This solely owned small animal practice had 4 DVM’s and had been in operation for over 65 years. The seller bought the practice from his father and operated it for the last 30 years.
The seller wanted to sell his practice and be relieved of practice management responsibilities but continue to work in the practice after the sale as an Associate for a couple of more years.
MVC knew that this valuation needed to maximize the sales price by correctly defining the practice's true profit.
The seller had already consulted with two prominent veterinary practice brokerage companies and was extremely disappointed when both groups told him that he would be fortunate to sell his practice for 50% of revenue.
The low valuation was because the practice employed four veterinarians who each appeared to receive approximately 40% of their production. The extraordinarily high veterinary compensation made the practice appear to have little to no profit.
Although the seller owned 100% of the practice, Praxis learned that many years earlier the seller very generously decided to divide most of the profit equally among all four veterinarians in the form of bonuses. When the profit was divided equally among all four veterinarians, it appeared as though they were receiving 40% production compensation
They were actually receiving 20% for production compensation and an additional profit sharing bonus. Praxis separated these bonuses from veterinary income and dropped them to the bottom line. Instead of being a no-low practice, the practice was in fact very profitable. After a sale, the veterinarians would no longer share any profit. Praxis needed to conclusively demonstrate the true profitability of the practice to prospective buyers to raise the value and desirability of the practice.
Praxis adjusted practice profit from 0% to 17% by correctly accounting for the previously overlooked bonuses in veterinary compensation. Praxis received 5 offers and sold the practice for 105% of revenue. The sales price was a 170% increase from its previous valuation. Praxis negotiated a 10-year triple net lease and secured a 2-year employment agreement with a favorable work schedule and production compensation.
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