7 Things That Can Affect Veterinary Practice Value
Updated: Sep 19
Veterinary practices are worth big bucks - vets are making an absolute FORTUNE from selling their practices. But if you're thinking of buying or selling a veterinary practice, there are some things you should consider. How do you know what your practice is worth? How do you put a price tag on all those years of hard work and sacrifice?
Here Are 7 Factors That Can Affect The Value Of A Vet Practice
Location
If you've ever tried to buy a house in a busy area, you know that location is everything. The same goes for practices. According to Transitions Elite location is one of the most significant factors affecting practice value.
For example, a veterinary practice in an affluent neighborhood might be worth more than one in a less-than-affluent area. Also, a veterinary practice in a rural area may be worth far less than one in an urban area with many potential clients.
On one hand, if the practice is located in an area with lots of competition from other veterinarians, then you may find that it's challenging to get top dollar for your practice because many other vets are competing for clients at the same level as yours. Conversely, suppose the area has few other vets around. In that case, it might be easier for you to sell your business for top dollar because there aren't many other options available for those who want to bring their pets to a nearby veterinarian.
Other considerations when looking at how location affects the value of a vet practice include:
Area population density and growth trends. If a practice is located near a major city, it may be worth more than if it were in a rural area.
Accessibility. Is the vet clinic/hospital easy to reach? Are there major thoroughfares nearby, or is it tucked away on a back road? Can people easily find you?
Demographics. Are you located in an area where people can afford pet care? What kind of income level do they have? That affects how much money they can spend on their pets and how many pets they have — which also affects the demand for your services.
Revenue A Practice Generates
Veterinary practices that generate more revenue will generally be worth more than those that produce less revenue. In addition, practices with high patient volume tend to be more valuable than those with fewer clients because they tend to have higher operating expenses per client.
Specialty Matters
We're seeing a trend where specialties are becoming more popular and valuable in today's market. Specialty practices offer something different than general practices, which means they can often charge higher fees or command higher salaries for their practitioners. If you've invested heavily in building out a specialty service line in your practice, this will pay off when it comes time to sell your practice.
Assets And Sophistication Of The Facility
The most advanced technology a practice has would likely make it attractive to potential buyers, especially if the technology is proprietary and makes them stand out from the competition.
Goodwill And Reputation Goes A Long Way
In business, goodwill refers to intangible assets that include positive brand associations, customer loyalty, and customers' positive emotions for your products or services. And some would include things like digital assets, trademarks, patents, and copyrights.
If a company has done something right, it will be remembered by people in the community, and it will increase their trust in the company's products or services. By implication, this means that if you do something wrong or show poor service to a client, it can negatively affect their opinion of you and your business and ultimately hurt the value of your practice.
Growth Opportunities
Investors looking to buy a veterinary practice want to know that it will continue to grow in value. In fact, growth is one of the most critical factors investors consider.
Growth opportunities can come from multiple sources within your practice. For example, some veterinary practices may have developed a clientele they target for repeat business. Other ways in which growth opportunities might arise include adding new products or services, increasing prices, and/or offering more services monthly.
So, if a veterinary practice has identified growth opportunities and can implement them successfully, this will likely mean higher valuations for investors looking to buy into the business.
The Economy
As with any business, if the economy is poor, it's more likely that your practice will struggle to command top dollar. During recessions, consumer confidence can be affected, and fewer people can afford veterinary care. At such times, potential buyers may be more willing to pay less for a practice than they would in better times. The same goes for veterinary practices during economic booms — owners tend to spend more money on their pets' health care when there is high demand.
The economy is constantly changing, and the veterinary industry, though quite more resilient than other sectors of the economy, is not immune to the effects of rising interest rates and inflation. It's important to know what's happening in the world around you so that you can make informed decisions about your practice's future.
Conclusion
Placing value on veterinary practices is not exactly straightforward. And to the untrained, it is near impossible to get it right. While the factors mentioned in these posts undoubtedly could influence the value of a practice, if you're a vet practice owner looking to sell, it is essential you know what your practice is worth, so you get a fair deal.
