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.
