More than money09 Jun 2018 - Simon Palmer - Business Broker
Many people think that that the purchase of a veterinary practice is solely a financial transaction, and that the highest dollar offer will always win the day.
Price is, of course, a primary motivator for any vendor and, as with any asset sale, the money paid is extremely important…BUT… it is a mistake to think that it is the only consideration involved in the sale. There is often more on the vendor’s mind than how much money is changing hands, and there are variables at play that can make small variations in price seem irrelevant.
There is a reason why offers to purchase are negotiated by price AND TERMS, and there are several non-monetary ways of making your offer more attractive.
Timing is sometimes critical in a sale - the vendor may want a fast sale, and this could be the deciding factor in their acceptance of an offer. Being able to deliver a speedy exchange and settlement can make the difference between your offer being accepted over a competitor’s. An unconditional offer in this regard can also be more attractive than one that comes with many caveats.
POST-SALE COMMITMENTS OF VENDOR.
It is quite common for vendor vets to work post-sale, to ensure a smooth transfer of goodwill. If this is part of the transaction that you are involved in, it may be possible for you to offset your upfront offer with better post-sale conditions, such as good commission, or assurances of flexibility with days and hours.
Business owners have often worked with their teams for many years, seeing them as family, and wanting to know they will be taken care of. Most practice purchasers will realise that there is goodwill attached to the team, and will want to keep them on anyway, but purchasers who make a stated intention to keep the staff on can win favour with the vendor, over those that don’t.
Sometimes vendors aren’t just accepting a purchaser’s price and terms - they are also choosing a future boss (if they are working post-sale) and/or a future tenant (if they own the real estate). When there will be an ongoing relationship between the vendor and the purchaser, personality and compatibility count, and can make small differences in price and terms irrelevant. The purchase process becomes a courtship, where the vendor needs to be won over. Here are some ways that can help you do this:
- THE 4 Ps: If and when you meet the vendor, politeness, professionalism, personality (being friendly, easy-going) and punctuality will count. Just because the vendor isn’t there, doesn’t mean you get a pass. The vendor will often ask the broker for their impression of the potential purchaser. Submitting an offer with some bullet points about yourself and your plans can also add some personality to your offer and make it stand out.
Most people would agree that when business transactions or interactions happen with individuals who don’t measure up in terms of the 4 Ps, there is far more frustration, complication and unpleasantness. If a vendor is faced with two similar offers, it can make their choice easier if one of them has all 4 Ps, and the other doesn’t.
- SHOW APPRECIATION AND MODESTY. Some people believe the way to get a good deal is to give an (often unsolicited) explanation of all the things they find wrong with the practice, in order to justify their disappointing offer. What the purchaser often fails to realise is that what they are finding fault with represents decades of the vendor’s time and work. The vendor often walks away from that conversation with a disappointing offer, a wounded ego, and an unfavourable opinion of the purchaser. A purchaser will get much further with statements of modesty, flattery and deference to the vendor’s experience, rather than letting the vendor know all the things they find subpar, and how much better they would do things if they owned it.
You will get much further if you can show that you appreciate the vendor’s work and the foundation that they have built, even if you can’t reach the asking price. There is always something that can be complimented if you are interested in buying a practice, even if it isn’t ideal for you in its current state.
If you are a purchaser, it is important to realise that you are in competition with other purchasers for the best practices and, as with any competition, it is important to realise the variables at play. A practice sale is a financial transaction at its core, but small variations in financials are often forgiven in the face of favourable terms (timing, staff, post-sale commitments) and personality.