Dead man's shoes have finally arrived , Help!

Re: Dead man's shoes have finally arrived , Help!

Martin Atkinson — Wed, 07 Dec 2011 19:02:24 GMT

[quote user="Gerry Henry"]

Forgive me for saying so but you seem a bit passive about the whole thing, kind of waiting for it all to drop into your lap, get stuck in.

[/quote]

I think this is a bit harsh Gerry, not everyone is a fearless, get-up-and-go businessman. The OP has been expecting, rightly or wrongly, for the transition to buying the practice to be straightforward if not exactly falling into his lap. He has a big dilemma which could cost him a lot if he makes the wrong decision. I presume he has ties to the area so its bit upheaval to just up and go, starting up on your own is buy no means a certain cash cow and he needs to make the right decision whether the present practice is worth the asking price. I think a bit of passivity is probably of the order for now while he considers his options for what is likely to be the most important decision of his life. I don't have the answer to what he should do, I had it pretty easy and my practice did virtually fall into my lap and I would get stressed if I got out of my comfort zone which is why I've remained sole-charge (and poor!) and sympathise.

Re: Dead man's shoes have finally arrived , Help!

Richard Carter — Wed, 07 Dec 2011 12:41:59 GMT

you will get more classed as mentally disabled than as a pensioner!! Carers allowances, help with council tax, maybe a plan in the making....

Re: Dead man's shoes have finally arrived , Help!

Bob Russell — Wed, 07 Dec 2011 11:18:42 GMT

66 if I am very lucky. I have a sinking feeling that I will not be able to retire at all. I will fade away as a gibbering wreck! I have already started on the downward spiral.

Re: Dead man's shoes have finally arrived , Help!

Gerry Henry — Wed, 07 Dec 2011 11:13:23 GMT

Ho Ho.

Saw Sam Jones at w/end BTW, he says hi.

Re: Dead man's shoes have finally arrived , Help!

Judith Joyce — Wed, 07 Dec 2011 10:33:40 GMT

[quote user="Gerry Henry"]Of course, silly me.[/quote]

Perhaps you're losing more than just the short term memory!!

Re: Dead man's shoes have finally arrived , Help!

Gerry Henry — Wed, 07 Dec 2011 10:00:14 GMT

Of course, silly me.

Re: Dead man's shoes have finally arrived , Help!

Hannah Wynne Richards — Wed, 07 Dec 2011 09:34:07 GMT

Gerry I think the pony joke

Wynne

Re: Dead man's shoes have finally arrived , Help!

Gerry Henry — Wed, 07 Dec 2011 09:29:23 GMT

Practitioners giving up after shorter careers, blimey not this one, I'll be here 'till I'm 66. Just too well off you southern types!

(Didn't get the opiate gag, what am I missing - apart from short termmemory).

Re: Dead man's shoes have finally arrived , Help!

Tim Mainland — Tue, 06 Dec 2011 23:24:35 GMT

[quote user="Gerry Henry"]

Making yourself a hostage to fortune if you're depending on a big pay out on retirement; the banks just aren't lending the way they used to and its going to get worse. i think we need to save more during our working lives (not neccesarily cash) and rely less on the final pay out. As far as your figures go I calculate the last month including professional advice would amount to no more than 8% of annual t/over and that's with a margin.

[/quote]

Yes, I'd agree with most of that. But as practitioners are giving up after shorter careers, they won't have the time to save for longer retirements. Are there viable longterm careers beyond practice ownership? I see you have a sideline in opiates, Gerry.

Re: Dead man's shoes have finally arrived , Help!

Gerry Henry — Tue, 06 Dec 2011 22:26:44 GMT

Re: Dead man's shoes have finally arrived , Help!

Tim Mainland — Tue, 06 Dec 2011 21:45:59 GMT

Devaluing the concept of goodwill is a two edged sword. If we say that a decent lump of it is only worth 50% of valuation, then we are also saying that when the same young buyer comes to re-sell it after maybe 30 years of hard slog, then it won't be worth much - maybe 50% of what they then think their lifetime's work should be worth.

