Are You Looking to Buy a Veterinary Practice Within the Next 5 Years?
Updated: Nov 25, 2023
What are the Pros and Cons of Buying Your Own Veterinary Practice?
Are you a new veterinarian just starting out?
Are you an established vet looking to expand your practice?
Are you worried about your student loan debt?
What if you want to make that ownership jump, but aren’t sure you can afford it?
There are many benefits to veterinary medical practice ownership:
Increased revenue
Increased clientele
Freedom to make your own choices that you feel best suit your small business
Ability to expand your staff, associates, schedule, and procedures
Typically a good investment
However, there are also a few risks to ownership:
Increased responsibilities
Profit may vary for the first few years
The pros and cons of practice ownership often depend greatly on the individual and what goals they hope to accomplish. And again, often, the benefits of buying and owning a veterinary practice outweigh the potential costs.
5 Steps to Buying the Veterinary Practice of Your Dreams
1. Establish Your Personal List of Pros and Cons
As stated above, each individual person has their own list of benefits and risks pertaining to the purchase of your own veterinary medical practice. It is very important to first determine what your needs, wants, and expectations are before you start looking into being the owner of a small business.
Sit down and think about all the necessary requirements that will be going into this real estate. Clarity, first and foremost, is the first necessary step in determining the best course of action for you and your new veterinary small business.
2. Speak with Your Financial Advisor
Veterinarians, new or established, almost always have a significant amount of student loan debt. That is the unfortunate reality of this career path.
A financial advisor will take into account your current student loan debt and help determine the appropriate loan amount, a realistic interest rate, and anything else you may need to take into account. Speaking with a financial advisor is a fabulous step because they can direct you to your best courses of actions for your individual needs.
What is the Typical Cost of Buying a Veterinary Practice?
The average price of buying a veterinary clinic or hospital is difficult to determine because it depends on exactly what you are looking for.
There are some clinics that are being sold for around $200,000 and others that are being sold for over $1 million.
The cost will fully depend on location, size, specialty, any current assets, and, maybe most importantly, what the current hospital’s reputation is.3
Is Money a Concern for You?
This is a concern for many. Realistically, veterinarians are leaving veterinary medical school with hundreds of thousands of dollars in student loan debt.
You do have options, though. There are business loans that can be applied for that have zero relation to your current, personal student loan debt. This is rather helpful in setting up your new practice and is, typically, a good investment for your career as a business owner. Additionally, you may consider going into business with an associate to cut down on the overall costs and alleviate some of the burden from your shoulders alone. Obviously, as recommended above, you should speak with a financial advisor before making any sort of decision.
You will need to choose a loan based on what fixed year interest rate works best for you. On average, most loans are fixed anywhere from 10-20 years and the interest rates can range anywhere from 4.25% to 7.00%.2
Knowing the estimated loan value you need, the rate at which you could pay it off, and the interest rate that is most affordable for you, is necessary before taking your next step.
3. Make the Determination on the Building
You will now need to make the determination on if you would like to purchase a pre-existing clinic or hospital or build your own.
This may be a relatively easy decision for some because it really depends on funding. Buying a pre-existing practice, most of the time, is much cheaper than building a clinic or hospital from scratch.
Assuming you are a newer veterinarian, you may opt to purchase a pre-existing practice. This is often a great deal because you have most of what you need set up for you already. You have a waiting room, reception, exam room(s), anesthetic room(s), recovery room(s), kennels, and (if you are extra lucky) a pre-existing clientele and patient list.
As an established veterinarian, you may opt to start your small business from the ground up. You already know what works and what doesn’t based on your previous employment, so this gives you the opportunity to thoroughly plan exactly what you want to have in your business to make your life more convenient. This, as you can imagine, may be a more expensive route, but could bring in more future revenue because you have personally optimized its efficiency.
How are Veterinary Practice Valuations Calculated?
There is a lot that goes into finding the market value of an established veterinary real estate. This may be very helpful knowledge if you would like to do research on the market value of whatever existing clinic you are looking to purchase or, alternatively, if you are looking to sell your own practice.
A great starting point is to compare the current clinic you are assessing to other local veterinary clinics on the market.
After this, you can determine the valuation of the clinic or hospital by their annual financial performance and valuation multiples derived from their sales.1 The most common valuation multiples of sale price are:
Annual Net Sales or Gross Revenue
Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA/EBIT)
Net Income
Veterinary Integration Solutions has written a fabulous article that provides a great example of how to calculate the valuation multiples for yourself in order to find your appropriate business value. Follow the above links to assist you in finding further, in-depth information you need to make an appropriate valuation on your veterinary clinic or hospital.
4. Find the Place You Want to Call Your Second Home
If you want to buy a pre-existing veterinary clinic or hospital, start browsing real estate in your area (or whatever area is your ultimate goal) to find an established place to set up shop.
If you want to start from scratch, start browsing real estate plots for sale locally (or again, wherever you want to ultimately live).
Regardless of your choice, this will likely take a large amount of time to find what you want. This may even take several years to find just the right place to call your second home.
You want to find a place that is easily accessible, suitable for your specific needs, and affordable. Do not make any rash decisions because this is a huge investment that should be expected to last at least the next 10 years.
5. Say Yes to that Practice!
Once you have found the perfect place to set up shop, make that offer! When you know, you know, so do what you can to make it happen. We know that this takes a lot of work, but you can do it.
Other General Tips
Take Your Time
Rome wasn’t built in a day and neither is a truly successful veterinary medical business. Take your time. Do your research. Look at multiple properties. Identify what you do and don’t like about each. You want to find the absolute best option for not just you, but your future clients and patients.
Talk to People Who Have Gone Through this Process
This may be the easiest thing you could possibly do during this process. Talking to someone (a friend or associate) who has been in your shoes will give you excellent advice on the do’s, don’ts, benefits, and risks of buying a veterinary clinic or hospital. They have gone through the motions and can provide you the best advice to make the process streamlined and easy.
Read into the Sale Price
The sale price has a lot of different factors in play. As mentioned previously, the selling price will depend on clinic size, profitability, location, specialty, and their prior reputation with the public.3 A cheaper or more affordable business may not always be a great deal because they need work or have a prior bad reputation. Similarly, an expensive business doesn’t always mean that it is necessarily better because they are just as capable of needing work or having an equally bad reputation that may need to be turned around.
Ultimately, the best advice to be given here is to take your time, do your research, and speak with people who have been in your shoes when you are in the process of buying a veterinary practice. Finding the perfect place to call your second home is a tedious, time-consuming, labor of love that you absolutely deserve.
These 5 steps and associated tips will make your life drastically easier when you are looking to purchase your own veterinary practice. By following these guidelines and tools we provided, you will be sure to buy a veterinary practice within the next 5 years. Do you need further assistance or have additional questions? DVMElite is an expert in all things veterinary! Contact us now by talking to one of our practice coaches and we can get you on the fast track to purchase the veterinary practice of your dreams!
Resources:
Harry. “Veterinary Practice Valuation.” ValuAdder Business Valuation Blog, March 11, 2022.
“Veterinary Practice Loans.” 1ST MED FINANCIAL. Accessed January 28, 2023.
Zak, Dr. Ivan. “How the Valuation of a Veterinary Practice Works.” Veterinary Integration Solutions. Veterinary Integration Solutions, May 20, 2021.
