How to Sell a Veterinary Practice the Right Way

A veterinarian usually does not sign up for the entrepreneurial duties, which they end up, more often than not, doing more than actually practicing medicine.

Whether or not they like it is entirely subjective, but most times, it becomes a driving factor to sell the practice. It’s a deeply personal choice. And for someone who’s spent years building a practice, it’s likely the biggest professional decision they’ll ever make. 

In this guide, we’ll learn how to sell a veterinary practice with the least resistance and the most confidence.

Start With a Clear Exit Strategy

The first step is to sit down and think about why it is that you’re selling your practice, and why now? Before preparing a vet practice for sale, you need to be clear about the big why.

While there’s no one-size-fits-all, usually the reasons for vet practice sales are:

• Wanting to practice medicine solely, part-time or full-time, while retaining equity
• Feeling burnt out
• Relocation or downsizing the workload
• Starting a new career or pursuing a hobby full-time
• Simply enjoying the spoils of your labor and retiring

You must also establish a timeline. Do you want to exit within a single year fully, or are you willing to gradually transition over a longer period? Perhaps, you want to stay on as a part-time DVM or a medical director.

Clarity on the “why” makes it much easier to determine what type of deal, buyer, and timeline works best for you. This way, you stay in control and exit on your terms, not out of desperation or pressure.

Talk to Legal and Financial Experts Early 

For such a major professional decision, it’s best to involve legal and financial experts as early as possible. They can help you manage paperwork, protect your interests, and make sure the deal supports your long-term goals.

An experienced attorney can review and negotiate the terms of the deal, draft and revise agreements, and make sure your liabilities are covered during and after the transition.

A CPA who understands veterinary practices can help clean up your books before buyer due diligence, advise you on positioning owner perks and add-backs, and make sure your financials support the valuation you are aiming for.

Taxes are another key factor. The way your deal is structured can have a big impact on how much you actually take home. A good tax advisor can help you decide how to divide the sale between goodwill, equipment, and real estate if you own the property. They can also explain the difference between capital gains and ordinary income and help you plan to reduce your tax bill.

Be sure to learn more about tax implications of selling your veterinary practice.

Understanding Asset vs. Share Sales

Most veterinary practice sales are structured as asset sales, where the buyer purchases the business assets, not the company or corporation. In some cases, especially with corporate buyers, a share sale may be preferred.

Asset sales give the buyer a clean slate but may require more paperwork. Share sales are usually simpler for the seller but come with more post-sale legal and tax risk. That is why having legal and financial guidance through this part of the process is so important.

Get a Professional Valuation (Not Just a Rule of Thumb)

One of the most important things to do is not to fall for rules of thumb. That is a major mistake that veterinarians make, falling for these informal tricks of valuation. A common rule of thumb is applying a flat multiple to gross revenue. These methods are outdated at best and misleading at worst. They do not take into account true profitability, operational efficiency, or risk profile, all things that a serious buyer actually cares about.

A serious buyer wants real numbers. So, it’s best to seek a professional valuation, as they take into consideration things that matter. For example, they calculate your adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), thus identifying discretionaries or one-time expenses that can be added back to show your true earning potential.

Understanding What Factors Impact Value

We mentioned EBITDA already, the very foundation of your valuation. The higher and more stable it is, the higher the sale price you can fetch. Besides that, other values include:

• Client Base: A loyal, active, and recurring client base and a steady flow of new clients are major assets. Buyers want to invest in a practice that is in demand.
• Growth Potential: A practice that has room to expand, be it in the form of extending working hours, offering new services, improving marketing, or adding new doctors, tends to attract a better price.
• Team Strength: By team strength, we mean not just the number, but a team that is reliable and productive. A massive green flag is when the team can function efficiently without depending on the owner.
• Systems and Infrastructure: Having modern systems in place that are efficient with clean financials is another green flag. For the buyer, this provides them with much-needed confidence.

Not only do these factors help you gauge the current value of your practice, but they also provide you with valuable information about where it lacks and how you can increase its value before selling.

Clean Up Your Operations and Paperwork

Before buyers ever make an offer, they’ll want to see how well your practice runs and scrutinize how easy the transition to a new owner would be. So, you must prepare your operations and get all the paperwork sorted out beforehand to get a higher multiple.

1. Getting Your Finances Right

Words spoken with confidence are, at the end, just words. When someone is making a serious offer, they want proper documentation of everything. Having incomplete or vague paperwork is a sure-fire way of losing all credibility.

You’ll need clear, up-to-date records for at least the last three years, including tax returns, profit and loss statements, and year-to-date financials. Best work with a professional advisor for this, as they’ll be able to present all information in a transparent way that showcases your clinic’s true earning power.

2. Standardize Procedures, Staff Contracts, and Compliance

Buyers wouldn’t want to invest in a clinic that will not function without the owner, aka, you. They want to have the confidence that, post-sale, the quality of operations won’t go down, and there won’t be disarray within the clinic.

Achieving this is fairly standard. Most clinics that have been running for a long amount of time can run independently. If not present already, document all standard operating procedures that the staff can use when needed.

Now, operations are also impacted by emotional reasons. Staff might feel uneasy with the transfer of ownership and how it would affect their life. Update all employment contracts so everybody knows what the next steps are. Finally, get current compliance records like licenses, OSHA, DEA, and payroll files in order.

Having everything in place instills confidence within the buyer and, of course, also increases the value of your practice.

Decide What to Do with the Real Estate

This may or may not apply to you, but if you own the property your clinic operates from, that’s another major decision you must now make. Options are clear: sell it, lease it, or hold onto it. This is a significant choice that will massively impact your deal’s structure, taxes, and the candidates that show up.

