Advice regarding buying a practice or starting up new

RE: Advice regarding buying a practice or starting up new

Martin Atkinson — Sat, 10 Jun 2017 10:27:32 GMT

[quote user="Gillian Mostyn"]

Very much depends on the housing and 'type' of the population though... Houses vs flats, families vs students, ethnicity, affluence. Lots to take into consideration...

[/quote]It also depends very much on your expectations. I know it is a very long time ago and many things have changed but when I bought my practice in 1981 it was a sole charge branch of a bigger practice 6 miles away and there was only one other practice within 3 miles. The goodwill was virtually mine as I already ran this branch sole charge. I got it for what was a pittance even then and the property alone is now worth a small fortune, probably unaffordable for anyone wanting to buy it as a going concern.

Since then half a dozen practices have opened up within that same radius, mostly now corporates but also one desperate start-up, but thankfully so far no-one has come within 2-3 miles of me. The demographics have changed, there is a lot more housing but much of it is affordable housing in multi-storey developments which discourage pets. In the end I am still sole charge, my turnover/client base is stable but I never had the desire to expand or be busier and I remain (happily) sole charge.

Not sure that this is of any help but the bottom line is that, if all you want to do is make a living and you're not bothered about taking over the world, you will probably do that wherever you decide to set up. Sole charge is no longer the burden it used to be with the availability of OOH care providers within easy reach wherever you are.

RE: Advice regarding buying a practice or starting up new

Gillian Mostyn — Sat, 10 Jun 2017 07:57:42 GMT

Very much depends on the housing and 'type' of the population though... Houses vs flats, families vs students, ethnicity, affluence. Lots to take into consideration...

RE: Advice regarding buying a practice or starting up new

Nick Taylor — Fri, 09 Jun 2017 15:09:11 GMT

I assume you really mean how thousands of people are needed to support one practice? We have four practices for 30,000 population.

RE: Advice regarding buying a practice or starting up new

Bob Russell — Fri, 09 Jun 2017 14:35:28 GMT

If you can shake the hand of the vet next door without leaving your front doorstep, there are probably too many veterinary practices in an area!

RE: Advice regarding buying a practice or starting up new

Dinu Catilina — Thu, 08 Jun 2017 22:44:10 GMT

Guys and girls, how do you define a good place to open a practice? How many vets would you fit in a town/ city?

RE: Advice regarding buying a practice or starting up new

Cool — Wed, 07 Jun 2017 16:13:57 GMT

that is really encouraging Nick and will be great to speak to you about this. I tried doing it sometime ago but the council later revoked the permission for the premises they gave us. Glad they did as 3 vet practices later opened up on the 2mile stretch of road I targetted. if the right place comes up I might give it a go

RE: Advice regarding buying a practice or starting up new

Nick Taylor — Wed, 07 Jun 2017 13:37:03 GMT

Hi Clover,

I've just joined and would love an update on what you decided.

My wife and I went through this in 2014. Upon realising that the goodwill is only a reflection of the vets working there (i.e. you) and there was no contractual barrier to leaving (stupid owner), the financially sensible route is starting from scratch.

1. It took 5 months to find a premises, get change of use from planning, buy all equipment and complete fittout.

2. It only cost approx £80k (you have probably got this in equity in your house like we did)

3. The only important number is your fixed costs (i.e. rent, utilities, nurse, rates(zero for first couple of years), insurance). Figure this out and divide between 80% of your (i.e. less 20% for variable costs of drugs) average client bill (£40 - £70) and you know how many clients you need per year to breakeven. Remember no VAT needs to be charged until you breach £84k in sales. In our case this was around £30k/£50 = 12 clients/week. Every client above that meant we started to get paid. We did 12 per day from the first week!!

4. Remember you are the goodwill that is why you will bring enough clients to ensure you cover your fixed costs.

Obviously there are a few more complexities but the reason I am writing to you is because you are the goodwill. Most people have restrictive covenants in their contracts stopping them from using their goodwill and setting up next door. You don't so its almost impossible to fail (assuming you are a good vet).

