When you are selling a practice and a property is owned by a third party, it is essential to get their agreement early on in the process to ensure that the sale process is not held up. It is worth considering that you pay any costs to the landlord to prevent delays, these should be minor in respect to the sale value of the practice
Fake Emails can be tricky to spot, hackers often use HMRC type addresses to get unsuspecting businesses to log onto the links they provide. From that link the scammers can hack into your internet account. To check if an Email address is from who you suspect is to hover over the ‘from’ address. The actual link the text leads to will not end in @hmrc.gov.uk (which all official emails from HMRC will). If this had been from a scammer the from would have been an address that I didn't recognise. If you’re unsure about the email, forward it to HMRC’s phishing team at firstname.lastname@example.org
Corporate Tsunami- Well the market has changed dramatically in the last 10 years- at the Moment corporates own about 33% of the veterinary market, based upon sites and probably nearer 40% based upon turnover The Future No one knows, but the market is likely to consolidate more with: Corporate practices dominating the scene – They may be share based (stock market) or have majority private equity shareholders. There are effectively 7 large corporates at the moment. Mini -corporates/ or chains - they may be localised to a large specific area. They have private equity behind them or may be self funded. Large practices employing 7-20 vets operating in a specific area. Large individual practices operating with 3-7 vets Smaller units with 1-2 vets So why do people Sell – They simply they want to retire They want the opportunity to obtain capital while it available They are unhappy with the changes and pressures of running a practice They are disillusioned with the difficulties getting and maintaining professional staff.Or They would like a career change Illness Divorce Their practice is financially unviable. So whom can you sell to? This depends upon who would be interested- this can range from – A corporate willing to pay the top price for a practice in a particular location with a high level of maintainable profits. A mini corporate looking for a practice with potential to develop A local practice with cash funds wishing to expand its area. A private investor vet looking to buy a start-up practice with limited funds. Practices in the wrong location, with restrictive premises and no true profit, may not be saleable. Saleability League Top Practice Price Obtained (per vet employed) Winners Turnover >£375k T/O per FT vet 3-5 vet practice One site Net Maintainable Profit > 18% of Turnover =[maintainable profit is after owner takes a market rate salary] Maintains its own night service with good on call hours. Good location in with Populated area with good total household income. Structured management not owner dependent. Good modern premises Losers Turnover <£150k T/O per FT vet Single vet practice > One site Net Maintainable Profit < 7% of Turnover =[maintainable profit is after owner takes a market rate salary] No Night service/shared available Sparsely populated or low income area Good location in with Populated area with good total household income. Very owner dependent. Poor premises or integrated with owners home. How much should you ask for? Well at the VBA we don’t set a price, once you have fixed a price there is only one way it will go - down What are you selling? I’ve seen practices with similar turnovers being sold for price variations for the goodwill, which is the intangible business with a variation of over 50% – why? Valuation inaccuracy Poorly marketed Lack of knowledge of potential purchasers Poor presentation Poor negotiation skills Failure to negotiate Not transparent Know achievable prices When you sell you must have an knowledge of what the achievable price your practice could sell for - this is not published and you will have to guestimate what you think your practice is worth or Accept a valuation offer from a corporate. Would you accept the offer from “We will buy your care” or the PX value of a car as being the best price you would get. To get the maximum price for your practice will almost certainly mean selling to one of the corporate practices. These firms are large, have extensive legal and accountancy support. You will need to employ professionals who are used to dealing with companies of this size, and transactions of this value in this particular field. Using a small firm that has sold a few retail businesses for £200-700k may leave you in a vulnerable