Buying a veterinary practice may be the most important decision you make in your professional career. We have developed a guide to help you in this endeavor so at the end of the purchase, when you see your first patient in your new office, the experience is everything you expect it to be.
In Part I of Buying a Veterinary Practice, we discussed:
In Part II, we let you know that although these tasks may seem overwhelming, you do not have to do this alone. We provide information on:
Having a team eases the process and assists you in analyzing the financial documents of the practice, evaluating the legal documents, and looking out for any red flags.
When choosing your advisory team, consider consulting with professionals who have experience in the sales and purchase of healthcare related practices. There are nuances for these types of businesses that are different than businesses that do not have patients, whether human or non-human.
A Certified Public Accountant (CPA) can assist you from the very start of your buying process by reviewing your own financial situation to be sure you can qualify for a loan and manage the practice after the purchase. A CPA will help you with the following tasks.
Determine a workable budget for your purchase. You will work together to determine a budget and the amount of debt you are able and willing to incur to make this purchase.
Evaluate the type of financing you need. Do you have at least 15 to 20 percent of the loan for a down payment? The Small Business Association (SBA) may be able to help. The SBA offers loans for veterinary practices that are easier to obtain than traditional bank loans and they often have lower interest rates. They may also offer a longer repayment plan than a traditional bank loan. In addition, you can generally use your business and personal assets as collateral for the business loan.
The documents should be readily available and are generally prepared by the seller and ready to be produced to potential buyers at the time the practice owner lists it for sale. If the seller says it will take some time to produce them, or seems reluctant to produce them at all, or uses any stalling tactic, that is a red flag. You should not pursue making an offer without your CPA receiving and evaluating these documents.
Evaluate the cash flow. This requires a detailed analysis of income that is generated by the practice and the practice overhead. You need to be sure there is enough income generated to pay the bills of the practice and provide you a personal income that will meet your personal needs. This evaluation will consider:
The accountant will answer your financial questions and provide you an assessment of the risks and benefits of the purchase.
Carefully review the purchase agreement. You do not want any surprises at the end of the sale. Specific considerations should be given to the following items.
Review all contracts with vendors and the practice location lease with the landlord. The need for an attorney to review all leases, including the lease with the building owner and all leases with all vendors, cannot be overrated. Some important considerations that must be looked at include:
The sale should be contingent upon a smooth transfer of the lease agreement according to the terms agreed upon by the seller and buyer.
Choosing a business structure. You may be so focused on beginning your career treating your patients that you do not pay attention to the business part of the practice. You need to determine if you want to be:
We can discuss your plans with you and make a recommendation of how you should structure your business. Then, our team will prepare the proper documentation and make sure any filings of documents comply with your state laws.
Real estate purchase advice. If you are purchasing the building in addition to the practice itself, you need an attorney to review all documents as would be required of any real estate attorney for any real estate purchase. It is more common for the seller to have a lease with a building owner.
At Dental & Medical Counsel, Ali Oromchian and our team of attorneys help veterinarians purchase or open their veterinary practice strategically. Contact us for a free consultation. We will answer your questions, discuss your needs, and explain how we can help.
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