I'm no great CVS fan, but interestingly paying for goodwill is what they do. They don't bother with property, cos that costs a fortune and delivers little financially; they pay a bit for gear; but it's goodwill that they really want, because only goodwill brings income and profit.

A further factor is this - most of us running a small business, whether veterinary or something else, will pay todays' bills with tomorrow's cashflow. That's how it works, and it works well for the entire duration of business ownership until......that final day arrives when you sell up. That day, the cashflow stops dead in its tracks. But the bills don't! They roll up for quite a time.....there's the final month staff bill, and it's associated PAYE/NIC payment; there's the final wholesaler bill; there's the last quarter's VAT cheque; then there are 101 smaller bills for lab/crem/disposables/insurance/gas/electric/phones/mobiles/car bills etc etc etc; then there's a lawyer's bill, an accountant's bill, and maybe other advisers' bills; and then there's a number of final income tax + NIC payments derived from the profits of the previous couple of years ( oh you did put that money away at the time didn't you???). I estimate these roll up to around 20% of ANNUAL TURNOVER. And then finally there's the bank account to settle up.

And all of this comes out of that glorious final goodwill payout.

Will it stretch?

Re: Dead man's shoes have finally arrived , Help!

Gerry Henry — Tue, 06 Dec 2011 16:04:40 GMT

In your boss's situation I would have offered you graduated equity share (partnership) over my last five years of active practice; that way you have evidence of my good faith and I get increments of capital against which I can offset my annual CGA; the fact that your boss hasn't done that would concern me slightly. IMHO you would be insane to pay anything like the amounts mentioned for goodwill (3/400k FFS, you could set up 2 excellently furbished SA clinics for that). Goodwill is an intangible, subject to huge (downward) fluctuations dependant on circumstances (collapse of pet insurance industry, one, possibly two keen young things opening up next door, pick your own scenario). Decide what you can comfortably afford for premises and goodwill, clear with the bank and make your offer (about half the asking price). If yes, then you're quids in, if no, hand in your notice, raise capital on your house and open up for yourself. Forgive me for saying so but you seem a bit passive about the whole thing, kind of waiting for it all to drop into your lap, get stuck in.

Re: Dead man's shoes have finally arrived , Help!

Anthony Todd — Tue, 06 Dec 2011 09:53:25 GMT

An item. object, hole in the ground, painting, practice or whatever is worth exactly, no more, no less, what a willing buyer is prepared to pay to a willing seller at the time. Valuations cost money and don't define a value, just give an idea, usually exaggerated and usually to the seller.

In my experience banks are only prepared to lend if secured by an asset which has a definite and permanent value, ie property, and then only a percentage of that valuation which is much lower now than it has been in the profligate past.....

Period.

You could suggest a private mortgage with the present owner?

Security is the business including property if available, no bank getting all sniffy about security, insurance policies, mortgage protection etc.

Income for him at a higher rate than available commercially, easy to set up, cheaper, and if you default he can sell it still.

"Employ" him as a consultant, a business expense for you??

Don't take my word or advice I'm not a lawyer or an accountant!!! But I charge much less....

Re: Dead man's shoes have finally arrived , Help!

Bob Russell — Mon, 05 Dec 2011 11:41:39 GMT

Banks are trying to find 'safe' lending options. They can show the government that they are lending as they are supposed to. If they say a flat 'No' then that is the answer.

Be aware that any loans offered are likely to be linked to base rate. This is very low at the moment and even with the mess the country is in this rate will go up within the period of the loan.

3% over base is cheap enough at the moment but how affordable will it be if base rates rise to 5%? They were there not that long ago and have been much higher in the past. Italy borrows at 7% at the moment! The banks seem to like 'no risk' lending but even this is not guaranteed.

The goodwill you have generated does belong to your boss unless you set up nearby!