position. The level of due diligence and the legal warranties the corporates will undertake will add onto to both your legal and accountancy fees as they go through the process, compared to a more “simpler” process if selling to an individual, therefore it is something you need to have under control throughout the sales process So should you use a Practice Sales Broker? and why use the VBA Ltd A broker should not be an estate agent – they should be involved from the onset of your sale through to completion. In most cases the property is a separate part of any sale and in many cases the property is leased to the purchaser, and actual terms being negotiated by the broker The major parts of any practice sale can be divided into Pre- Sales Process -Estimation of the achievable value of the practice, whether it is for the sale of the shares in an incorporated practice or the sale of the assets with a sole trade/partnership practice. This is undertaken by combining a site visit with the analysis of the practice accounts and practice structure and makeup.Preparation of the practice sales memorandum- this should give any potential purchasers enough information to make an indicative offer. Sales Process - This should involve marketing the practice to selective buyers, deciding on preferred bidders, obtaining Non Disclosure (protection) agreements for the seller, dealing with all offers, negotiation of detailed terms of the agreement and preparation of Heads of Terms (What you agree to in the negotiations) Due Diligence and completion period - Liaise with both sets of lawyers and accountants throughout. Benefits of using an experienced broker- Experience has shown that saving on costs can in the long term result in less value when sold, cheap fees do not always means savings - In life you usually get what you pay for. Self Sale Broker Will you Save on Fees? Not necessarily Self Sale - You will have legal & accounting fees e.g. For a £1m incorporated practice sale the legal fees could be between 3-5% plus VAT. The more complicated the transaction the greater the fee. Additional accountancy fees will be charged in addition as all sales will require final accounts and they will have to respond to (DD) Due Diligence The Broker should minimise both legal and accountancy fees, as they should prepare the practice for the DD and assist your legal and accountancy firm throughout the sale. What will a broker charge Either a fixed fee or a commission based success fee of 5-10% of the final sales figure. Obviously commission based fees stimulate the broker to get the bets price rather than a fixed fee The increased selling price obtained and time saving should always pay for any fees charged Will you get the best price? Maybe- but you will never know Do you know what the possible maximum achievable price for your practice could be? Do you know how to present your practice (business) to get the best price? Do you know what other practices similar to yours are going for? An experienced broker should know and deal with 1,2 &3 Do you have the best contacts to approach in the sale of your practice? ? The more potential purchasers the better the chance of obtaining the maximum sale value. An experienced broker will deal with all of the major large corporate groups on a regular basis. Have you dealt with a successful company sale before? ? Like any complex procedure experience comes with undertaking it on a regular basis. Do you had]ve the a financial and accountancy sales experience to manage the sale throughout A broker should be experienced in selling practices for between £500k and £5m Will you maintain your regular practice income while going through the sale process? ? Selling a practice business can involve 6 months additional work, which will take you away from maximising your practice income at this time A good experienced broker should release you from a lot of this, as a result of knowing the procedures and requirements of a company sale Will you get the amount you originally agreed? ? Failure to declare financial information or support stated facts could result in PRICE CHIPPING where the original price no longer appears justified. An experienced broker should handle this Will you negotiate a better price? ? A broker should know from experience what the larger corporates and groups are prepared to pay from previous sales and be able to obtain a price at least 10% more than you would have achieved yourself Selling your practice will probably be the biggest and most complex financial transactions you will undertake in your career, so get it right first time if you want to maximise the benefits of the present market.
