Industry Survey Shows that New Graduates are the Most Common Practice Buyers

To get an industry pulse on veterinary practice sales, members of the Association of Veterinary Practice Management Consultants and Advisors (AVPMCA) conducted a “State of the Market” survey and released the results at the Central Veterinary Conference on Aug. 27. Respondents’ comments about barriers to sales surprised Dick Goebel, DVM, and David Gerber, DVM, AVPMCA members and coauthors of the survey. The association was formed in 2001 and now has 159 members.

Responses indicate a lack of industry awareness about the different types of lender options and what constitutes acceptable debt load, Goebel said. “I find it baffling,” he added, that 35 percent of respondents had difficulty getting financing or had trouble refinancing, since there are a variety of lenders that specialize in cash-flow financing (a common option for veterinarians) and some sellers participate in financing. “It is not uncommon for buyers to purchase a million dollar practice with $10,000 to $15,000 of their own money,” Goebel pointed out.

A typical down payment from a buyer is $25,000, according to the survey, which also showed that 72 percent of practice sales are handled by commercial lenders. “Veterinarians may not be fully aware of the [other] lending possibilities,” Goebel said.

Comments about debt load also surprised the authors, who work for Simmons and Associates, a veterinary appraisal and brokerage firm. “I don’t consider educational loans a barrier,” Goebel said, but 13 percent of surveys respondents do. “Lenders see educational debt, versus credit card debt, as good debt.”

The median sales price of mature practices has slipped to 82 percent of one year’s gross income, from 86 percent five years ago, but Goebel believes that the current seller’s market will draw that number up. “There seems to have been a [market] rebirth over the last year,” Goebel said. “There’s more competition to buy practices this year.”

The most common buyer is four to 10 years out of school and looking for established practices with modern equipment and drug inventory. Goebel said, “Today’s buyer is fairly sophisticated and wants a turnkey operation, not a fixer upper.” Quality equipment and updated inventory are more than superficial gauges, he said. “They are barometers of a practice culture where clients are accustomed to saying yes to recommendations made by staff members who are practicing with modern methods.”

Distributed in July, surveys were sent to 60 individuals involved in practice sales and included questions about practice salability as well as common barriers to sale. A total of 26 surveys were returned, which represents about 40 individuals, Goebel said. He intends to tweak questions to ensure clarity and hopes to repeat the survey annually or biannually to establish comparisons. “This is a timely issue,” Goebel said. “Nobody else is measuring this type of stuff in the public domain.”