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Buying A Veterinary Practice

How To Buy A Veterinary Practice And Not Go Broke

Dec 5, 2014 2:06:00 PM

broke-monopoly-guyVeterinarians considering acquiring a veterinary practice often find themselves confronted with questions, concerns, and considerations in areas with which they are unfamiliar.  In all likelihood, they are about to make the largest purchase of their lives. In such circumstances, it is wise to seek experienced experts who can make sure that all of the important matters are properly handled. However, expert advice can be extremely expensive.

If a prospective buyer is concerned about aspects of an agreement, they can hire an attorney to draft a document on their behalf or review a document that has been provided to them. The drafting of such documents, and the negotiation, can easily run between $5,000 and $10,000.  If the purchaser has questions about taxes, the purchase price allocation, or corporations, they can easily seek expert counsel from a certified public accountant. This can also be very expensive - especially with no guarantee that the sale will close. 

The difficulty is encountered because the cost of investigation of a practice opportunity, based on an hourly fee structure, can run into the many thousands of dollars. Even if the prospective purchaser has, or can obtain, the necessary funds for that expert advice, they have no assurance that the deal will close and that the money will be well spent. 

Sometimes sales don’t go through. During your assessment of practice opportunities, you may conclude that it is not the practice for you after all.  The seller may decide that after the fees and taxes are deducted from the proceeds of the sale, he/she will not net enough to justify the sale after all.  The bank may decide that there is not enough money for both the buyer and the seller, who wants to stay on and work as an associate in the practice, and decline to finance the transaction. Even though the deal dies, your hard earned money is long gone as a result of non-contingent fees.

A more practical option might be to enlist the services of a consultant who works on a contingent fee basis and can help you finance the fee. These consultants would assist with fair market value, standard terms of agreement, allocation of the purchase price for taxes,  leases, employment contracts, association agreement, and other matters which are essential to a smooth and fair transition. 

These consultants ordinarily work  on the purchaser’s behalf for a flat fee or a percentage of the purchase price. The funds for the fee, whether a flat fee or a percentage, can be  borrowed from the bank at the same time as the purchase price of the practice is borrowed. Since the fee is only paid if the practice is purchased, the purchaser does not risk spending money and ending up without a practice to show for it.

No more spending without succeeding. We think this is a more sound approach. If you would like Praxis to help you buy a veterinary practice for a contingent fee and no out of pocket costs, please give us a call.


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