A good job advert should attract attention, relevant interest, desire and a means of acting to get further information. Use simple easy to read headlines, and leave space around the text to allow readers to follow it, and be concise. Bullet points are very useful Do not Use over-designed graphics – distracting Use too many words Strange fonts Always - Include the location for any advert. State whether the role is full-time, permanent or a temporary. Give a reference number Mention Equal opportunities statement Give the practice website address Any advert whether for a job, service or product should be based around the sales training acronym, AIDA- Attention- Interest- Desire- Action Attention - this part is the headline that makes the first impression count Interest - this should build up information, show something of interest Desire - this should relate benefits to the reader so that they will have a desire for them. Action – All the above are no use unless you prompt the reader to action – an email or phone number. Attention Good Banner/Headlines Poor Banner/Headlines How far do you want to climb? Vet surgeon required The best of both worlds Assistant needed Exciting Career opportunity Looking for a new challenge? Interest This must include issues that the reader may think about that is of benefit NO out of hours 1 in 10 Rota Friendly 2 centre companion animal practice Experienced ambitious vet looking for an upward career move £65k pert annum 8 weeks holiday Desire This should offer job appeal E.g. the position offers training in equine medicine and surgery, including soft tissue surgery and orthopaedics etc. Other features of the job. Action Advertising that does not prompt action is a wasted opportunity so make it simple Go to - www. Thevets.com/applications Telephone - Phil on 123-123456 Email Phil@Thevets.com
You cannot prevent a client requesting a prescription. However the type of clients who will request these can usually be divided into the following Clients who surf the net to compare prices on everything Clients who are on long term/ or expensive medication and see it as an obvious way of saving money. Clients who feel that veterinary practices do not offer value. You must be careful and not panic and assume that everyone eventually is going to buy on the net, and attempting to to compete like for like could be economic suicide and unbalance your practice finances. However selective competition can be quite effective. One approach is to make sure your commonly dispensed drugs are not excessively priced. Compare them yourself to the Internet pharmacies and pitch these products to no more than 20-30% more than the competition. Clients will not usually start buying elsewhere with the hassle that involves unless there are substantial savings to be made. Additionally you can maintain your drug prices for the normal dispensing amounts (E.g. 14, 21, 28 units) but give a discounted price for larger amounts that are collected on prescription. Another method would be to increase your consultation fee and give a discount voucher for drugs dispensed at the time of a repeat prescription. This discount would effectively come off the drugs dispensed and would reward clients who purchase from you. Offer postage of prescription drugs or home delivery if you have the facility. I certainly don’t believe it is right to charge an extortionate prescription fee to try and remove the financial benefits the client would obtain by purchasing the products on line. This would re-in force any belief they had that the practice was taking advantage of its privileged position. Take time to show your clients that the fees and charges you make are not arbitrary but are derived from the overheads you that you have to ensure you give a quality service with support that the internet pharmacies do not.
What is a shareholder? A shareholder (or member) is the name given to anyone who owns shares of a limited company. A share is a piece of the company and is used to represent a percentage ownership in that particular company. A company can have just one or many shareholders and each shareholder is entitled to receive a share of the profits of that company. They are liable towards any company debts up to the nominal value of the shares they own. Shareholders are not involved in the running of the company unless they are a director or have a specific job in relation to that company The minimum number of shares that a company can issue is one, there is no upper limit and a company can issue as many as it wishes; What are shares worth? Shares have two values, a nominal value and a market value. The nominal value is usually a £1 is the sum the member has paid for a stake in the company. As mentioned earlier this is the maximum the shareholder will have to pay towards any company debts. The market value is what someone will pay for the shares when they are sold For example, a veterinary practice made up of 100 shares with a nominal value of £1 when sold for £1,000,000, would have a share premium of £999,900. Some companies, notably Join venture veterinary companies, or equity backed companies may have more than one type of share. The Ordinary shares give equal voting rights and equal profit rights. Alternatively, companies can issue multiple classes and values of shares to provide some shareholders or members with different voting and profit rights.
