For a long practicing veterinarian, the idea of selling their veterinary practice might be foreign and overwhelming. The veterinary practitioners who are considering selling their veterinary practice are faced with a wide range of concerns like fair deal price, financing options, legal and tax implications, etc.
Veterinary practitioners must plan an exit strategy well in advance to increase the likelihood of their exiting their practice at the right time with maximum profits. We refer to this planning process as “succession planning.”
What is a Veterinary Practice Succession Plan?
A veterinary succession plan is not a financial retirement plan or a tax plan, although there are important financial and tax consequences to it. A veterinary practice succession plan is a strategic plan to enable an owner to exit his/her practice at a desirable time in order to maximize the after-tax profits from the sale.
It is ordinarily a detailed plan if the veterinarian wants to implement the succession plan in the near future or it can be very general if the veterinarian is not planning on any action for many years.
Benefits of creating a Veterinary Practice Succession Plan:
Enables Long Term Planning
Maximizes after-tax profit
Gives time to find a deserving buyer
When Should A Veterinarian Create A Succession Plan?
It’s important for a veterinary practitioner to explore suitable succession plans for his/her target year for exiting the practice. It may take a few months to even several years before finalizing a succession plan, as there are always several factors which need to be considered to ensure profit maximization.
Options when Structuring A Veterinary Practice Succession Plan:
There are several options for structuring a veterinary succession plan transaction. The transaction will vary greatly depending upon whether the buyer is buying all or part of the veterinary practice. The transaction will ordinarily fall into one or two general categories - asset sale or stock sale.
There are some basic distinctions between the two types of sale transactions that are important for a selling or a buying veterinarian to understand:
Asset Sale Structure- Here, the legal entity of the veterinary practice is retained by the seller veterinarian and the buyer only purchases individual assets of the company- equipment, licenses, inventory etc. This does not generally include cash and the veterinarian typically retains long-term debt obligations.
Stock Sale Structure- Here, the buyer purchases the veterinarian’s shareholder stocks directly, thereby, obtaining legal ownership of the veterinary practice and its corporate structure. Actual assets and liabilities acquired in a stock sale tends to be similar to that of asset sale.
Almost all veterinarians have invested years of labor into their practice and they want to sell their veterinary practice to a deserving buyer. They also wish to maximize their profits in order to live a comfortable life post retirement. A well-thought-out and professionally prepared succession plan structured in advance helps the selling veterinarian accomplish both goals.