Selling the property alongside the practice is the cleanest way of going about it. Buyers who want full control prefer this. If you’d like to retain ownership, though, you can decide to lease the property and enjoy the passive income while maintaining a valuable asset.

Finally, selling the practice but holding onto the property can then allow you to sell it later or to a third party. This approach is complex, but it means you retain a valuable asset.

Real estate also affects the overall structure of your deal, particularly how funds are allocated between goodwill, assets, and property, which in turn impacts your tax liability and capital gains exposure. These pointers are best discussed with a broker, CPA, and your legal team early on.

Each path has its pros and cons, and there are no right answers. The decision depends entirely on your long-term financial goals, retirement plans, and appetite for continued landlord responsibilities.

NOTE: This decision impacts your buyer pool and deal terms to a great extent. For example, if you’re going to lease the property, you’ll likely find more corporate or private equity-backed buyers as they prefer that and don’t want to deal with the headache of managing real estate. On the other hand, individual buyers may wish to own the building outright, especially if they’re relocating or investing long-term.

Find the Right Buyer (Not Just Any Buyer)

The highest offer isn’t always the best deal. You ideally want the agreement to align with your goals, often a combination of freedom, control, and, of course, financial gains. We here at Transition Elite helped one of our clients get five offers, ranging from $12.5 million to a whopping $22 million. Our client opted for the second-highest offer of $20.8 million because that deal offered them the best terms.

There are primarily two types of buyers: Private Buyers and Corporate Consolidators.

• Private Buyers are usually associate veterinarians or independent DVMs/ODs who want what you have built over the years. They are more likely to preserve your clinic’s identity and its legacy, as well as the culture you’ve built. However, they might need third-party financing, which can slow down the process or introduce risk if the deal falls through.
• Corporate Buyers, on the other hand, are extremely strong financially. They often offer high valuations and want you to build upon your business with all the operational resources they have. Generally, they let the medical side of things stay as it is, but completely change HR, marketing, and back-office systems. This can impact staff and your role.

Look Beyond the Numbers

The best buyers are the ones who:

• Understand and respect your legacy
• Want to retain your staff and keep them in a leadership role
• Share your vision for the future of the clinic
• Are financially capable and professionally credible

This is especially important if you’re staying on in any capacity. You’ll want to make sure the new owner is someone you can trust to uphold the standards you’ve worked hard to build.

So, Set Expectations for Your Role Post-Sale

Needless to say, you need a plan after you’ve made the sale. What this plan entails is entirely a personal choice. Do you plan to have plenty of time to enjoy life fully and retirement with a payout? Perhaps you’d like to stay on as a part-time vet and solely worry about practicing what you love?

This is necessary for both you and the buyer, as they need to know your timelines and availability, and a clear agreement around duties, hours, and compensation helps clarify things early on.

Ensure a Smooth Handoff to Staff and Patients

Now, patients and staff deserve consistency and empathy during this time. It can be troublesome and anxiety-provoking for them, too. So, the smoother the transition is for them, the more likely they are to relax and keep performing as they are.

As professional sales advisors, we recommend working with a buyer who understands this. They help gradually bring in changes, provide training and mentorship if needed, and most importantly, reassure the team about their job security and benefits.

Be transparent about changes, timelines, what will and will not change, and answer any questions they may have that they deserve to know the answer to. New ownership should be brought in with a positive light.

Why it Pays to Have a Trusted Guide by Your Side

A successful deal is multi-dimensional. Knowing your legacy and financials are protected is quite confidence-inducing. As we hinted before, at Transitions Elite, our team is tasked to do just that. That is, think of your best interest.

We specialize in helping veterinary practice owners sell their practice for a deal that is leaning in their favor. We offer hands-on support throughout the period, from first appraisal to final closing. After establishing a clear understanding of your goals your priorities, our team will develop a structured deal that matches it.

We’ve helped countless other vets and have real results with our veterinary practice sales services. What you’ve built is something special. Our goal is to help the buyer see the same, so you get the rewards of the seeds you have sown. Get a free evaluation of your practice to get started today.

Final Thoughts

You only get one opportunity to bank on if you’re selling your practice. You deserve every bit of what you’ve poured in. So, develop a strategy early on. Plan, make smart moves, one of which is getting expert support, and start working towards the next phase of your life. The right strategy will provide you with financial and mental freedom.

FAQs

How Do You Market a Veterinary Practice?

If we’re talking about marketing a vet practice for sale, start by working with a sales advisor who has access to actual qualified buyers. It’s risky to go at it alone using an online listing. A practice sales advisor will help create confidential information records that can be showcased to potential buyers to showcase clinic strengths, promote you discreetly, and help you achieve a position of power by showing your practice’s strength based upon real metrics like EBITDA, team stability, and growth potential.

What is the Average Profit Margin for a Veterinary Practice?

Most veterinary practices have a profit margin of 10% to 20%, depending on factors like operational quality, location, and size. Well-run practices observe revenue exceeding 20%, making them highly attractive to buyers.

How Do You Value a Veterinary Practice?

Veterinary practices are valued using their adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), then applying a market-based multiple. The multiple is usually between 4x and 8x, but varies based on several factors like profitability, owner dependence, staff stability, growth potential, and location.

What Corporations are Buying Veterinary Practices?

Vet practices that are well-run, profitable, and have growth potential are in demand among a growing number of corporations, including pet healthcare insurance providers, tech startups, corporate consolidators, and private equity groups.

What is the Rule of 20 in Veterinary Practice?

A rule of 20 is a system developed by the American Animal Hospital Association (AAHA) to bring objectivity into the practice of assessing the financial health of a practice. As the name might suggest, it has 20 key performance indicators (KPIs), such as labor costs, revenue per DVM, and profit margins, to help identify strengths and areas for improvement.