first published by Malcolm Wright BVMS.MRCVS. on Aug 18, 2015 Client compliance During a busy surgery, it can be easy to fail to get your clients to ensure compliance with your recommendations. A routine dentistry, an overdue booster, a 6 monthly health check or an Intra dermal Allergy test, the worst is to not let the client even know of the services that are available to their pets, that way will result in 100% compliance failure. The result can be both future problems for the pet, and a marked shortfall in practice income. Say a SA practice turning over £500,000 per annum, with dentals accounting for say 5% of the practices income (£25,000) If the practice only obtains a 60% compliance rate this would result in a loss of £10,000 per annum. The classical situation is a suggestion that Fred the Poodle’s teeth require some dental treatment in the near future. Really he needs the treatment now, but for some reason the veterinary surgeon leaves it to the owner to book Fred in at their convenience, which in 30-40% of cases may not happen. The failure of the client to comply with the vets opinion is based upon the owner not be convinced that there is a need to do it now, and therefore it is not urgent. The basic belief must be that as the vet we must believe in what we are saying for it to be effective. So why do people comply? , Well you don’t have to be a psychologist to understand the reasons and improve the compliance of your clients when you recommend a procedure or products in the consulting room but to help with this we can we can look at some work by Robert B. Cialdini a social psychologist who wrote in his book “The Psychology of Persuasion” that there are 6 principles of persuasion. Reciprocity - this is based upon people if given something, will give something back. The rational behind free samples in marketing. A treat for the pet in the waiting room, free coffee, a free dental check – Offering a discount plan for regular clients - this often results in the client agreeing to a suggestion. Commitment and Consistency – once we've committed to something, we're then more inclined to go through with it. People who commit orally or in writing to something that is suggested are more likely to honour that commitment. Remember people only retain 10% of what they hear, and it is essential for people to comply that they understand exactly what you are talking about. You must be committed to the advised route and you should re emphasise the key points, This could be a form that the owner signs to show they understand what you are suggesting and ask them to take it to reception to book their pet in.Consistency is essential, if different staff members offer different views on the need for the same procedure you will almost be certain of zero compliance Social Proof - If people see other people doing something they will often follow, if there are people looking at a car stopped by the police, nearly everybody else looks to see what is happening. The majority of clients never want to be the first to do anything - Informing your clients that (a) “90% of teeth with periodontal disease will have to be extracted” (b) “Most Poodles over 7 have sever periodontal disease”, (c) “80% of entire females will develop life a threatening Pyometra” (d) “25% of cases that we test for skin allergies can avoid continuous drug treatment”All of these will give social proof. Similarly showing before and after pictures of certain conditions from other client’s pets can also confirm that proof. Liking - Cialdini says that we're more likely to be influenced by people we like or feel comfortable with - clients are more easily persuaded by people that they like, and feel comfortable with, practices who present with a smart tidy waiting area, staff with smart clean uniforms all these will give confidence, personal hygiene also gives confidence. Body piercing-and tattoos will result in less compliance – especially with people over 35, the majority of your clients. But remember your perception of what people like may be based upon your likes- this may not always be best! Get a second opinion. Authority -People will tend to obey authority figures; authority figures usually wear a uniform, i.e. vets coat. Clients want to spend time with a person who will deal positively with their pet’s problem. 75% of people will follow a recommendation if the vet is positive and shows leadership to direct them what is best for their pet. The client often wants the vet to make the decision for them; if they feel confident in the vet - Euthanasia is the best example of this where the vet often has to make the decision that the client knows is right but can’t say. Scarcity - This principle says that things are more attractive if availability is limited, or if we could lose an opportunity for something. Perceived scarcity generates demand Examples are, special offers for dental work, neutering, spays etc. with a "limited time only period" encourages sales. Sample of Booster Compliance Effect. Remember, loss through failure to comply will not just be dental work, but treatments, return visits, other procedures, all of these will have a direct effect on practice income