I am hoping you didn't spend £1m on that practice and have set up on your own. Within two years you will be making more profit on your own despite a much smaller turnover without the burden of huge debt repayments.

I promise you you have an amazing opportunity and if you want a friend who has done exactly this contact Charly and I.

Best of luck.

RE: Advice regarding buying a practice or starting up new

Cool — Tue, 20 Dec 2016 11:17:43 GMT

Learnt a lot from this discussion. Thanks to everyone and I wish you all the best Clover. I will suggest that you should not be fearful though. Approach it well armed with all the information you need.

RE: Advice regarding buying a practice or starting up new

Hannah Wynne Richards — Fri, 22 Apr 2016 16:35:04 GMT

Like cholera, bubonic plague, smallpox and AIDS combined!

Wynne

RE: Advice regarding buying a practice or starting up new

Gerry Henry — Fri, 22 Apr 2016 15:36:10 GMT

I think if your boss was sincere about the 'wants to stay independent' stuff he'd have approached you first. Also I think you'll struggle to raise sufficient money from the banks, for what its worth I'd pick the right spot and put my plate up. Avoid JVPs like cholera.

RE: Advice regarding buying a practice or starting up new

Richard Carter — Fri, 22 Apr 2016 13:09:39 GMT

everybody in independent practice gets these letters. Think you need to square up your boss, confirm an interest in purchase/ buy-out, find out the price on offer is to see if you even in the game and get the books. Then you need to speak to a specialist or lender to see if the money is there in the business (and your gut feel from working there already) and then you need to assess if you feel you can take on this sort of responsibility - not just the practice but also the borrowing. Banks will lend you millions if they think the business is there. However if the business isn't there then it is your problem to find ways to cover the repayments because they don't stop being your responsibility.

When I started, the bank was pushing money at me for equipment, vehicles etc and I think if I had taken it, would have been in quite a lot of trouble.

RE: Advice regarding buying a practice or starting up new

Hannah Wynne Richards — Fri, 22 Apr 2016 12:27:32 GMT

Grumpyoldman. I'll second Gillian.

Turnover is vanity, profit is sanity.

An unrealistically cheap practice could be like a lot of modern dairy farms, massive turnover due to huge volumes, but actually loosing money!

Wynne

RE: Advice regarding buying a practice or starting up new

grumpyoldman — Thu, 21 Apr 2016 22:33:47 GMT

[quote user="Clover"] I am aware of a few "on behalf of my client" type anonymous letters showing interest in what the boss's exit strategy will be.[/quote]

I think most people ignore this nonsense and treat it with the contempt it deserves ,it comes from several sources. They are trying to find people with no exit strategy , no pension in place etc who are looking for a quick out . They are trying to middle man an impromptu auction with a number of corporates who are hungry for market share and gagging to grab another brick in the wall. Just a bunch of chancers in suits really.

RE: Advice regarding buying a practice or starting up new

Clover — Thu, 21 Apr 2016 22:06:29 GMT

Thank you for your offers of help. I shall be getting in touch with a few of you once have thought things over after all the advice here, plenty to think about.

One more question, what about any conflict of interest in advisors/buying parties? I am aware of a few "on behalf of my client" type anonymous letters showing interest in what the boss's exit strategy will be. Should I approach a company for advice that has another potentially interested party already on their books it wouldn't set me back?

RE: Advice regarding buying a practice or starting up new

Rob Loxley — Thu, 21 Apr 2016 16:12:16 GMT

[quote user="Gillian Mostyn"]As has been said, make sure you go over the numbers VERY thoroughly. If the current owner has no business debts, then current profit might be fine for them but, when your debts are taken into consideration, might be awful! [/quote]

Saddling yourself with debt to buy someone's lifestyle business is definitely one to avoid

RE: Advice regarding buying a practice or starting up new

Andrew Mellor — Thu, 21 Apr 2016 13:37:26 GMT

Having been In exactly the same situation just over 3 years ago I would say really good veterinary accountant like Moore Scarrott who will advise best way to go re ltd company sole trader llp etc and prepare accounts that you can then show to banks, PPS for personal insurances etc which you will definitely need to get a loan, I struggled because the good will was much greater than the property value so the bank had limited capital, when it comes to good will your share of the good will needs to be taken into account as well as the bosses, in my case I was the lead vet and the boss did no more than 1 hour per week, but even though the accountant said the good will was mine the agent selling obviously fought against that and we ended up with a gentlemans agreement and splitting the difference which the vendor snapped my hand off for - so I obviously offered too much. Also be aware of what would need doing - have your own surveys done etc

Good luck , it took me 18 months to persuade banks to lend to me but it was worth it , maybe you would not have the luxury of that much time.

