For solo practice owners, whether you're a primary care physician, dentist, optometrist, dermatologist, or veterinarian, timing is everything when it comes to selling your practice. One of the most common mistakes doctors make is waiting until they're ready to retire before considering a sale. Unfortunately, by the time most doctors are emotionally and mentally ready to exit, they're often not prepared for the reality that to receive maximum value for their practice, they will still need to continue working for several years after the sale.
When private equity firms and strategic buyers acquire a practice, they are not just purchasing a patient list or a few exam rooms. They are acquiring a stream of recurring revenue. To pay a strong multiple on earnings, a buyer needs to feel confident that the business will at least maintain its current cash flow or preferably continue growing. That confidence disappears the moment a buyer learns the solo doctor plans to retire shortly after the sale. Without a solid transition plan, the buyer's biggest fear usually becomes reality: patients leave with their doctor.
Patients often have strong emotional connections with their healthcare providers. When a solo doctor leaves, especially after decades of building trust and rapport, most patients will follow. This is especially true in primary care, optometry, dermatology, and veterinary care, where the relationship is highly personal and longstanding. If a buyer sees that the doctor is stepping away immediately, they will anticipate significant patient attrition and lower their offer, sometimes drastically. In these cases, the deal might be reduced to a simple asset or goodwill acquisition, capturing only a fraction of the practice's true value.
There are exceptions, of course. Dental practices tend to experience less patient churn post-transition, largely because patients often build long-term relationships with hygienists, not just the dentist. However, even in dentistry, buyers usually prefer the seller to remain for one to two years after the sale to introduce the new dentist(s), maintain production levels, and support continuity of care. That transition period, even in more resilient specialties, still plays a major role in deal success and valuation.
Timing Is Key When Selling a Medical Practice Solo
When is the best time for solo doctors to sell their medical practice? Selling three to five years before you plan to retire allows buyers time to bring in a replacement provider(s) who can be slowly integrated into the practice. This transition phase enables patients to get to know the new doctor while the original doctor is still present, which significantly improves patient retention. A gradual handoff allows the buyer to feel more confident about maintaining revenue, and therefore they are more willing to pay a premium for the business.
From a deal structure standpoint, most transactions are not 100% cash at closing. Sellers typically receive around 60% to 70% of the total purchase price upfront, with the remainder paid through an earnout or in the form of equity rolled into the new entity. Additionally, the seller usually stays on post-close as an employee for several years, receiving a market-rate salary. These terms can vary significantly based on specialty, geography, deal size, and negotiation leverage.
All of these point to the importance of working with a knowledgeable mergers and acquisitions advisory firm.
The Value of a Healthcare M&A Advisor
An experienced healthcare M&A advisor can help you position your practice to maximize value, run a competitive sales process to attract multiple buyers, and negotiate favorable deal terms. The advisor can also offer invaluable guidance on what is considered standard, favorable, or non-favorable in today's market. Beyond the financials, an advisor serves as a critical sounding board, helping remove emotion from what is often one of the biggest and most personal financial transactions of a doctor's life.
Unfortunately, not a week goes by without my M&A advisory firm, VERTESS, having a difficult conversation with a doctor who waited too long. These are seasoned professionals who are ready to retire and assume their years of dedication will command top dollar, only to be met with the reality that their practice, with no plan for transition, has lost significant value. At that point, they're often left with two options: continue working for a few more years to maintain value or accept a low offer that reflects only the value of their equipment and charts.
The reality is that most solo doctors don't think about the sale of their practice early enough. It's not something that typically crosses their minds until retirement is just around the corner, but by then, the leverage is gone. The good news is that with proper planning and the right team, doctors can time their exit to maximize both financial return and personal peace of mind.
If you're within five years of retirement, now is the time to start exploring your options. Preparing early gives you more flexibility, stronger negotiating power, and a significantly better shot at walking away with the value you deserve for the business you spent your career building.