by Malcolm Wright BVMS.MRCVS. on Jun 18, 2017 No, this is not about Donald Trump, but about selling your practice. This sale will probably be the largest financial transaction that you will ever undertake and the purpose of this short article is to inform you how to maximise the price you will receive on completion. Continue reading → Over the last few years, since the development of the corporates I have acted for practices that have sold for more than double the initial offer, similarly, I have heard of practices failing to achieve the right price because of poor presentation or poor negotiation The jungle drums may tell you that a neighbour got £1m for his practice, but http://thevba.com/subrion/admin/that doesn’t mean you will get the same. Every deal is different and needs to be handled on an individual basis. To get the best price you will need to have - 1. A Profitable practice, as the price will relate to true profitability. 2. A practice that has a particular or special attraction for a purchaser. 3. A realistic expectation of price 4. A practice that is presented in the most favourable light. 5. A comprehensive and informative sales memorandum which includes local demographics, competitor analysis,financial performances and full practice management system analysis professionaly produced. 5. Negotiations handled by an experienced person and in a professional manner Understanding the corporates Corporates Veterinary businesses are either funded by- 1. Public and private investors – raising money on the stock Exchange when required e.g. CVS UK (AIM) and Pets at Home (Vets4Pets & Companion Care) (LSE) 2. Equity groups such as Summit Partners, August Equity and EQT Partners. These equity groups invest funds into corporate ventures such as IVC, Vetpartners and hold the vast majority of the shares in the Veterinary corporate business. They will get their return either by selling on the business to another Equity group or by floatation on the stock market. 3. Smaller corporates are usually funded by Private fund, Bank or Equity Funding or a mixture of these. Outside the corporates there are the Independent Private practices, whether these are incorporated or not they are usually owned by veterinary surgeons, their purpose is to produce profits to allow a lifestyle, both vocational and private Corporates Buying Rationale- When they undertake an offer it will be based upon the true profit of a practice and will use something you may have heard of called EBITDA (Earnings Before Interest Depreciation Amortization) as the basis of calculating the value of your practice (Where Earnings are equivalent to Profit after the normal practice running costs have been deducted) The major corporates want the means to increase the true profit that is produced over a 2-year period by • Improved purchasing power for supplies and services • Increased fees • Additional marketing • Additional referrals income to their own clinics This improved profitability will increase the value of the corporate either 1. On the stock market by improving the share price. 2. To another Equity group who may wish to buy out the present investing group Selling With ownership of over 1,500 sites the major corporate groups have the experience and knowledge to know what a practice is worth to them and how to approach a purchase to get the best possible deal. No matter how friendly their approach they are not there to fund your future lifestyle and it is up to the sellet to get the best possible price. What do you need to do as a seller - 1. Get the base price right – know what is achievable from experience of previous sales. 2. Prepare for the sale – ensure that you present everything that a potential buyer will require is there. 3. Find the right potential buyers, usually not the first one who has approached you and made an offer. 4. Ensure dealing with the potential buyers is professionally done - there are plenty of practices willing to sell, so the corporate groups will want the best practices at the best price. I know of owners who have turned down a good offers because they were convinced they would get more, only for the corporate not to bother coming back. Preparing for the sale In practice, you should have a professional sales memorandum that covers the information that every buyer will want to know this is something that comes with the experience of dealing with corporate buyers. Negotiating the deal Have you played poker with a professional? And won? Behind the Corporate team that you see there will be a financial team who are used to dealing with practice purchases and will have calcu;ated the maxium they will go to before any offer is made. Having dealt with and advised some of the financial houses that are looking to invest in the veterinary industry, so that they undertstand the veterinary market,these groups are dealing infunds of £90 million plus. A potential buyer may guess, or assume, but should never know, who else is interested in purchasing the practice. If you have more than one potential buyer, an experienced negotiator will know how to manage the situation to obtain the best price. Potential bidders should never know what another bidder is offering, it will not necessarily lead to your obtaining the best price. Corporate businesses prefer to have a structured approach to buying, rather than an auction. Play Poker 1. Once they have decided they want your practice they will know how much they are prepared to pay. 2. They will not know what price you will accept. 3. They will assume other parties are interested – let them assume 4. They will not know what any other parties have offered – let them guestimate 5. It is a question of getting their maximum to your acceptable level. It can sound easy when you start talking in telephone numbers, but think rationally when you are offered £1,500,000 and another offers £1,555,000, you can do a lot with £55,000 taxed at only 10% so think! You will need an experienced lawyer, to give you legal protection and accountant to ensure you only pay the tax you need pay. Many deals structure the price on the future earnings of the practice, which you should not accept as the practice will no longer be under your control. All final negotiations when dealing with the preferred bidder should take place before any offer is accepted. Remember, know what is achievable and what is acceptable to you by making sure you take the right advice at the outset. Find out more.......... GOOD LUCK