Do you have an independent written valuation for the practice based on the accounts? If you do then clearly the business is not worth paying that much for. If you don't have a figure it is all guesswork.

Almost all is fair in business negotiation. Talk to local estate agents (including commercial specialists) so plan B can be put in place. If you cannot negotiate a sum that is genuinely fair for both parties and/or you cannot borrow the money then you have to walk away.

Re: Dead man's shoes have finally arrived , Help!

james herriot lied — Sun, 04 Dec 2011 21:48:42 GMT

[quote user="Judith Joyce"]

you will find that when you talk to a half-decent lawyer, the restrictive covenant in your contract is next to worthless, so you are effectively free to set up in opposition.

[/quote]

Completely correct. Breach of contract is in any case a civil matter, which means the guy would have to sue you himself, out of his retirement pot - which, as he's no longer going to be in business in the local profesion, he'll have no motivation to go through with.

I wouldn't be informing him right now that you'll definitely walk and set up - that would be antagonistic. But dropping into the negotiations, in a light and friendly manner, that for less than the business is valued, you could just set up by yourself - thereby massively reducing the value of said business - should be enough to find common ground. Suddenly, selling to you would seem a great idea.

But then, you were complaining that you felt under-respected after 14 and a half years of loyal service. How might your boss feel, after 14 and a half years of putting a roof over your head, paying your bills and absorbing the costs of your mistakes, if you were to try screwing the price down and so diminishing his standard of living as an old man? Would shelling out a few grand, which you'll make back eventually anyway, be so bad?

Re: Dead man's shoes have finally arrived , Help!

Judith Joyce — Sun, 04 Dec 2011 20:10:13 GMT

[quote user="An On MRCVS"]300K his guy has said over 400K[/quote]

Not too far apart then, though both figures are suspiciously round. It is time to negotiate, and not to carp. The business is either worth 400k or it isn't. If you can borrow to buy, service the loan and end up earning at least what you are earning now (but acquiring a business at the same time) then the deal is a good one. If you can see potential to improve the business further then the deal is a very good one.

If the numbers don't work, then make an offer of a purchase price that does make the numbers work.

Contrary to popular belief, you as an employee cannot expect a "concession" on goodwill - you have been paid a salary already and the goodwill generated by you, and the other employees, belongs to the business. On the other hand, as an employee, you will find that when you talk to a half-decent lawyer, the restrictive covenant in your contract is next to worthless, so you are effectively free to set up in opposition.

It is not a good time to be borrowing but if lenders are consistently reluctant to lend, it is usually because the business proposition is sub-optimum. Too many veterinary practices are "life-style" businesses that give their owners a reasonable living but don't really cut the mustard as stand-alone businesses. The banks, or any other lender, will hesitate to lend 600k unless the business has an obvious value with or without any key individual.

Malcolm N

Re: Dead man's shoes have finally arrived , Help!

Gillian Mostyn — Sun, 04 Dec 2011 20:02:44 GMT

I assume you have seen some figures as to the net profit that the business is taking? Does the goodwill seem reasonable considering this? That is all goodwill can be measured against really. Afterall turnover is vanity, profit is sanity!

Put bluntly, a bank (a specialist healthcare advisor obviously) will usually lend almost 100% on a long established business making a good profit, so if you have had a flat 'no' then there is a problem with profit margins... I know £600K is a massive amount but if the business is taking £150K annually then the numbers suddenly sound better!

Don't take all this so personally and then cut your nose off to spite your face. This guy is only trying to get the best price he can for his retirement, I doubt he is deliberately trying to con you. If the goodwill valuation is realistic, then it must be an excellent business and worth fighting for. Get hold of the figures, decide what you can afford and are prepared to pay, and sit down with him. You never know, you may end up with your own business at the end of it....

Re: Dead man's shoes have finally arrived , Help!