RE: Advice regarding buying a practice or starting up new

Nick Lawrence — Thu, 21 Apr 2016 13:35:03 GMT

Hi Clover,

There are a lot of good comments and advice in this thread.

Having been involved in dozens of "start ups" and "acquisitions" over the last 10 years I have seen what has worked well and in some cases what has not gone so well. Valuations of practices will vary but ultimately a practice is only worth what someone is prepared to pay.

I am happy to speak to you on the telephone (01823 282100) if you want some further input at this stage. With the benefit of the last 3 years accounts (and any written valuation) I am happy to meet up with you talk through how Moore Scarrott could help in terms of an opinion on the value of the practice, funding options and also optimum trading structure for you. Any meeting would be at a location convenient to you, free of charge and no obligation to use our services.

Nick Lawrence

Associate Partner

Moore Scarrott

RE: Advice regarding buying a practice or starting up new

Braden Collins — Thu, 21 Apr 2016 12:56:21 GMT

[quote user="Clover"]

Thank you all for your replies so far.

Does anyone have any recommendations for advisors?

The practice could be a lot more profitable even though in a rural relatively poor area of the country. Boss even says so himself but now just wishes to get a good price and retire. We are very cheap compared to the local corporates, hence why so busy as the locals know this.

If setting up a new practice how do you make cash flow predictions? Plus most of the staff have said they would follow me having worked for corporates before and hated it. Unfortunately the other vets aren't really interested in partnership at the moment as still fairly new.

Do wonder if should ask the boss to advertise to replace our current locum for a permanent vet that is interested in becoming a partner very soon. However if don't get on could cause problems even if makes getting finance easier!

[/quote]

Red flag right here. If you're busy because you're cheap, you may find a lot of the good will walks out the door when you take over and put prices up.

I would get the practice valued, then see if the boss will sell to you at that price. I certainly wouldn't pay more than the valuation, and if much good will is linked to the boss you should pay significantly less.

If the boss wants to sell to a corporate, or the corporate outbids you, I would let the boss sell then set up in oposition. That way the boss gets his coin and the only one who gets burned is the evil corporate.

I have purchased 2 clinics now. First one was fair prices but underservicing. That grew very well. Second practice was poor service but no "higher level" work offered. We found as soon as we took over someone really cheap set up down the road, and with our price/quality increase, we had a lot of clients more to chase the cheap place. It took 12-18 months for word of mouth aboute the good work we do to reverse the flow of clients and the practice is now groing very well, but on reflection we paid too much for the good will (we paid what it was valued at, but we should have predicted the loss of clients with pricing changes, etc).

From experience, I would prefer to set up my next practice from scratch rather than buy established as you won't pay for good will which might walk out the door or lose if a corporate sets up down the road.

RE: Advice regarding buying a practice or starting up new

Clover — Thu, 21 Apr 2016 12:03:14 GMT

Lots of great advice from everyone so thank you so much.

Will have a chat with the boss again and see if renting the building to start with and paying him a rent is an option. I think there is a way to get a contract/mortgage type affair set up so after a few years the building would become mine unless I'm mistaken? Maybe a definite end point would make him more amenable to that option.

Have more of a plan of action now. Will ask him if I can look at some accounting details and contact a couple of veterinary advisors to start with who should be able to push me in the right direction. A good one should be able to help with a start up if buying the current place doesn't work out?

RE: Advice regarding buying a practice or starting up new

Bob Russell — Thu, 21 Apr 2016 11:16:35 GMT

They have good contacts with banks and can smooth the borrowing process. Any valuation is a starting point and will be required by any bank or responsible lender as part of the process. Better that this is done by someone with knowledge of the profession.