Thinking of selling your practice? Minimise making avoidable mistakes and financial losses by considering the following, in order of importance First published by Malcolm Wright BVMS.MRCVS. on Aug 3, 2015 Thinking of selling your practice? Minimise making avoidable mistakes and financial losses by considering the following, in order of importance. Getting too close to potential purchasers about your practices value. Responding to unsolicited buyers before knowing your practices market value. Setting too high a price/underpricing your practice. Making yourself indispensable. Failing to assemble a professional selling team before putting it up for sale . Failing to negotiate the best deal. Insisting on including property as part of the deal. Failing to produce management accounts on time & not producing transparent financial reports. Failing to allow enough time to both prepare and undertake the sale. Failure to have a Plan B. Trust is vital in any negotiations- Not being completely transparent in the practices finances and functions, with holding secret work, under the counter deals, industrial tribunal activity -If any of this comes out during the Buyers Due Diligence, trust will be lost and the deal could be finished. Talking to potential buyers without knowing what your practice could fetch on the open market can be disastrous Similarly discussing matters with local colleagues can often leave you in a disadvantageous position. Would you think about selling your house without finding out from the local estate agents, or local papers what other similar properties are selling for? Unfortunately it is not as easy to get comparable information about veterinary practices, but certainly you should at least take advice from someone who has that knowledge.TIP Always keep things close to your chest- at this stage you need to find out information not give it away. Responding to unsolicited buyers- on receiving an unsolicited offer, can result in a failure to maximize the practices true value. The purchase market at the moment is dominated by the corporates; they have the funds available, the knowledge to make a commercial offer and the skill to complete a purchase quickly.However, you must remember that that there 3 main buying major corporates, and several up and coming smaller national groups. Each operating in a different manner with different needs. Having knowledge of the maximum potential price can ensure you speak to the best corporates for your practice sale. If you think your practice is worth say £500k, but getting an offer of £700k can result in a knee jerk response, when the practice/company could actually be worth £900k to another buyer –Remember no one will offer the top price as an opening offer. TIP Listen to the offer, and get professional advice on whether it is viable for you to consider accepting before considering responding. Remember you will only sell once so get it right and take your time. Setting too high a price/underpricing your practice – Overpricing is not the same as maximum pricing, there are many practices that will sell for 20-70% more that the assumed value due to a mix of circumstances and buyer desire The market however can be divided into two groups, corporate purchasers and private purchasers. Both types need to be able to show the practice has maintainable profits, for the corporates – because profit is what they are buying, and for the non-corporates to allow them to fund the purchase through loans that are supported by those profits. Obviously some practice/individuals will not require external funding but they are unlikely to want to buy a loss making business, and if they do show interest the price offered will probably reflect that.Many practices sellers underestimate or overestimate the value of practices, and what they are selling for. Every practice is different but the 5 key factors that will determine this value are on a sliding scale are.1.Location 2. Turnover 3.Profitability 4.Manageability 5.Clarity of FinancesOverpricing is easily done and is often based upon the historic traumas that went into developing the practice. The buyer will not be interested in the history, only the present and future of the practice. If overpriced, the practice will stick, and the longer it is on the market the more difficult it will be to sellUnderpriced – what the seller thinks is a fantastic offer price may in fact be well below the true achievable value market - a figure you may never find out.TIP Consider how many surgical procedures you have undertaken in your career, and the skill that has come with experience. Then consider how many practices you have sold over that same period. Then decide whether to do it yourself or take advice from someone with that experience Making yourself indispensable - Running a veterinary practice is hard work, especially if you are the sole owner. The total commitment put in by many principals removes the delegation that would normally take place in other industries. The result can be that you can become indispensible to the long-term success of the practice. A corporate buyer prefers to purchase a ready made structure that is not reliant on one particular person, and as such will normally only be interested if the principal stays on for a period of time to maintain the continuity and allow a more delegated structure to be developed.TIP Its not just about the sales value of a practice, but delegation and developing a structure of responsibility will also increase the long term profits and pleasure in running your practice. The ideal practice for a corporate structure has everything in place that they require to allow it to bolt onto their model. So anyone who shows potential or the desire for advancement within the practice should be encouraged and trained to improve your management team.5. Failing to assemble a professional selling team before putting it up for sale – selling larger high value practices requires a professional team to deal with the buyers to both maximise the price, but also to look at the tax and legal issues of the sale.