For veterinary practice owners specifically, retirement presents both unique challenges and opportunities. Not only does your journey involve simply preparing to enjoy your golden years, but it also involves ensuring the health and longevity of your business as well. With the landscape of corporate buyouts and all of the intricacies of practice ownership, here are 5 crucial tips to ensure a smooth transition:
1. Determine the Actual Value of Your Practice
Start by objectively valuing your practice. Picture this scenario: If you were offered a blank check today, what number would be “the number” to make you sell your practice immediately?
You might be shocked to find out that most veterinary practices aren’t actually worth what they think they are. But the good news is, we can help with that.
By understanding the real-time value of your practice, you not only secure a fair deal when you are ready to sell, but you also protect the future financial health of your practice, especially if unforeseen circumstances arise. As morbid as it sounds, did you know that a practice owner who dies without a written transition plan loses 40% of the value of their company?
If you are hoping to sell your practice as part of your exit strategy, it’s imperative that you have a clear understanding of your practice’s market value.
2. Invest in Life Insurance & Structure Agreements
Speaking of your practice losing 40% of it’s value if you die without a written transition plan… there are several things you can do to prevent your family and your practice missing out of the 40% lost value. One of the ways is simply to purchase a life insurance policy and assigning the practice as the beneficiary. This helps ensure that your practice retains its worth. Another way you can help safeguard against value depreciation is to structure a buy-sell agreement with associate partners. But what the heck does this mean? Our team will speak more in depth about this at our session beginning at 9:15 AM on October 22, 2023 at the VetSouth Conference, but for a quick example, one type of buy-sell agreements you could structure with an associate partner could be for them to contribute to life insurance premiums in exchange for an agreement that ensures they can acquire the practice under certain circumstances (such as death). Who would have thought, right? This is just one of the many ways our team can help you think outside-the-box and both creatively and strategically help you plan for your retirement.
3. Attract & Retain the Right Talent
In the world of corporate competition, you HAVE to think outside-the-box and as veterinary practice owner. If a large corporate-owned veterinary practice offers more attractive salaries or benefits, you have to find a way to compete and be able to provide an attractive enough offer to secure the right talent. One of the ways you can do this is by offering potential ownership or growth opportunities within your practice. Structuring deals like giving an upfront 10% ownership with an incremental 1% annually can appeal to younger associates looking for both job stability and growth potential in their career. However, remember the importance of setting contract terms that ensure commitment, like staying on for a specific duration to earn that ownership.
4. Maintain Clean Financial Records
Sometimes, with owning your own practice, it can be easy to mix finances from time to time. But, the integrity of your accounting can make or break a deal if you’re looking to sell.
Inaccurate record-keeping can not only diminish the perceived value of the practice, but also deter potential buyers or partners. It’s vital to separate personal and business expenses, ensure records reflect actual earnings, and employ qualified personnel to manage the practice’s finances.
5. Plan for Strategic Mergers or Collaborations
If your practice doesn’t meet certain criteria, like hitting specific revenue benchmarks or if you lack an associate vet with significant career time left, consider mergers or collaborations. Partnering with another practice can boost the collective value, making it more attractive to larger entities or buyers.
The retirement journey for a veterinary practice owner is multifaceted. It’s not just about ensuring personal financial health but also about safeguarding the business’s future and legacy. By determining your practice’s value, putting protective measures in place, hiring and retaining the right talent, maintaining transparent financial records, and being open to strategic collaborations, you can ensure a smooth transition and a prosperous retirement.
Setting yourself up for success in retirement isn’t an easy task… especially if you are a veterinary practice owner. And if you’re looking to retire in the next 5 to 10 years, NOW is the time to start planning to ensure your financial goals are met.
Join us for a deep dive into Entry and Exit Planning at the VetSouth Conference for our session at 9:15 AM on Sunday, October 2, 2023 and arm yourself with the knowledge you need to ensure you live your golden years in style.
Always be prepared and think ahead; the success of your practice and your peace of mind depends on it.