What to Look for When Buying a Veterinary Practice
Buying a veterinary practice is a major decision, and the asking price is only one part of the equation. A practice can look attractive on paper but have financial, operational, or staffing issues that become apparent after closing.
Before moving forward, prospective buyers should look closely at how the practice actually operates and whether it fits their professional and financial goals.
1. Consistent Financial Performance
Start with the numbers.
Review several years of revenue, collections, expenses, and profitability rather than relying on the most recent year’s results. Look for consistent performance and investigate significant increases or decreases.
A practice with strong, stable financial results can provide a clearer picture of what a new owner may be taking over.
2. A Strong Client Base
An established client base is one of the major advantages of purchasing an existing practice.
Look at the number of active clients, new-client growth, retention, appointment volume, and overall patient activity. A large client list is less meaningful if many clients are no longer active.
3. The Practice’s Reputation
Online reviews and the practice’s reputation in the local community can provide useful insight.
Look beyond the overall rating. Read reviews to identify recurring comments about wait times, communication, staff, pricing, and quality of care.
4. Staff Stability
The employees can be just as important as the physical assets.
Find out how long key employees have worked at the practice and whether they are expected to remain after the sale. High turnover or dependence on a small number of employees may create additional challenges for a new owner.
5. The Current Owner’s Role
Ask how dependent the practice is on the selling veterinarian.
If the owner personally handles most appointments, client relationships, management, and decision-making, the transition may require additional planning.
A practice with strong systems and staff may be easier for a new owner to take over.
6. Equipment Condition
Don’t assume that equipment included in the purchase is automatically an asset.
Review the age, condition, maintenance history, and expected remaining useful life of major equipment. An apparently attractive purchase price can become less attractive if expensive replacements are needed soon after closing.
7. Location and Facility
Consider the location independently from the business itself.
Evaluate accessibility, visibility, parking, surrounding population, competition, and potential for future growth.
If the practice leases its space, carefully review the lease terms. If real estate is included, evaluate the property separately from the operating business.
8. Services Offered
Look at what the practice actually provides to its patients.
A practice offering surgery, dentistry, diagnostics, boarding, or other specialized services may have different revenue opportunities and expenses than a general veterinary practice.
Also consider whether there are services the practice could reasonably add in the future.
9. Growth Potential
A good acquisition does not necessarily need to be the largest practice available.
Instead, look for realistic opportunities to improve the business. These might include:
- Adding another veterinarian
- Expanding appointment availability
- Adding services
- Improving marketing
- Renovating the facility
- Updating equipment
- Improving operational efficiency
10. Operating Expenses
Two practices with similar revenue can have very different profitability.
Review payroll, rent, supplies, insurance, utilities, marketing, technology, equipment costs, and other recurring expenses.
Understanding where the money goes is essential when determining whether the practice can support its purchase price and ongoing obligations.
11. Outstanding Debt and Obligations
Find out whether the business has outstanding loans, equipment financing, leases, contracts, or other obligations.
These items can affect the transaction and should be identified during due diligence.
12. Why Is the Owner Selling?
This is an important question that prospective buyers should ask.
Retirement is a common reason for a veterinarian to sell, but buyers should understand the seller’s specific circumstances.
The reason for the sale can provide useful context when evaluating the opportunity.
13. The Transition Plan
A smooth transition can make a significant difference.
Determine whether the seller will remain available after closing and, if so, what responsibilities they will have.
A transition period can give the new owner time to become familiar with employees, clients, vendors, systems, and day-to-day operations.
Questions to Ask Before Buying
Before making a final decision, a prospective buyer should be able to answer questions such as:
- Is revenue stable or growing?
- Is the practice consistently profitable?
- How dependent is the business on the current owner?
- Are key employees likely to stay?
- How old is the major equipment?
- Is the facility adequate for future growth?
- Are there significant outstanding liabilities?
- Does the asking price make sense based on the financial performance?
- How much working capital will be needed after closing?
Don’t Focus Only on the Purchase Price
The cheapest practice is not necessarily the best opportunity.
A practice with a higher purchase price may have stronger financial performance, better equipment, a more stable client base, and greater growth potential.
The goal should be to evaluate the overall economics of the opportunity rather than simply finding the lowest asking price.
Final Thought
The best veterinary practice to buy is not necessarily the largest or least expensive. Buyers should evaluate financial performance, client relationships, employees, equipment, location, services, expenses, liabilities, and growth potential as part of the overall decision.
Thorough due diligence can help a veterinarian understand what they are actually purchasing and identify potential issues before committing to the transaction.
