Impact of Economy On Sale of Veterinary Practices

Selling a veterinary practice is a combination of personal and strategic decisions. On the personal side, you are focused on the emotional journey of selling and how you will take care of everything from ensuring the practice’s reputation to finally selling to the ideal buyer. The strategic side is the opposite; it is one that is influenced by the economy and its conditions, like demand from buyers, interest rates, inflation, and trends in the industry. Why? Because all of these can significantly impact the value of your practice and your chance to secure a deal with an ideal buyer at the right value.

After COVID-19, the surge in pet ownership has also had a positive impact on the demand for established veterinary practices, and we have seen many owners who never thought about selling their practice take an immediate decision because the economy and other conditions were in their favor, and they didn’t want this opportunity to slip from their hands. 

Today, we are going to cover how the economy impacts the sale of veterinary practices and will provide you with some actionable tips for navigating these external forces.

1. Buyer Demand and Economic Cycles

In simple words, the economy operates in cycles, and this can directly affect buyers’ demand. In times of economic growth, there’s often an increase in the demand for recession-resistant businesses like veterinary practices.

Veterinary practice buyers including corporate groups, private investors, or individuals—seek stable, profitable clinics as safe investments. 

However, during economic slowdowns, demand may dip as buyers become more cautious, focusing on only the most attractive and efficiently run practices.

What This Means for You:

• In an economic upswing, your practice might receive higher valuations due to competition among buyers.
• During a downturn, your practice with strong financials and growth potential can still attract buyers but may face reduced offers.

Actionable Tip:

If you are a practice owner and your clinic has had stable growth over the past few years and everything is working well, we suggest you take advantage of the opportunity and evaluate the option to sell your practice. While economic trends are still in your favor, in the near future, with no surety of how the market will behave, combined with the fact that if there are many practices put up for sale in the near future, the trend will shift from a seller’s market to a buyer’s market. Even if your goal is to retire in the next few years, you need to take the first step now because the buyer will also want you to stay after they buy your practice.

2. Interest Rates: The Hidden Influencer

For buyers, one of the things that can impact their decision is the interest rates. Imagine if you want to buy a new house. When would you make the decision? When the interest rates are high or low? We are sure you’d agree it would be when the interest rates are low. Similarly, interest rates play a key role in the sale of your practice. When the rates are low, borrowing is more affordable, which encourages buyers to offer competitive bids. On the other side, rising interest rates can reduce the purchasing power of buyers, which impacts the pool of qualified buyers and eventually decreases the practice valuation.

Here’s how interest rated impacts

According to Veterinary Practice news Interest rates after peaking at nine percent in mid-2022, inflation subsided to a range of three to 3.5 percent by the end of 2023 The rise in interest rates has increased borrowing costs for buyers, and thus has negatively impacted business acquisitions and practice valuations for those hoping to sell to the corporate market.

How Interest Rates Affect Deals:

• Low Rates: Buyers can access financing with ease, often leading to multiple offers and a seller’s market.
• High Rates: Buyers become more selective, focusing on practices with proven profitability and minimal risk.

Actionable Tip:
You’ve likely seen examples from Veterinary Practice News that rising interest rates have increased borrowing costs for buyers, which can negatively impact demand and premium valuations. But did you know there is still a window where you can sell to an ideal buyer at a premium valuation?

Next steps? Just get in touch with us! We have access to a qualified pool of buyers who are still paying high premiums for practices with 2+ doctors and more than $2M in revenue.

Click the button below to get a free valuation of your practice now.

3. Inflation and Rising Costs

In simple terms, inflation means an increased cost of products and services over a period of a year or so. A study published in the National Library of Medicine indicates that from 2021 to 2022, the national average compensation for a full-time associate veterinarian increased by 12%, nearly double the economy-wide inflation rate of 6.8% over the same period (PMC). This suggests that while veterinarians are seeing larger paychecks, the actual purchasing power of these increases may not be as significant as they appear on the surface.

Inflation impacts everyone—from staff to practice owners to potential buyers. The rising costs of supplies, utilities, and staff, including DVM wages, can decrease profitability and make your practice less appealing to buyers.

Turning Inflation into an Opportunity:

Here’s the fact: Buyers will value practices that have already adapted to rising costs and implemented cost-saving measures. For example, if your veterinary practice has a manual appointment booking system that requires a lot of manpower to schedule appointments and do follow-ups, a simple solution is to check out software like Vetstoria or similar options. These can automate the process, reducing dependency on staff and, in turn, lowering billed staff hours. Similarly, if your clinic has limited space but consistently sees long queues and waiting times, it’s the perfect opportunity to introduce telemedicine. Not only will it increase the number of consultations, but it will also decrease overhead costs.