At VERTESS, we specialize in helping physicians sell their medical practices with strategy and confidence. Whether you are exploring your options or ready to take the next step, our team is here to help you protect your legacy and maximize value. Start the conversation today. Your future deserves a plan.
Kevin Maahs, CM&AA
As a seasoned entrepreneur with 12 years of experience owning and operating a durable medical equipment company specializing in urological and power mobility, I have developed a deep understanding of the industry and the complexities of running a successful business. In 2021, I achieved a significant milestone by successfully selling my business, a process facilitated by the expertise and guidance of Vertess.
Navigating the sale of a company can be one of the most challenging and emotional journeys for any business owner. However, with Vertess’ unwavering dedication, meticulous attention to detail, and seamless process, my experience transitioned from stressful to highly rewarding. This transformative experience ignited my passion for helping other entrepreneurs achieve their goals and maximize the value of their businesses.
Today, I am excited to leverage my firsthand experience and insights to support business owners in navigating the complexities of selling their companies, helping them turn what can be a daunting process into a fulfilling and successful endeavor.
We can help you with more information on this and related topics. Contact us today!
By: Kevin Maahs, CM&AA and David E. Coit, Jr., DBA, CVA, CVGA, CM&AA, CBEC, CAIM
Market demand for veterinary practices is currently very robust. Both strategic and financial buyers are eagerly acquiring private veterinary practices throughout the United States. This increased interest and transaction activity has prompted a similar increase in owners of veterinary practices reaching out to VERTESS to inquire about the current market value of their businesses.
In this article on veterinary practice valuations, "veterinary practices" include clinics, service providers, and hospitals. Before we discuss veterinary practice valuations, it's helpful to take a closer look at what's causing the increase in the demand for these companies.
Rise in Veterinary Practice Transactions
Veterinary practices are considered safe, lucrative, and generally recession-proof investments. Companion animal practices provide cash flow diversity, appealing to private equity and strategic buyers. Veterinary data is valuable for future consumer engagement and marketing. According to HealthforAnimals.org, pet ownership rates — approximately 70% of U.S. households, 60% of United Kingdom households, and 50% of European households — surged during COVID-19 lockdowns. Remote work has fostered stronger pet-owner bonds, boosting spending on products and veterinary services.
According to The North American Pet Health Insurance Association, rising veterinary costs drive pet insurance demand, with this market seeing about 17% growth in North America and more than 6 million insured pets in 2023. Regular checkups, vaccinations, and treatments create stable income for practices. Consolidation opportunities allow larger players to gain economies of scale and regional dominance.
Key Veterinary Practice Value Drivers
To better understand the current value of veterinary practices, let's begin with discussing some of the key performance indicators that buyers are looking for when evaluating potential practice acquisitions.
Key value drivers include the following:
Specialty areas. Shelter medicine, reptile and amphibian, exotic companion mammal, and equine are but a few of the American Veterinary Medical Association's (AVMA) 48 recognized specialties. Specializations create competitive advantages and barriers to entry. Specialization provides an opportunity to offer better treatments and more focused care for complex animal health problems. Specialization also allows practitioners to become experts in their chosen specialty, which fosters enhanced referral relationships. Specialty veterinary practices typically enjoy higher profit margins.
Location. Veterinary practices in urban and affluent areas typically enjoy higher profit margins than rural ones. Lower competition in an area enhances one's client base and revenue. Demographics and income levels of clients influence overall financial performance. Loyal clients with frequent pet care needs create value for the practice. Higher competition diminishes value by reducing the client base and growth opportunities. Areas with little or no competition typically achieve premium valuations.
Facilities, services, staffing, and operations. Modern, well-maintained facilities attract higher valuations. Proprietary or advanced equipment adds a competitive edge. Companies with specialized services, like surgery, or a focus on small animals are in high demand. Diversified services increase appeal and revenue potential. Experienced, qualified, and sufficient staff improve valuation. Practices with multiple veterinarians are more attractive than solo operations. Effective systems for inventory, scheduling, and financial management support profitability. Organized financial records make valuations easier and more favorable. Compliance with licensing and legal requirements affects credibility. Non-compliance significantly devalues a practice.
