Looking to buy a veterinary practice?

01 December 2016, at 12:00am

Helen Skinner of FTA Finance presents a guide to first-time purchase - from securing the best financial support, through to build rapport with the seller, and ultimately buying in.

BECOMING YOUR OWN BOSS is many people’s dream. This may be a result of logical career progression or, as we are seeing more and more today, a means to protect a position within a business.

Practice finances are coming under increasing pressure nowadays and it is quite often the salaries of the veterinary surgeons which come under scrutiny. 

This is even worse for locum surgeons who, being self-employed, have very little protection under employment law, meaning their income share will reduce year on year, but they could even be asked to leave if the practice is sold and/or the practice owner decides to change their terms.

With this in mind, the only sure way to be in control of your financial future is to purchase your own practice.

However, this isn’t quite as straightforward as it was for those who took the plunge into practice ownership in the early to mid 2000s, when there seemed to be a ready supply of practices at sensible prices and the banks would lend to anyone simply because they were a vet!

The financial world has now changed somewhat, and the banks are now taking a much more critical approach to any finance requests, and will review in depth all aspects of any proposal.

This is coupled with a marked increase in practice goodwill values and sizeable competition to purchase, both from fellow veterinary surgeons and from established practice owners seeking to expand their group.

It is vital therefore that you set yourself apart from the rest. Here are a few tips to help your chances of securing the practice of your dreams...

How much can I borrow?

Before you start your search, you need an idea of how much you could potentially borrow. This would be a good time to arrange for a  financial pre-assessment.

By answering a few straightforward questions about your clinical and employment background, together with a summary of your personal financial position, you would get a better guide as to the level of bank support you can expect. Sales agents and vendors will always look favourably on any offer which is accompanied by a financial pre-assessment certificate.

It is essential that you work with an independent adviser who works with all of the banks – there are currently nine high street banks which will lend to the veterinary profession against goodwill plus a number of smaller “niche” lenders.

And don’t make the mistake of just approaching one bank directly as it will only outline what its lending guidelines will permit and this may not be the most flexible or competitive. All the banks operate differently and there are currently some very favourable and flexible terms available, but only if you approach the right lenders.

Viewing the practice

With so many potential purchasers, you need to stand out from the crowd. Firstly – I know it sounds obvious – turn up on time.

It’s then important to establish a rapport with the vendor – many owners prefer to sell to someone they like and believe their clients and staff will be comfortable with.

It would be wise to prepare a verbal CV in advance as very likely the vendor will be asking you questions as well.

Demonstrate a level of understanding of the overall purchase process – your independent business adviser should be able to provide you with a list of the right questions to ask. 

Offering on the practice

Before you make an offer on any business, it is essential to ensure the practice is affordable for you and to offer accordingly – don’t get carried away in the frenzy simply to acquire “any” practice.

While a financial pre-assessment may demonstrate the amount a bank could lend you, this will still depend on the financial strength of the practice itself.

You will need to prepare a forecast “profit and loss” based on you as the owner or co-owner – using the vendors’ prior year accounts as a guide and building in any changes you propose as well as your own personal costs (of which your loan repayments will probably be the largest).

This P&L projection will dictate if you will be better or worse off buying the practice and most importantly the maximum level at which you can offer – based on available savings and future profitability. Again your business adviser should provide you with support in preparing these forecasts.

Working with experts

It is vital that you work with a solicitor who has a true understanding of the veterinary conveyancing process and that you let both vendor and sales agents know you are working with such an expert. Increasingly we are seeing firms offering a fixed price tariff which helps when it comes to budgeting for purchase costs.

It is also important to have an accountant who is used to working with practice owners. This will ensure the most tax-efficient purchase structure is in place not just to facilitate the purchase but also on an ongoing basis.

Working with an independent business adviser will not only give you the peace of mind of a whole of banking market overview, but they will also help you prepare your business plan and forecasts (which the banks will want to see), negotiate with the banks to ensure you secure best terms and then ultimately hold your hand to the very end.

Looking ahead into 2017, it is likely to be a tough time for a first- time buyer to acquire or buy in to a veterinary practice, but it is possible if you follow the right advice.