make sure you want this veterinarian as your successor and believe he or she can help take your practice to the next level.
Value. Given your relationship with this person, are you willing to give a little on the value of the practice? Owners sometimes make this choice because of loyalty, a wish for security, or even guilt.
Financing. Again, given your relationship with the person, are you willing to finance the sale? Owners often offer their associates financing, especially if they know the associate well. It can be a good investment.
- Clients and staff members will experience a relatively seamless transition from old owner to new owner.
- Given your relationship with the buyer, you'll probably be more willing to finance the transaction, making the sale that much smoother to close.
- Because you have a personal relationship with your associate, you might be too accommodating when it comes to the terms of the deal—value, interest rate, down payment, and so on—costing you in the long run.
- The negotiation process might be awkward.
2 SELLING TO AN OUTSIDER
This exit can be difficult to find, making for a gut-churning ride. Basically, you're gambling that when you're ready to sell, there'll be a buyer there to wave you off the expressway.
You'll want to work hard to get your practice in tip-top shape prior to putting it on the market. You'll want to:
- improve practice gross revenue and profit
- decrease personal expenses running through the business
- make necessary cosmetic changes and other improvements
- put the word out to colleagues and industry professionals that the practice will soon be for sale.