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Should I stay or should I go? Not only was this the question posed by the UK Punk Band ‘The Clash back in 1982, but it’s also one of the most frequently asked questions from veterinarians who are looking to sell their practice in 2024.
Our team at Ray White Practice Sales have been involved in professional practice transitions for over 20 years and frequently finds that both the buyer and seller can benefit tremendously by agreeing on post-sale working arrangements.
The benefits for the buyer of a post-sale arrangement are pretty obvious, particularly in a tight labour market where simply finding an associate veterinarian can be hard. The continuity of having the existing principal vet stay on for a period of time can reduce any impact on both pet owners and staff alike. Customers have time to get used to the ‘new guard’, and when handled correctly, having the exiting vet help transition pet owners across can significantly help reduce the chances of them going elsewhere for their pet care.
However, a poorly communicated and swift exit of the known and trusted principal vet can result in a mass exodus of customers who are now open to the marketing messages on their social media they previously paid no attention to.
There are advantages of a post-sale arrangement for the selling veterinarian too, although these are often less well documented. Even when money is not a factor, working part-time in your former practice provides the selling vet with some income to help cover living expenses. It also tends to limit the need to dip into your retirement funds, thereby making them last longer.
But even more than financial, there are intangible benefits to continuing on as an associate in your former practice. If you still truly enjoy treating animals, practising part-time can help you transition from active practice to full retirement. This can enable selling vets to maintain a sense of purpose and fulfilment; after all, there is only so much golf a person can do in a day.
As with most things, there are also pitfalls to consider regarding post-sale arrangements. The one pitfall we have witnessed more than any other over the years is not financial, although we will come on to that in a moment, but cultural. An unhappy post-sale working relationship can’t be blamed on one side of the equation as we have witnessed sellers become quite hostile post-settlement, and we have seen buyers make unreasonable changes that make the working environment untenable.
As with every business relationship, communication is the key, as is having robust documentation set up prior to the sale. For example, if the buyer says they won’t stop the seller from using certain products post-settlement, then they should not have a problem putting that in writing.
There can also be financial risks at play with post-sale arrangements, particularly if part of the sale price is tied to an ongoing working arrangement for an agreed period of time. This is often referred to as an ‘Earn-Out’ and is commonplace when selling to some veterinary corporations. These agreements are not unreasonable as, very often, the corporation is paying a premium over what might be achieved when selling to a private buyer.
However, some corporations have radically changed things during the earn-out period, even selling to other groups, so these things should be considered when entering into them. In short – look beyond the number written on the cheque unless it is a ‘walk-in-walk-out’ arrangement.
When selling to a private buyer who also wants the current owner to stay on, we recommend you consider a ‘Bonus’ structure instead of an ‘Earn Out’ structure as I think most of us appreciate a carrot more than a stick.
The idea of getting a bonus in one or two years’ time seems far more palatable than losing something we have been promised for reasons that may be beyond our control. As the seller, you are getting a fair market price for your practice today, plus not only the income you generate going forward but a bonus should everyone get over the finishing line in one piece, and neither party will feel cheated or be financially compromised if the finishing line is not reached.
As always, we recommend thorough due diligence by both parties and in the case of the seller, really plan ahead if you possibly can. None of us can stop the clock ticking, but we can plan for the outcomes we want.
If you don’t want to be on the tools past 60 years of age, start looking for a buyer at 55, as you will inevitably get a better outcome for your personal life plan than leaving the process until it’s too late.
For a private and confidential discussion and complementary appraisal of your practice, contact Carl at Ray White Practice Sales. carl.burroughs@raywhite.com or 1800 032 801
Carl Burroughs has been at the forefront of professional services business development in Australia since 2001. His marketing company, Integrated Dental Marketing (IDM), has helped hundreds of dental practices achieve their goals through proactive marketing and advertising campaigns. Carl has personally consulted with many of the dental corporations and groups that have emerged within the profession over the past 20 years. More recently, Carl co-founded Ray White Practice Sales, which is a brokerage service dedicated to helping the Veterinarian and Dental sectors. Although still in its first year of operation, Ray White Practice Sales has consulted with dozens of Vet Practices around Australia and helped achieve outstanding outcomes for the Vet Practice owners they represent.
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