Buying and selling essentials (Sponsored by Intervet/Schering-Plough Animal Health)
If you already work as an associate in an equine practice that you want to buy out (purchase 100%) or buy into (purchase less than 100%), then you're one step ahead. But even if you're still searching, remember that your ultimate objective as a buyer is to make enough money to pay for the practice, live comfortably, and save for retirement. To minimize the risks inherent in such a major purchase, always:Conduct thorough investigations. Analyze potential practices on paper and in person—a process formally known as due diligence, says Tom McFerson, CPA, ABV, co-owner of Gatto McFerson CPAs in Santa Monica, Calif., and a member of the Association of Veterinary Practice Management Consultants and Advisors (AVPMCA). His advice: Carefully review the medical records to see if you can provide the same services as the current owner and the quality of medicine matches your standards. Next, analyze the financial records for cash flow, net profit, and practice growth or decline. Finally, ask the seller for a practice valuation—a report that estimates the practice's fair market value. Usually the seller will pay a certified professional to perform the valuation, McFerson says, but you can hire your own advisor to help you review it. If the seller has not obtained a valuation, consider hiring someone to conduct a feasibility analysis, says Charlotte Lacroix, DVM, JD, owner of Veterinary Business Advisors Inc. in Whitehouse Station, N.J. "It's less expensive than a full-blown valuation, but it will help determine if there's enough cash flow to pay the debt on the practice."
McFerson also stresses the importance of spending time with the owner to see how he or she operates the practice. Look for anything that could pose a problem, such as the number of on-call hours or a cost-cutting measure that you don't agree with. "You want to be certain that the practice you purchase is a good fit," he says. "If the reality of the practice you're buying is already close to the vision you have for it, then your chance for success is much higher."
Protect your new turf. "A noncompete agreement signed by the seller is an essential part of the purchase agreement, so make sure it's rock solid," Dr. Lacroix says. If you're buying a practice with non-owner associates and your state's noncompete laws do not apply to employees, ask your attorney to draft confidentiality and nonsolicitation clauses into the purchase agreement, she advises.