Selling a veterinary practice often hinges on one factor owners don’t evaluate early enough: whether the business produces enough cash flow to support a sale. Many potential buyers — especially internal associates — don’t have the capital for a traditional purchase. Even with financing or family help, it’s common for the numbers to fall short. That’s where seller financing becomes an option, but it only works if the practice’s current profits can support the repayment terms.
The challenge grows when the buyer already contributes to the practice’s revenue. They won’t pay for production they generate themselves, which can reduce the sale price and surprise an owner who expected the proceeds to fund retirement.
The most successful transitions begin well in advance. Five to ten years of preparation allows owners to strengthen financial statements, increase profitability, and clearly present the practice’s value. Early planning creates more options, smoother transitions, and stronger outcomes for both the seller and the successor.
Transcript:
Selling a business comes with more complexity than most owners expect. You might plan to sell to an employee, bring in an outside buyer, or transition the practice to a larger company or investment group. No matter the route, one factor determines whether the sale is even possible: cash flow.
Most buyers simply don’t have the capital to purchase a practice outright. Even if they’re able to access financing or family support, it’s often not enough to meet the seller’s expectations or the true value of the business. Many owners consider using a seller’s note—financing the purchase through future profits—but that only works if the business generates enough cash flow today to support those payments. If the practice brings in $20,000 a month and the required note needs $30,000, the deal collapses before it starts. The buyer ends up “buying a job” and losing money along the way.
This becomes even more complicated when the buyer already works in the practice. If they’re contributing to the revenue and profit, that portion generally can’t be counted toward the purchase price. Many owners don’t realize this until they’re deep into the selling process—often at a point when they feel emotionally done with ownership. Some owners even reach the point of closing their doors or selling for far less than their business is worth simply because they waited too long.
If transitioning your business to another person is even a small possibility, the ideal time to prepare is at least five years in advance—ten years is even better. Clean books, clear profit-and-loss statements, and wellorganized tax returns help you tell the financial story of your practice. This gives a future buyer confidence and helps you capture more value.
There are also creative ways to help a successor accumulate funds over time, such as structured bonus arrangements that build into a lump sum used to purchase part of the business later. If you’re exploring this path and aren’t sure where to start, reach out — we can help you think through your options and next steps.
This material is intended for general public use. By providing this content, Park Avenue Securities LLC and your financial representative are not undertaking to provide investment advice or make a recommendation for a specific individual or situation, or to otherwise act in a fiduciary capacity. Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation. Tom is a Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is a wholly owned subsidiary of Guardian. Florida Veterinary Advisors and The Next Step Planning Group are not an affiliate or subsidiary of PAS or Guardian. California Insurance License #0K80141. AR Insurance License #15823672. Florida Veterinary Advisors is not registered in any state or with the U.S. Securities and Exchange Commission as a Registered Investment Advisor. The individuals associated with Florida Veterinary Advisors do not maintain specialized licenses or qualifications for the financial services provided to veterinary professionals. 7989827.1 Exp 5/27