Can a New Veterinarian Buy a Veterinary Practice?
Becoming a veterinary practice owner does not necessarily require decades of experience. A newly graduated or relatively new veterinarian may be able to purchase an established practice if the buyer, transaction, and practice financials meet the requirements of the financing program.
For veterinarians considering veterinary practice financing, understanding what lenders may evaluate can help new veterinarians prepare for an ownership opportunity.
Experience Is Only One Factor
Professional experience can be relevant when evaluating a practice purchase, but it is not necessarily the only consideration.
The strength of the practice itself, its financial performance, the transaction structure, and the buyer’s overall financial profile can also matter.
An Established Practice Can Provide a Head Start
Buying an existing practice can give a new owner access to an established client base, employees, facility, equipment, and operating history.
This can provide more information about the business than would typically be available when starting a completely new practice.
Review the Practice’s Financials
A prospective buyer should carefully review the practice’s financial history.
Important information can include revenue, collections, operating expenses, profitability, payroll, accounts receivable, and other financial data.
Understand Cash Flow
Cash flow is particularly important when evaluating whether a practice can support its ongoing obligations.
A buyer should understand how much cash the business generates and how that may change after the ownership transition.
Credit History Can Matter
Lenders may review a borrower’s credit history as part of the financing process.
A strong overall financial profile can help support an application, although lending decisions depend on the complete circumstances of the borrower and transaction.
Personal Liquidity
A veterinarian may need personal funds for certain transaction expenses, working capital, or other costs.
The amount of personal liquidity required can vary depending on the financing structure and lender requirements.
Student Loans Do Not Automatically Prevent Ownership
New veterinarians may have significant educational debt when entering practice ownership.
Existing student loans can affect a borrower’s overall financial profile, but they do not necessarily mean a practice acquisition is impossible.
The lender will evaluate the borrower’s complete financial situation.
Choose the Right Practice
A new veterinarian should consider whether the practice is appropriate for their level of experience and professional interests.
A practice with established systems, experienced staff, and a stable client base may provide a different transition experience than a highly complex or rapidly expanding operation.
Evaluate the Seller’s Role
The selling veterinarian may be able to assist with the transition after closing.
A defined transition period can help the new owner become familiar with clients, staff, vendors, systems, and daily operations.
Review the Staff
Experienced employees can provide valuable institutional knowledge to a new owner.
Before purchasing, the veterinarian should understand staffing levels, compensation, turnover, key responsibilities, and employee relationships.
Evaluate Equipment
The buyer should review the condition and age of major equipment.
Older equipment may require replacement or substantial maintenance soon after the acquisition, which should be considered when evaluating the overall economics of the transaction.
Understand the Facility
The buyer should determine whether the practice operates from leased or owned property.
If the facility is leased, the buyer should review the lease terms and determine whether the lease can be transferred or renegotiated.
Complete Due Diligence
New owners should not rely solely on the seller’s description of the business.
Financial records, tax returns, equipment, leases, contracts, inventory, employee information, and other relevant records should be reviewed before completing the purchase.
Consider Working Capital
The purchase price is not the only financial requirement.
The new owner may need funds for payroll, supplies, marketing, repairs, inventory, and other operating expenses after closing.
Develop a Transition Plan
A transition plan can help reduce disruption when ownership changes.
The plan may address communication with clients, employees, vendors, referring professionals, and other stakeholders.
Financing Options
Depending on the transaction, financing may potentially be used for eligible acquisition costs and other business expenses.
The available options and requirements vary based on the borrower, practice, purchase price, and financing program.
Consider Future Growth
A new owner should evaluate the practice’s growth potential.
Opportunities may include adding services, improving scheduling, expanding the facility, purchasing equipment, increasing marketing, or adding another veterinarian.
Get Professional Advice
Buying a veterinary practice is a significant financial decision.
Veterinarians may benefit from working with professionals experienced in veterinary practice transactions, including accountants, attorneys, valuation professionals, and financing specialists.
Final Thought
A new veterinarian can potentially become a practice owner without having decades of ownership experience. The key is finding a practice that fits the buyer’s professional capabilities and financial goals while carefully evaluating the business and transaction.
Strong practice financials, realistic projections, appropriate financing, adequate working capital, and thorough due diligence can all help a new veterinarian prepare for successful practice ownership.