Mark Hedberg — Sun, 04 Dec 2011 18:31:30 GMT

Simple. It's time to tell him you'd rather walk. If you want to set up on your own, he can hire a lawyer to sue you. Point out that you represent a significant percentage of his valuation and if he sells to someone else, you are leaving. His practice is worth a smaller amount without you and any new owner will suffer a fall in turnover should you leave. A solicitor can have all kinds of fun with "selling under false pretences"…if he knew you were leaving and didn't mention this to prospective buyers…

Re: Dead man's shoes have finally arrived , Help!

An On MRCVS — Sun, 04 Dec 2011 18:18:00 GMT

Well 2 months on and nothing very much has changed other than he has employed a salesman to sell the practice and had it valued etc as he is away so much doing other things it has taken until last week to get the sales particulars and he is having a laugh! The goodwill has been valued by 23 people for me and they agree 300K his guy has said over 400K and no concession for the fact that I have been there for 14 1/2 years and been lead clinician for the last 7 years with minimal input from him. the bank has said no , too big a loan for an individual 600K and I would be paying it off forever. Where do I go from here ? I suppose I could set up on my own but have a restricrtive covenant. so depressed now feel like I have wasted years of my life working for someone that I thought respected me , obviously not!!!

Re: Dead man's shoes have finally arrived , Help!

Michael Woodhouse — Thu, 06 Oct 2011 00:36:33 GMT

[quote user="An On MRCVS"]

has anyone any experience of hazlewoods for accountancy, valuation of goodwill etc ?

[/quote]

Do you want to send me a PM? I will share info in a conversation I wouldn't put on the forums.

It WILL save you a LOT of money.

Re: Dead man's shoes have finally arrived , Help!

Alan Tevendale — Wed, 05 Oct 2011 20:56:09 GMT

[quote user="Bob Russell"]

[quote user="An On MRCVS"]

has anyone any experience of hazlewoods for accountancy, valuation of goodwill etc ?

[/quote]

Very swish but I felt they were very expensive for the work done. We changed from them but that ended up 'frying pan into the fire' and the local accountant we used subsequently took even more money and did even less work and the work he did do was completely wrong!

If you are tempted get a quote and details of what they are going to do and how much it is going to cost you.

[/quote]

We use Hazelwoods. I'd agree that they certainly do seem expensive but have an excellent track record. Extremely proactive about all our accountancy. No plans to change.

Re: Dead man's shoes have finally arrived , Help!

Tim Mainland — Wed, 05 Oct 2011 14:07:28 GMT

[quote user="Alan Tevendale"]

[quote user="Gareth C."]

i founds lloyds better than most for understanding the profession in terms of borrowing.

[/quote]

I'd agree with that.

[/quote] It depends entirely on who you get to deal with as ever. On the one hand I've had the same Lloyds manager for 15yrs now, which is great. On the other hand, when I sold part of my practice to a colleague a couple of years back, Lloyds appointed a local livestock and farm auctioneer as the goodwill valuer "because he was on the panel". No sign of Anval, Animus or someone who knew a consulting room from and ECG machine. The guy was clueless about the business of vet practice. But I don't believe that any other bank is better. Nowadays they are all a rum lot.

Re: Dead man's shoes have finally arrived , Help!

Bob Russell — Wed, 05 Oct 2011 11:31:21 GMT

[quote user="An On MRCVS"]

has anyone any experience of hazlewoods for accountancy, valuation of goodwill etc ?

[/quote]

If you are tempted get a quote and details of what they are going to do and how much it is going to cost you.

Re: Dead man's shoes have finally arrived , Help!

An On MRCVS — Wed, 05 Oct 2011 08:51:26 GMT

has anyone any experience of hazlewoods for accountancy, valuation of goodwill etc ?

Re: Dead man's shoes have finally arrived , Help!

Alan Tevendale — Tue, 04 Oct 2011 21:52:34 GMT

[quote user="Gareth C."]

i founds lloyds better than most for understanding the profession in terms of borrowing.

[/quote]

I'd agree with that.