(a) Your accountancy firm must be able to produce information quickly and in a structured manner. They should be used to dealing with a commercial sales.(b) Legal Team, tax law changes all of the time, and every individual has a different taxable position, so it is essential to check out what your liability will be after selling your practice. This is especially so when you have incorporated, as there can be some complex issues that may arise that can relate to the incorporation and sale. If you are incorporated and the purchaser wishes to buy only the assets rather than the shares- this can leave you in a difficult position when it comes to accessing the funds post sale.Use solicitors with good commercial experience who have an in depth understanding of the legal issues associated with commercial and corporate sales.(c) Practice Sales Team- They should offer a professional sales services, and undertake marketing, introductions, negotiating, work with both the lawyers and accountants and help throughout the process. They should be able to achieves at least a ten to twenty per cent higher sale price for your practice that should easily cover any fees plus.TIP You need an accountancy firm that has specialist tax accountants, a legal team that is experienced in commercial sales & should be large enough to allow the process to progress at the right pace. Having a one-man band going on holiday for 3 weeks in the middle is not ideal! Your selling team should have the drive to maximise your practice value and expertise to deal with your legal and financial advisors. 6. Failure to negotiate the best deal – completing a successful deal is not just getting the price right, it also involves the add-ons that may comes with the offer- whether the property is purchased, its price, if rented the terms of the lease, any employment considerations and other factors relating to the assets. If you practice is incorporated a buyer purchasing the assets as opposed to the shares can have tax consequences for the seller. All of these factors should play a part in agreeing to an acceptable offer. Ideally when you sell it is better to have at least 2 interested parties, this will always put the seller to be in an advantageous position. Simply trying to auction the best price between two or more parties can result in failure. Similarly making excessive demands can lose a buyer. Most buyers are not happy to go into a bidding war, however negotiating skills can allow the best price/deal to be obtained from a potential buyer. Once agreed is essential to write up a Heads of Terms (HOT),(Memoranda of understanding), although not legally binding it saves problems later, your broker will normally do this as part of their service.TIP I remember buyers do not know whether there are 1,2 or 3 other interested parties. If the seller wishes to reveal this it should only be revealed when the time is right as the negotiation’s progress. Having a good and honest relationship with the buyer is essential to get the best result. Remember and keep a note of everything you discussed and agreed when the offer was accepted as this can save stress if any disagreements or different interpretation’s of the agreement come up later. 7. Insisting on including property as part of the deal - This is difficult if the practice is part of the seller’s residence. Larger practices are not interested in using their funds to invest in property; their aim is to buy businesses and the profit that business can make. Private buyers are in a different position and often want or need the property to get security for borrowing. When deciding, be flexible, if you want to sell and the buyer only wants to rent you may lose the sale. Consider if you do rent to a good tenant the property could then be sold at a later stage to a property investor to allow you to realise your capital. If you do sell and get cash what would you do with it? Rental returns could average 5-10%; Bank Saving rates offer 1-1.5% return!TIP It is always better to keep the practice property and your residence totally separate, it may save you money during your working life, but it can be a millstone when it comes to selling your practice. Often the residential part of the premises will have a value that is not supportable by the profits of the practice. My advice is to always ensure they are two separate entities early on in your business career. 