Staff compensation and turnover. According to IBISWorld, the average cost of wages (not including owner compensation) was 36.7% of revenue. While the percentage of salaries and wages is important, so is employee turnover. Although tenured employees typically receive higher compensation than newer employees, tenured employees often create more value because they have adapted to an organization's culture and possess a strong understanding of the policies and processes, which results in increased productivity (i.e., tribal knowledge).
Pet Insurance. Practices that accept insurance realize higher annual revenue, all other things being equal. According to the AVMA, revenue per patient was 92% higher for insured dogs than uninsured dogs. Moreover, after three years, 81% of insured dogs were at the same clinic compared with 46% of uninsured dogs.
Finally, relative size also matters regarding the market value of veterinary practices. There is a greater appetite for higher revenue, multi-doctor, multi-location veterinary practices. The greater appetite leads to higher offers.
Veterinary Practice Buyer's Industry Considerations
Astute buyers carefully evaluate the risks and rewards associated with acquiring a company. The following key veterinary industry trends significantly influence risk:
Profitability. Buyers prioritize profitability, typically looking at earnings before interest, taxes, depreciation, and amortization (EBITDA) margins as a key metric. Well-run veterinary practices should enjoy an EBITDA margin of 15% to 20% of total revenue. Address high costs (e.g., cost of goods sold (COGS)) or low daily transactions (i.e., average daily turnovers (ADTs)) to improve profitability. Reinvestments should provide measurable return on investment (e.g., equipment like surgical lasers must be utilized effectively). Higher revenue and patient volume indicate strong value.
Number of practitioners. Multi-veterinarian practices are preferred for risk mitigation. Single-doctor practices or those reliant on part-time/relief veterinarians are at higher risk. Revenue generation should not rely heavily on one veterinarian. A balanced patient load across doctors is more attractive to buyers.
Turnover and culture. High turnover of veterinarians or staff raises concerns for buyers. A positive workplace culture eases transitions to new ownership. Proper staffing helps ensure growth and operational efficiency.
Equipment quality. Outdated or poorly maintained equipment reduces practice value. Buyers consider upgrade costs when determining purchase price.
Differentiators. Specialty practices often command higher valuations due to premium services. Modern facilities enhance the practice's competitive edge.
Location. Rural practices face challenges but can thrive with limited competition. Practices in areas with populations exceeding 100,000 are highly desirable. Accessibility, population demographics, and affluence significantly impact value.
Economic conditions. Developments like recessions or booms affect client spending and practice valuation. Resilience to inflation and interest rates is a key factor.
Growth plans. Buyers look for veterinary practices with plans to expand services, increase pricing, and/or develop repeat business. Growth potential signals long-term profitability.
Current Veterinary Practice Valuations
Below is a breakdown of what we at VERTESS calculate as the current estimated market values for veterinary practices based on multiples of adjusted EBITDA; seller's discretionary earnings (SDE), which is EBITDA plus owners' salary(ies) and bonus(es)); and percentages of annual revenue, by revenue size:
Market Valuation*
Annual Revenue$2M to $5M$5M to $10M$10M to $50M$50M+
Multiple of Adjusted EBITDA 4.0x to 6.0x 6.0x to 8.0x 8.0x to 10.5x 10.5 to 13.5x
Multiple of Adjusted SDE 2.5x to 4.5x 4.5x to 7.5x 7.5x to 9.5x 9.5x to 12.0x
Multiple of Annual Revenue 65% to 85% 85% to 100% 100% to 125% 125% to 145%
A well-performing veterinary practice should have an adjusted EBITDA margin of 14.0% to 15.0%, or an SDE margin of 15.5% to 16.5%. As such, a well-performing veterinary practice with $6 million in annual revenue would have a market valuation range of between $5.9 million to $6.2 million.
Note: The above valuation does not include real estate, which must be appraised separately from the practice.