Buyers value practices that have already adapted to rising costs. If you’ve implemented cost-saving measures or invested in efficiency-boosting technology, your clinic may stand out as a better investment.

Actionable Tip:
Review your expenses and identify areas for improvement. You can also consider upgrades like automated systems, energy-efficient equipment, or streamlined workflows to enhance profitability and appeal.

Note – Are you a veterinary practice owner considering selling your practice? Watch this success story from Ohio vet practice owners who successfully sold their practice with the help of Transitions Elite. 

“Transitions Elite holds your hand through the whole selling process. For many, it can be a frustrating & stressful time, but they make it very easy.”

Dr. Lonnie & Naomi Davis

Learn how our expert team maximizes practice value, ensures a smooth sale process, and supports you every step of the way.

4. Corporate Consolidation Trends

When the economy is strong, corporate buyers focus on growing their businesses by purchasing more veterinary practices. This creates competition among buyers, as they look for the best opportunities to expand their operations. As a result, the value of practices tends to rise, giving sellers a chance to benefit from higher offers

What Corporate Buyers Look For:

• Efficient Systems and Teams: Practices with streamlined operations and trained staff ready to maintain smooth workflows.
• High-Demand Services: Clinics offering sought-after options like telemedicine or specialized care that cater to evolving client needs.
• Strategic Locations: Areas with growth potential or underserved markets, providing opportunities for expansion and increased revenue

Actionable Tip:

Even if you’re not planning to sell yet, get your practice ready for corporate buyers. Focus on showing your efficient operations, growth potential, and modern facilities in your marketing. Being prepared can help you get better offers when the time comes.

We have also covered this topic in detail – Why are corporations buying veterinary practice?

5. Recession-Resistant Nature of Veterinary Practices

The stability during economic downturns is one of the biggest advantages of buying a veterinary practice for buyers. Since pet care remains a priority for most families, this assures and ensures that there will be a steady demand for veterinary services and clinics. This fact makes investment in veterinary clinics very attractive to buyers even in a challenging economy.

How to Leverage This Stability:
As a practice owner, to make your practice attractive to potential buyers, we suggest showcasing your clinic’s ability to maintain revenue and profitability during past economic fluctuations. This will provide confidence to buyers and justify a strong valuation or asking price.

Actionable Tip:
At Transitions Elite, we’ve mastered the process with a documented step-by-step approach to ensure you can sleep peacefully and focus on your clinic while we handle the selling process. All you need to do is take the first step toward success—Claim Your Free Practice Valuation

6. Local Economic Conditions

While national trends matter, local economic conditions also have an impact on your practice’s value.  There are many factors like population growth, pet ownership rates, and competition within your area that can influence buyer interest. 

Example:
A practice in a city with increasing pet ownership rates may attract more interest than one in a stagnant or declining market. 

Actionable Tip:
Work with a veterinary practice broker who understands your local market and can position your practice accordingly. A practice broker with a detailed understanding of the veterinary landscape can guide you in the right direction on how to price your veterinary practice and identify the key areas to focus on to increase its value. This is where Transitions Elite comes into the picture

7. Timing Is Key: When to Sell

There’s no right or wrong time to sell your practice. It’s not always about market conditions. We believe that aligning economic trends with your personal and professional goals is the key to a successful sale of your practice.

When the Economy Works in Your Favor:

• As a matter of fact, when interest rates are low, demand is typically high.
• Your practice is thriving with steady revenue growth.
• Buyers are actively competing for practices in your area.

Actionable Tip:
Don’t wait for a “perfect” time. You must start preparing your practice for sale now to ensure you’re ready to act. To help you understand this point in more detail, we have covered the topic here.

Conclusion: Turning Economic Trends Into Opportunity

Well, honestly, the economy does have a positive or negative impact on the sale value of your veterinary practice. However, as you know, preparation is the key to success. When you take the right steps, you can make your practice more attractive to buyers and get the value it truly deserves.

And when you have trusted advisors like Transitions Elite on your side, you don’t need to worry about a thing. We handle everything from Step 1: Getting to Know You to the final closing of your practice. Our expertise is backed by years of experience in the veterinary field and a proven track record of working with practice owners just like you.

Here’s what they have to say:

Dr. Sharon Gorman:
“I knew that I would get the best value for my practice if I had Transitions Elite helping me. I got a fabulous deal thanks to them!”

 Dr. David Graeff

“Transitions Elite helped make my practice very attractive to the best buyers. I could never have done this on my own!”

If you’re thinking about selling your veterinary practice, now is the time to talk to experts who can help. Let’s discuss your goals and create a plan to get the best value for your practice—no matter the economy.