Try borrowing without a valuation! It is also a negotiating tool however the corporates may play by other rules and have other motives linked with general expansion.

RE: Advice regarding buying a practice or starting up new

Anthony Todd — Thu, 21 Apr 2016 10:57:23 GMT

[quote user="Bob Russell"]strike me as the safest bets for advice.[/quote]

Usually these people use a rigid formula and then a wide factor to multiply their assumed value of car-parking[!] etc. which makes the exercise pointless, and a waste of money.

After all, it's worth what someone pays for it.

Having worked in the practice you should have a good idea of what you are prepared to pay which may be poles apart from a "valuation" and much more or less than the vendors best offer.

I don't think anyone has mentioned a private mortgage with the present owner. Cheaper easier and should suit the owner as he will need to do something with the money.

Rent the property, and even the assets, and do a private mortgage for the rest and don't pay more than you think it's worth.

Good luck!

RE: Advice regarding buying a practice or starting up new

Bob Russell — Thu, 21 Apr 2016 10:36:17 GMT

It is such a shame that this sort of purchase has become such a problem. In the past there was a fairly standard formula based on what a business is worth plus a bit of 'hope' value. This is the extra that the incoming partner/individual believes he or she can get from the business.

Corporates which seem to have almost bottomless pockets and a slick buying team have knocked the stuffing out of the traditional pattern that has worked well.

Hazelwoods and Moore Scarrott strike me as the safest bets for advice.

RE: Advice regarding buying a practice or starting up new

George Cooper — Thu, 21 Apr 2016 08:13:34 GMT

Two further thoughts to add.

1. He's selling what IS, and very often vets trying to fund retirement may have unrealistic expectations.

2. YOU are buying what COULD be - increased fees, increased work-ups, increased preventative sales, food sales, all driven by your own passion to do what is best for your patients. It is perfectly possible to improve turnover (but perhaps not the important bit - the profit) by up to 70-80% with new enthusiasms in place.

oh and 3. Do not underestimate the single biggest headache in owning your very own practice, especially a multi-man setup - the staff/HR issues which can seem insurmountable at times. Have you lots of hair that you can tear out when times get tough?

er - and 4. Setting up your own, new practice would be unlikely to fail, even though there are cases where for a variety of reasons this has happened.

RE: Advice regarding buying a practice or starting up new

Gareth C. — Thu, 21 Apr 2016 00:25:30 GMT

I bought out someone a few yrs ago and currently financing a new build. Pm me if you want to contact a good finance broker.

Has the boss thought of keeping the building and renting it to you after you buy the business? Definately persue it but as others have said dont end up paying way over the odds for it to outbid the corporates. I took some valuation advice from hazlewoods who were v good.

RE: Advice regarding buying a practice or starting up new

Laurence Webb — Wed, 20 Apr 2016 23:06:01 GMT

20 months ago I purchased the practice that I had worked in for the previous 14 years. It is a smaller practice than yours (2 vets) but essentially a similar proposition.

The purchase was done as an outright buy - I purchased the building as well as the business. With a 5/6 vet practice you may not be able to get enough funding to do so yourself but purchasing the business then buying the property at a later stage may make it more affordable.

Your current boss appears to be on board with you purchasing so ask for the accounts for at least the last 3 years (ideally 5) to see how profitable the business is at the moment. Bear in mind that he won't have the loan repayments that you will have though! Historical turnover figures will give you some idea on past performance but may not correlate with profitability.

Get an understanding of how you are going to drive business growth in the future and what threats may work against you (new corporates in the area etc). You don't have to pin down the details yet.

My next step was to speak to a veterinary accountant (following advice from friends who have purchased or built their own practices I contacted Nick Lawrence Moore Scarrott) who reviewed the figures to get their view if it was a viable option. Speak to friends to get their opinions of accountants and speak to a few if you want. I'd definitely advice to use one that specialises in vets though.

In my instance, the figures worked so banks, business plans and everything else went from there.

If you want to chat about my experience PM me.