The actual market value is also a function of the (1) quality of offering memorandum and reporting, (2) quality of intermediary representation, (3) historical financial performance of the company, (4) future growth prospects of the company, (5) quality, type, and number of potential buyers, (6) current and projected macroeconomy, and (7) current and projected industry stability and growth, and numerous other factors.
There are outlier market multiples in unique veterinary merger and acquisition (M&A) transactions where optimal buyer/seller synergies push valuations above the norm. Moreover, market multiples change over time depending on the overall economy, regulatory and reimbursement modifications, and industry trends.
Acquisitions of veterinary practices are typically asset purchases, as opposed to equity purchases, and are done on a cash-free/debt-free basis. Sellers typically distribute excess cash balances prior to closing the sale and after paying off all outstanding indebtedness.
What Is Your Veterinary Practice Worth?
If you're an owner of a veterinary practice, you can receive a market valuation from VERTESS regardless of whether you're considering selling your business. Knowing your current market valuation can provide insight into determining your go-to-market plans. Perhaps you're contemplating whether to sell now or five years from now. A good roadmap begins by knowing where you are today. A market valuation of your veterinary practice is a great start to planning for your future.
As a healthcare-focused M&A firm, we at VERTESS help owners understand the expected value of their business if they are to bring their company to market. We'd be happy to provide you with a current market valuation of your veterinary practice.
Kevin Maahs, CM&AA
As a seasoned entrepreneur with 12 years of experience owning and operating a durable medical equipment company specializing in urological and power mobility, I have developed a deep understanding of the industry and the complexities of running a successful business. In 2021, I achieved a significant milestone by successfully selling my business, a process facilitated by the expertise and guidance of Vertess.
Navigating the sale of a company can be one of the most challenging and emotional journeys for any business owner. However, with Vertess’ unwavering dedication, meticulous attention to detail, and seamless process, my experience transitioned from stressful to highly rewarding. This transformative experience ignited my passion for helping other entrepreneurs achieve their goals and maximize the value of their businesses.
Today, I am excited to leverage my firsthand experience and insights to support business owners in navigating the complexities of selling their companies, helping them turn what can be a daunting process into a fulfilling and successful endeavor.
David E. Coit, Jr., DBA, CVA, CVGA, CM&AA, CBEC, CAIM
I am a seasoned commercial and corporate finance professional with over 30 years of experience. As part of the VERTESS team, I provide clients with valuation, financial analysis, and consulting support. I have completed over 400 business valuations. Most of the valuation work I do at VERTESS is for healthcare companies such as behavioral healthcare, home healthcare, hospice care, substance use disorder treatment providers, physical therapy, physician practices, durable medical equipment companies, outpatient surgical centers, dental offices, and home sleep testing providers.
I hold certifications as a Certified Valuation Analyst (CVA), issued by the National Association of Certified Valuators and Analysts, Certified Value Growth Advisor (CVGA), issued by Corporate Value Metrics, Certified Merger & Acquisition Advisor (CM&AA), issued by the Alliance of Merger & Acquisition Advisors, and Certified Business Exit Consultant (CBEC), issued by Pinnacle Equity Solutions, and Certified Acquisition Integration Manager (CAIM), issued by Intista. Moreover, the topic of my doctoral dissertation was business valuation.
I earned a Doctorate in Business Administration from Walden University with a specialization in Corporate Finance (4.0 GPA), an MBA from Keller Graduate School of Management, and a BS in Economics from Northern Illinois University. I am a member of the Golden Key International Honor Society and Delta Mu Delta Honor Society.
Before joining VERTESS, I spent approximately 20 years in commercial finance, having worked in senior-level management positions at two Fortune 500 companies. During my commercial finance career, I analyzed the financial condition of thousands of companies and successfully sold over $2 billion in corporate debt to institutional buyers.
I am a former adjunct professor with 15 years of experience teaching corporate finance, securities analysis, business economics, and business planning to MBA candidates at two nationally recognized universities.
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