Today's Veterinary Business

AUG 2018

Today’s Veterinary Business provides information and resources designed to help veterinarians and office management improve the financial performance of their practices, allowing them to increase the level of patient care and client service.

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18 Today's Veterinary Business Business Business TRANSITION Dr. Gjivoje: By a multiple of current EBIDTA. Some buyers dis- agreed, some agreed. Dr. Harris: We connected with a local commercial Realtor to deter- mine property value. The broker determined the practice value after we shared profit and loss state- ments and year-end numbers. Dr. Kaddatz: The value in today's practice is based on EBIDTA. Then determine an agreeable multiple. Were you comfortable handling your part of the sales process? Dr. Friedman: I relied heavily on the professionals I hired to assist me: a veterinary consultant, a vet- erinary industry attorney, my CPA, my brother, who is an attorney, and another California attorney for de- tails on California law. Under their superb guidance I was as comfort- able as I could have hoped to be in what is an arduous process. Dr. Gjivoje: Yes. I have a supersav- vy partner and a phenomenal at- torney, so we didn't need anything more. We were a great triumvirate. Also, we had attended numerous NAVC conference lectures on suc- cession planning, especially ones by Daren Osborne out of Canada. They proved helpful when it came time to implement. Dr. Harris: There were and are so many moving pieces to a sale that more communication with the buyer during the process would have helped both of us have a smooth transition. Dr. Kaddatz: I was totally com- fortable on our side as most of the financials were furnished by our accountant and we had a very capable lawyer. What significant surprises or special challenges did you encounter? Dr. Friedman: There were daily challenges, turns and twists in the road, ways in which my particu- lar circumstances did not match up with the normal way things are handled. For example, I was dealing with two separate prac- tices in different counties with different landlords, different lease lengths, different staff, different equipment. One big challenge was continuing to be a full-time vet- erinarian while juggling the long phone calls, extra desk work and negotiations. Another challenge was how expensive the process was. And that the timetable was not of my making. Everything took way longer than expected. Dr. Gjivoje: A broker sent us can- didates who lacked a strong finan- cial foundation and expected us to hold a large note as part of the sale. That note would be secondary and subordinate to the first bank note, and we were uncomfortable with that. Also, it became clear along the way that the broker just wanted us to sell, even if it was not in our best interest financially. We stopped working with the broker and shifted our focus to the corporate compa- nies on the advice of our stellar attorney. Dr. Harris: It goes back to communication with the buyer during the process. For example, helping her get estab- lished with her accounts. The pro- cess took longer than expected. Dr. Kaddatz: My main challenge was and is having all our vendor contracts and payments transferred to the new company's accounts. We also needed to form a new cor- porate entity for the medical side of the practice while they set up a corporate entity in New York for the management company. How did you prepare your staff and your clients for the change? Dr. Friedman: The members of my staff were of enormous help and very supportive in the few years preceding the sale. I informed a few fairly early in the process that this change was com- ing. The rest found out a month or so beforehand. They were natu- rally concerned about how the transition would alter their lives, but as we constructed it, it was smooth enough that not too much changed right away. Gradually, a lot of changes happened but in a natural, organic way. Dr. Gjivoje: We kept them ap- prised all along. We wanted the staff to know that we value and respect them enough to keep them duly informed, that we have their backs and best interest in mind, and that they can be com- fortable and trust us in the process. It went a long way in keeping the stress and anxiety level down on a day-to-day basis. We wanted them to know that it wasn't just about us, but about all of us, so including them in the conversa- tion was hugely import- ant. We run a practice known for open lines of communication, mutual respect and apprecia- tion. We couldn't run it without the support and cooperation of our outstanding staff. Dr. Harris: The staff knew of my wishes to retire and adjusted well to the changes. Clients were not made aware of anything until the sale actually closed. Dr. Kaddatz: Once our contracts were signed, we held a staff meeting to tell everyone what was happening. The doctors knew ahead of time, as individual con- tracts needed to be negotiated to maintain the professional staffing. Interestingly, the new contracts were, in many of the details, more generous than the ones we had with the other doctors. What advice do you have for other veterinarians who are con- sidering selling their practice? Dr. Friedman: Hiring experts is essential. The money I spent on pro- fessionals meant that the process was easier on me and that I could have confidence in the day-to-day decisions I had to make. Lastly, it takes far longer than you think it will; don't wait to get the ball rolling. Dr. Gjivoje: Consider all your options: private, corporate, buy-in and buy-out. Pick a great attorney who has veterinary experience and moxie. Give yourself plenty of time, so start a few years in advance of the desired sale date. Don't sell yourself short. Sell when you are at the top of the mountain. Beware of broker agreements, and if you are going to use one, have your attor- ney approve the agreement before you sign it. Dr. Harris: With a private sale, have an open line of communication with the buyer as the sale process progresses. Many of the administra- tive tasks could have been handled ahead of time. Buyers need to be aware of unique regulations in the state where the practice is located. In Ohio, the state pharmacy board requires veterinarians to have a license to prescribe and dispense drugs. Our buyer could have ap- plied for this before closing to avoid our having accounting issues as we continued to do this role for her. Dr. Kaddatz: The main reason we chose the company we did was we felt it was the best deal for our- selves, our staff and our community. We felt good that our clients would not see any change in the way cases are handled. There was no change to the signage or letterhead, and we continue to be a community-based practice. Depending on how selling veterinarians want to withdraw from practice life, they need to decide about how this is done so the prac- tice and the clients won't suffer. Judy Gray is president of CEOonCall in Tallahassee, Florida. She served as interim CEO of the North American Veterinary Community in 2012 and 2013. "Sell when you are at the top of the mountain. Beware of broker agreements, and if you are going to use one, have your attorney approve the agreement before you sign it." — Dr. Vedrana Gjivoje

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