Much like the merging of tributaries forming a mighty river, the decision to sell a veterinary practice often arises when various factors converge. In many cases, the intersection of an approaching retirement age, staffing challenges, and a strong passion for pet care, but a dislike for the intricacies of business administration, serves as the catalyst for veterinarians to consider the sale of their practice. The increasing amount of corporate ownership and merging of practices is an indication that more veterinarians are choosing that option. If you are in that group, here are key considerations to prepare your practice for sale.

Improving the Value of Your Veterinary Practice

For private practices, earnings before interest, taxes, depreciation and amortization (EBITDA) is a key metric and a driver of the ultimate value of your company. The more you can increase that number, the more you can expect a prospective buyer to pay. In simplest terms, if you can increase revenues and decrease expenses, your EBITDA will increase and elevate the value of your practice.

Increase Revenues

It’s not easy to increase revenues when you spend the vast majority of time delivering care. Although it takes a team effort, there are viable methods to explore.

• Expand Service Offerings - Diversifying your services is one of the most direct ways to boost revenue. Adding dental health and cleaning, diagnostic testing, boarding, grooming and more allows you to cater to a broader range of pet needs and attracts a more extensive clientele. Leverage appointment reminders to promote your new services to the clients who already value your practice.
• Expand Client Base - New clients increase top-line revenue and there’s no better way to attract additional customers than promoting your great customer service. Devoting more time to your website, social media, email marketing, YouTube and other digital tools, increases your visibility and attracts more clients. According to a survey on Statista, on average, a new client will spend nearly $200 annually on services.
• Capitalize on Promotional Opportunities - Seasonal promotions can be a great way to boost revenue. For instance, if your practice offers pet boarding services, launch promotions ahead of summer vacation and major holidays.
• Sell Complementary Products - Adding high-quality pet care products such as grooming supplies, supplements, and pet accessories can deliver additional revenue streams.

Decrease Costs

Developing a budget and adhering to those restrictions is an important start. In addition to looking more closely at spend areas you may not assess today, there are other steps that can decrease your overall costs.

Reduce Inventory Costs

Inventory represents the second largest expense next to labor for any practice. Maintaining supplies of:

• Pharmaceutical drugs
• Medicines and ointments
• Shampoos, flea and tick treatments
• Pet food

...not only result in a substantial financial outlay but when not managed properly, generate unnecessary costs. These items represent significant revenue opportunities so you can’t afford to run out but too much inventory, some of which may have passed an expiration date, is like lighting money on fire. Prevent overordering by establishing minimum and maximum inventory levels. You can’t afford to stock out of frequently used drugs like Ketamine or Amoxicillin or even dog treats, but stocking too many costs money. Establishing a range allows you to maintain the quantity you need without overdoing it.

Reduce Cost of Goods Sold

Reducing the costs of goods sold often just takes a greater focus on analyzing, planning, and controlling the purchase and use of supplies. In addition to examining the amount you inventory, evaluate your supplier base. If you purchase from more than one supplier in a specific category, is a single source a viable option instead? In many cases, multiple suppliers result in higher acquisition costs and potential product inconsistencies that can impact patient care.

Further, when looking for savings opportunities, don’t just assess the high-expenditure items like drugs, medications, food and pet care products. Other lower spend areas that are still required to run your business frequently fall into the “tail spend” category. This is the perceived low-value spend that is often unmanaged or receives less attention. It includes items like veterinary labels, printer supplies and janitorial supplies, to name a few. Yet, tail spend management can reduce costs. A study by the Hacket Group found that tail spend management brought average savings of 7.1% to survey respondents.

Lastly, if you are part of a buying group like VMG, are you taking advantage of discounts? Merely purchasing through their partners can help you reduce costs.

Increase Efficiencies

No one likes to waste time on a task. But it’s not just employees who benefit from a better process. Increasing efficiency allows a practice to operate more profitably and deliver greater value to customers. In fact, a study of companion animal-exclusive practices found that revenue per employee was nearly three times higher in highly efficient practices vs. the average practice. Increasing efficiency can compound EBITDA gains.

Implementing practice management software is one way to attack inefficiencies and improve performance.

Practice management software simplifies processes including scheduling, charting, invoicing, and communication, which can lead to increased productivity, cost savings, and improved patient care.

Finding the Right Buyer

Merger and acquisition history is littered with bad outcomes because of a poor cultural fit. Although you can expect changes from any organization you might sell to, major differences in philosophy can cause unnecessary staff disruptions. Understanding changes the buyer expects to make, their goals and objectives, and learning about the acquisition and integration process from other recently acquired practice owners, are steps you can take to help you make an informed decision.

United Ad Label

UAL’s complete stock and custom label product offering, combined with an in-depth knowledge of veterinary practice processes, procedures and protocols, allow us to standardize items, reduce SKUs, and reduce costs. Contact us to learn more about our services.