This solely owned, small animal practice had a great reputation in the community and had been in operation for over 80 years. The seller, a 65-year-old male, had owned and operated the practice for 30 years. The animal hospital was located in a nice suburb of a major city next to a well-known university.
The owner wanted to be relieved of practice management duties but continue to work in the practice as an associate for approximately 6 years after the sale. The owner had tried to sell the practice a couple of years ago to a close family friend that had previously worked in the practice as a DVM. This prospective buyer had offered to purchase the practice for approximately 65% of the practice’s revenue. It was at this point that the owner learned that it is not top line revenue but rather bottom line profit that largely dictates the sales price of veterinary practices.
Between the time the owner had first tried to sell his practice and now, the owner had terminated two administrative staff members that had been convenient but not essential. Praxis emphasized the elimination of these two salaries and their respective benefits. Praxis also highlighted other cost cutting measures that had caused the practice’s profit to skyrocket from 13% to approximately 25% in just one year. Praxis presented that despite the staff reductions, revenue continued to rise.
Praxis received multiple offers and ultimately secured a price, benefits, and schedule that the seller never thought possible. Praxis obtained an offer of $1.1M, or 102% of revenue, for the practice. Praxis worked with the seller to make sure that the allocation of the purchase price left him with as much of his sales proceeds as possible after paying taxes. A two-year associateship agreement was entered into where the seller would work approximately 28 hours per week with the option to work more hours if needed. It was also agreed that the seller could extend his associateship at the end of the two-year period and reduce his work schedule to approximately 18 hours per week if desired. The seller and his family will have their insurance coverage provided by the practice. Both parties agreed on a higher purchase price with a gross lease - rather than a triple net lease.