The Cold Call

In 2011, we received the first one – a cold call asking if we were interested in selling our business.  We had been open not quite 8 years and were only one year into our second location.

We were surprised as the thought of selling had not crossed our minds.  However, it caught us at a moment when we were tired.  We had opened our second location in 2010, during the recession.  Our caseload had been what we projected but our average case transaction had not.  We were seeing steady revenue progress but it had been a stressful 12 months.

So, when that cold call came, we sort of sat up and took notice.  We felt validated that we really had built something of value.  I’ll admit it – we were flattered.  At that time, I hadn’t heard of other practices getting cold offers.

However, despite the challenges, we weren’t really willing to sell.

More Calls

But then we got another.  And another. And then we heard someone was going to open a competing practice close to us.  We needed a new building.  My partner’s husband had a great idea for another business. So instead of saying, “No thank you,” we started talking.

We asked a lot of questions and realized that none of the cold callers were right for us.  But pandora’s box had been opened and we merged with a larger group in 2013.

The new cold call reality

In 2019, most of the good practices I know in Seattle get cold calls asking about sale on an amazingly frequent basis.  I’ve talked to people across the country in all sorts of practices who are getting these calls.  Like me, some of the owners still have many years left in their careers

Questions to ask yourself

If you get a cold call, there are several important questions to ask yourself.

First and foremost, are you ready to retire?

If you are looking to truly retire within 12-24 months and haven’t found your exit, you should consider having the conversation with the caller.  The multiples being paid right now are high.  However, your best chance of getting the highest price for your practice is to talk to not just one cold caller, but to explore multiple options.  The first cold call is extremely unlikely to be the right buyer but they may provide an offer that allows you to negotiate with a group you prefer.

Next, what matters to you?

The reality for many veterinarians, it that to retire successfully, you need to do well out of the sale of your practice.  But for many of us, there are also other important considerations.  What do you want your legacy to be in veterinary medicine? Is it the continued existence of your practice with its name? Your culture or your medical approach? The success of people who have worked for or with you? Or are your goals related to your financial freedom to contribute elsewhere?

If practice legacy matters to you, you need to understand sales terms AND the purchasing company’s culture. Is the company veterinary controlled? Why was the company founded? Do the core values of the company line up with your own? A good way to know more about a purchasing company is to talk to other previous veterinary owners who sold several years prior.

Many owners view long term staff as an extension of their family.  In a sale, you can negotiate some protections for your employees.  However, there are many benefits that have to change – some for the better but some not.  Your managers will have less autonomy no matter how it is set up.  There are some roads in bigger organizations for career advancement but these are dependent on the size and growth of the company.  It is also important to remember that the group you sell to now may not own your practice in 5 years.

If you want your practice to remain locally run and locally controlled, you do have options.  I know of practices that were recently purchased at good prices by associates or by veterinarians looking to move into the area.  I also know of veterinarians across the country who are buying a second practice to help keep local practices locally owned. One hospital successfully set up an ESOP and partially sold to their employees.

This piece from the VIN news service has a great sidebar with other sale options,

What if I am not ready to retire?

If you are not ready to retire, then you have different set of issues to consider.

Is my goal to work for the seller?

You may decide to sell in order to minimize risk or debt but want to stay working at your practice. In that case, it is important that you negotiate the sale in two pieces:

1) The sale transaction and

2) Your employment contract

Your employment contract should include a clear job description, contract length, and compensation. While not usually part of a contract, understanding your level of authority in your former practice is super important.  Many groups say they will not change your medicine.  But will you have any input on which staff are hired?  How new doctors are recruited? What equipment purchases are prioritized? Or what CE your staff is eligible for?  These are some areas of misunderstanding for previous practice owners.

What are my options after I sell if I decide not to stay?

In general, it is best to negotiate for the shortest set employment commitment possible but with options to renew if things go well.  Many small business owners find the transition to employee  quite difficult. Thus, you really don’t want a locked in, 5-year commitment, especially in a market where second sales are becoming more common.

Your non-compete will also be crucial to consider.  If you are committed to living in the town where your practice is located, you need to realistically think about how you will support your family if you leave.  The distance, the roles covered by the non-compete, and the time frame will all have a dramatic impact on what you can and cannot do if things don’t work out with the seller.  While non-competes are being limited in some states for employees, they are enforceable when part of a sale agreement.

Is the offer really that good?

When you look at offers and are NOT at retirement age, you need to compare the offer to what you will make over time if you continue to work and grow your practice.  In many practices, the combination of your salary as a veterinarian, any management fees you take, and the profit, over a 10-year period may be more than a sale offer.  If it really works out and you get cash for the practice AND continue to work at a good salary, then it is all great.  But if you get cash and after a year decide to leave, the numbers may not be as favorable.  It is important to do the math with an accountant’s help so you can really assess your options.

What is your gender?

I would love to not write this.  However, after conversations with many veterinarians, I strongly believe that the experience of selling and merging your business in with most consolidating groups is VERY different if you are a female rather than a male owner.  If you are a female veterinary practice owner, look carefully at who is in the C-suite, who is on the board, and who is in the regional management.

Maybe its time for a reset

I recently spoke to a practice owner who had received a cold call from a new consolidating group.  She had not been considering a sale but was feeling burned out.  After looking carefully at the offer, she decided not to sell.  However, she decided to use the call as the impetus to make some needed changes.

She decided it was time to refocus her business.  Her energy would be focused on the specific parts of her practice that she most enjoyed rather than trying to serve all potential clients. She prioritized taking a vacation and figuring out better ways to delegate.  The cold call became an opportunity to reset toward what mattered most to her.

Closing Thoughts

There is a bit of a “feeding frenzy” at the moment and consolidators want you to feel rushed in decision making.  If you are getting these cold calls, take a moment and be proud of what you built and own.  Veterinary businesses are hard work and it is OK to feel validated by the call.   Then, take your time, do your homework, use your advisors, and don’t rush your decision making.