If you're a longtime veterinary practice owner, you're likely facing a tricky decision: Is now the right time to sell your practice? Let's see what the Magic 8 Ball says. "It is certain" ... "Reply hazy, try again" ... "Outlook not so good." All right, maybe a toy isn't the best oracle to divine the right time to cash in your nest egg. But if you're desperate for answers—from any source you can find—you're not alone.
Today's environment has many practice owners scratching their heads over the state of the veterinary market. All indications are that the economy is recovering ("signs point to yes"). And that's good news for sellers and buyers alike. But how much better might it be in two years? In five? And how many other potential sellers out there are thinking the same thing?
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Sell now and you might miss further upside. Sell later and you might get stuck in a flooded market. While no one is certain how the next five years will play out, I'm venturing to predict that we'll see a rush of practice owners cashing out in the next half-decade. Let's take a look at the demographic and economic shifts on the horizon in this country so you can make a more informed choice about your impending practice sale.
Baby boomers—those people born between January 1, 1946, and December 31, 1964—number nearly 78 million, a quarter of the U.S. population. They started hitting the retirement age of 65 on January 1, 2011. It's estimated that every day of this year and beyond, another 10,000 baby boomers will turn 65. On a national scale, this will lead to a whole host of problems. Our economy, our Social Security system, and our healthcare system are all buckling under the strain.
These same percentages mostly hold true inside the veterinary industry. Of the estimated 28,000 privately owned veterinary practices across the country, thousands are owned and operated by veterinarians on the cusp of retirement. Many are single-doctor practices. Many don't have a firm transition plan in place—or any plan at all. These owners aren't grooming an associate to take over, nor do they have partners ready to buy them out. Their endgame is simple: Put the practice on the market, sell it in a bidding war, and walk away with all cash.
This plan may work for a few, but probably not for the majority. The question will be in the timing. How many for-sale veterinary practices can the market absorb at once?
RETIREMENT PLANS RETURN
Many practice owners' retirement plans have been delayed by three devastating factors. First, the stock market crash of 2008 and 2009 shrunk investment portfolios 20 percent to 40 percent. Second, the real estate crash cut residential and investment property values 10 percent to 30 percent. Third, the gloomy economy pulled down veterinary practice income, which in turn impacted business values.
Combined, these three factors rewrote many retirement timelines. Check out "How the recession has affected practice owner retirements" to see some examples of how practice owners have dealt with this blast of bad financial luck. The end result, of course, was the painful realization for many aging practice owners that retirement would have to wait.
Today, while the real estate market remains in the doldrums, the stock market has recovered and the general economy is improving. Two out of the three major components of a sound financial retirement are heading in the right direction. Older practice owners are just now feeling more secure about their future. This means that these same practice owners are now more willing to revisit their plans for retirement and selling their practices.