Practice Seller Mythbusters -Part 1

As experienced vet practice brokers in Australia, my team and I are always amazed at the misconceptions that some vets have about the process of buying and selling a practice. In this series of articles, we thought we would address some of the more commonly heard and persistent misconceptions that we hear from sellers:

Seller Misconception #1 – Once we have agreed on the price…everything else will fall into place

While price is no doubt the most important item that you and the seller will need to negotiate, it is not everything. There are dozens of other terms that you will need to negotiate to close a deal, and many of them might change how you or the seller think about price. Examples of these terms include the timing of the transaction, whether 100% is paid upfront or some is withheld and paid over time, post-sale work commitment and conditions for the vendor, if the purchaser wants the staff to stay and many more)

Seller Misconception #2 – Once the transaction settles, I’ll be able to sail off into the sunset

While this can be true, it is rare.

Most sellers commit to working in the business for months (or even, in some case, years) post sale, to finish their cases and ensure a smooth transition/handover of goodwill occurs.

This post-sale commitment significantly de-risks the purchase in the eyes of the purchaser and the bank, as it gives the practice a greater chance of patient retention. As a result, we can almost always get a better financial result for a transaction where the vendor agrees to stay on post sale.

For this reason, it is important for sellers to plan ahead and bring their business to market while they still have the time and energy to work post sale. 

Seller Misconception #3: The buyer's ability to get a loan is not my problem

As much as I wish that it was all about the presentation of the practice and salesmanship, that simply isn’t the case.

The amount that you will be able to get for your practice will have a lot to do with how a bank views it, and if there is some quality of your practice that makes getting finance difficult (a poor lease on the premises, poor quality of financials, etc.), it will almost certainly impact your sale and selling price.

As such, the quality of the information that you provide to buyers to give to their banks is a vital component to getting the result that you want.

Seller Misconception 4:  If I know a buyer, brokers add no value

Firstly, if you have a buyer that you are dealing with in isolation…How will you know that they are offering good price and terms? How do you know another buyer of equal or better quality wouldn’t offer more. If your answer to this is “I’ll get a valuation to dictate the price”

My response to this is:

• A valuation isn’t the end of the negotiations with a buyer it’s the beginning; and 
• Auctions beat valuation prices a lot of the time

The reason we have confidence in pricing is when the market dictates a price.

Secondly, a broker’s function isn’t to introduce a buyer… a broker’s function is to introduce several so that market forces to achieve the best possible the price and terms for their client. A broker’s function is also to present the business in the best possible way to highlight its features and potential, to negotiate, to structure and streamline the process, chasing down lawyers and landlords to make them responsive and to generally to get the deal done as quickly as possible, because time kills deals.

In short, if you feel you don’t need a broker because you have a buyer… you are misunderstanding the function and benefits that a good broker will bring to your transaction.