Practice Buyer Mythbusters

My team and I are always amazed at the misconceptions that some veterinarians have about the process of buying and selling a practice. In this article, we thought we would address some of the more commonly heard and persistent misconceptions that practice buyers have:

Buyer Misconception 1:   My perfect practice is out there waiting for me
Many buyers have a rigid list of success criteria of what they are looking for in a practice and what it will cost and wont explore options outside of this criteria. What they don’t realise is:

1. You pay for perfection. When something perfect or close to perfect appears, there is a lot of demand. A lot of the time, everyone is looking for the same criteria in a practice and, when it appears, the demand can push the price up beyond what you feel is reasonable.
2. Potential perfection is far cheaper than proven perfection. Sometimes, if you look a little outside your criteria, there are diamonds in the rough.  The foundation and potential for perfection is there, behind a less-perfect exterior, waiting for someone to come in and smooth over the rough edges. 
3. You may not know what perfect looks like yet. If you start looking at things a little outside of your criteria, you may find that your initial criteria was too rigid or needs adjusting. You may find that some things that you previously thought was a “must have” becomes less important and you find other things to prioritise in your wish list.

Buyer Misconception 2:  A lawyer is a lawyer, and all sources of finance are the same.

When you are selecting a lawyer and financier, please look for one that is:

1. Available and quick to respond. 

There is a saying that “Time kills deals”. When you have a deal on the table and both sides are excited to accept, you want that excitement to help carry the deal to the finish line. Any delay can break that momentum and allow circumstances inside the practice (e.g., staff quitting, or downturn in figures) or outside the practice (another offer comes in, changes in economic circumstances, etc.) to interfere with that momentum.  Lawyers and banks that can work on your matter and respond quickly are much more likely to get you to the finish line.

2. Professional and polite in their approach. 

A lawyer that is antagonistic and combative or rude in their correspondence can kill a deal.

3. Experienced in vet practice sales

Most veterinarians would cringe to hear of someone in their profession selling themselves to clients as able to do complex clinical work that is outside of their abilities. Work that should be referred to someone else. This is how I feel when a buyer tells me that they:

• Will be using a lawyer to help them buy a practice that they used for their divorce, immigration or buying their house.
• Have a lawyer that “does a bit of everything”.
• Are going to use a financier to help them buy their practice that has never financed a business before.

Buying a practice is an expensive and complex transaction, with many moving parts. To give yourself the best chance of success, you need specialised help from a bank and lawyer that have deep knowledge of the profession you are in and type of business that you are buying.

Buyer Misconception 3:    The best way to negotiate the price is to criticise what is being sold 
There is a school of thought that, in a price negotiation, the buyer should point out every fault, weaknesses, minor flaw and imperfection of the acquisition and talk down any strengths in order to justify giving the vendor a lower-than-expected price.

This negotiating strategy may seem like a logical way to communicate your lower appraisal of the asset in question. It may be honest feedback, and it may even work when buying assets like a second-hand car from a used car salesman. However, when buying a business from someone who has owned, worked in and built it up for years (sometimes decades), this type of negotiation is more likely to be completely ineffective and counterproductive.

Time and time again I have seen a vendor be more likely to bend their price expectations for the purchaser who expresses appreciation and respect for them and their practice, than the one who does not.