8. Inability to produce management accounts on time & not producing transparent financial reports – the quality and frequency of the financial reports produced are essential for the buyer. They will monitor the management accounts from the day of the sale agreement to the purchase date. They are probably paying a lot of money for the practice and obviously do not want to see a sudden drop in sales or profit during the build up to completion. The level of financial detail sought by corporate buyers from the date of the HOT to the completion of the sale– is often beyond what the average veterinary practice produces to manage the business effectivelyTIP Try and ensure that the practice continues to improve on the previous years turnover and profits, as this is comforting for the buyer. Regarding accounts and declarations you must be totally transparent, and everything should be declared. Any HR issues past and present, tax issues and legal issues, if such things arise during the purchasers due diligence without having being informed earlier this could affect the sale.If you undertake some veterinary work, which does not show in the accounts, e.g. Ministry Inspections/kennels this should also be declared as failing to do this could result in warranties being enforced that can be very costly. 9. Failing to allow enough time to both prepare and undertake the sale - You should start to undertake the preparation for the sale of your practice at least 18 months before selling. Thinking about selling does not; mean you have to stop enjoying practicing and running your business. The longer you allow the more time you have to make changes that could affect the final sales price, an increase in net profit of £15k could produce £40-£80k extra in the Goodwill. Obviously you have to balance your circumstances when doing this and many well run practices show sufficient profitability to allow a sale to go through quite quicklyTIP Ideally the sale of the practice should be simply another stage in your practice career of Growth, Consolidation and Sale. Each stage producing differing levels of financial return. Your last consultation fee before retiring may produce £50, but you first business sales deal after selling could produce £500,000! 10. Failure to have a Plan B - if the practice fails to sell – It is important to consider alternative methods of divesting yourself of your business simply trying again is not the best way forward, Should you sell at a reduced price, change broker, take on a manager and invest in the practice, lease the practice?You will need to look at the practice, its strength’s and weakness and accommodate them in any changes you make to the way the practice functions.TIP If you have a practice in an unattractive location, unless you are making very good profits you may have to reduce the price to attract someone, investing large amounts of money may not give you a return, but minor décor and appearance changes could make a difference. Your broker should be honest enough to let you know the position regarding salability at the onset. Suggesting an unrealistic sales price simply to get the work can result in failure to sell at all. If the practice runs from your residence consider moving it to a commercial site, that way the practice value may well be increased and you will have a house to sell on the open market.Conclusions-Selling is a stressful business, and one of the main worries practioner’s have is what will happen to the practice and their clients when they have left – You are selling because in most cases you are moving on to another stage in your life. The compensation is the freedom and financial security that hopefully you will receive and it is important to leave the emotional attachments behind, of course it won’t be run as well as when you had it but that is something you will have to accept.
Comparing the requirements of a corporate and individual buyer for a generic practice First published by Malcolm Wright BVMS.MRCVS. on Sep 27, 2016 Corporate Tsunami- Well the market has changed dramatically in the last 10 years- at the moment corporates own about 33% of the veterinary market, based upon sites and probably nearer 40% based upon turnover Who do you sell to? This is dependent upon who might be interested- this can range from a corporate having real desire to pay the top price for a practice in a particular location with a high level of maintainable profits to a local practice with cash funds wishing to expand to a private investor vet looking to buy a start-up practice with limited funds. What are you selling? I’ve seen practices with similar turnovers being sold for price variations for the goodwill of 100% – why? You are selling Turnover Profit Location Management structure Quality of the premises How do you get what you want? Ensure profiability Know achievable prices Non dependent management structure (ie the owner is not required for it to function!) Pleasing appearance Quality presentation Professional negotiations Transparent How do you Fail to get what you want? Overpriced Low profitabity Poorly presented business Failure to negotiate Non Transparent Appearance Locatation & Visibility or Who do you sell to? This is dependent upon who might be interested- this can range from a corporate having real desire to pay the top price for a practice in a particular location with a high level of maintainable profits to a local practice with cash funds wishing to expand through to a private investor vet looking to buy a start-up practice with limited funds. Many practices in the wrong location, have restrictive premises and no true profit, these may not be saleable. Saleability League The following is only a indicative league of the type of practice that would be of interest to different buyers Top Practice Price Obtained (per vet employed)% Profit is after owner takes a market rate salary Top-team Turnover >£350k3-4 vet practiceNet Maintainable Profit > 18% of TO Maintain own night service with good on call hoursLocation Populated area with good incomeGood Management StructureGood premises Bottom Team Turnover <£150kSingle vet practiceNet Maintainable Profit < 7% of TO No Night service/shared availableSparsely populated areaOwner dependent management and incomePoor premises