The Practice Success Prescription: Team-Based Veterinary Healthcare Delivery by Drs. Leak. Morris Humphries
Thomas E. Catanzaro, DVM, MHA, FACHE, DACHE
A mature, full-service, companion animal practice must have a solid fiscal foundation. The numbers should look something like this:
All W-2 salary/wage monies, including doctors and staff, should be less than forty-three percent of the annual gross income.
the P&L expenses, less rent, doctor monies, and ROI, should be below fifty percent every month and below forty-seven percent any quarter.
Occupancy payment needs to be less than ten percent, doctor monies should be less than twenty-three percent, and ROI should be at the Wall Street Journal mutual fund return rate, based on tangible assets in the practice.
Balance sheet monies are about five to six percent. This leaves about nine to fifteen percent pure excess net for the owner in a well-managed practice.
Most mature companion animal practices have about seventy percent of their overhead committed to inpatient care, and draw about thirty percent of their income from inpatient care. The practice has about thirty percent of the overhead supporting the outpatient/client areas of the practice, and brings in about seventy percent of the income from outpatient services.
Leasing portions of the inpatient facility to house-call veterinarians can change this unbalanced ratio.
Adding new programs, such as a fat farm programs for pets, which use the inpatient facility, without drawing exceptional staff time, can also change this unbalanced ratio.
Day admits for inpatient-served diagnostics can better utilize the facility, rather than blocking a consultation room with waiting clients, and increases income instead of overhead.
Ambulatory practices can reduce their overhead by providing a vehicle allowance, but not having the vehicles, or vehicle insurance and maintenance overhead, on their books.
In equine practices, and most other ambulatory practices, assigning a driver increases production by fifteen to twenty percent, if the driver is accountable for keeping track of all the charges and entering the primary charges on the invoicing system.
In house-call or ambulatory practices, divide the area of operations into distinct quadrants for wellness care. Have a specific day of the week for each quadrant with a "preferred client" zone fee for that day. The preferred rate is the existing rate, not a discounted rate, then the practice increases its out-of-quadrant mileage rate for emergency calls. An emergency is defined as "the client wants service now", not on the assigned "preferred client rate" day. This allows clients to be grouped and production maximized.
In any ambulatory practice with quadrants, a client request for services, outside the quadrant day, automatically causes a mileage fee to become assessed, as well as an emergency fee.
Cowboy says: Poor is havin' to sell the horse to buy the saddle.
Consultant says: When explaining new fees, weigh your words, don't count them!
A specialty practice usually has about eight to ten percent lower overhead just due to the amount of "time compensation" on the income side. This allows this extra money to be put into the salaries of the doctors and staff.
Most specialty hospitals have too much hallway space, which inflates their occupancy costs. This is usually due to the academic background of the specialists, where hallways were needed for moving students.
We have previously designed a three-story, twenty-eight thousand square-foot, multi-specialty veterinary practice, into a fixed foot-print property, with ONLY eight feet of single use hallway. It can be done. Demand it if you are paying the bill for the architect and contractor! The text Design The Dream is a post-architect selection text, while the AAHA Design Starter Kit, third edition, and the subsequent AAHA Design It Right, fourth edition, are designed as pre-architect planning references. They all provide insights and information to better help control the design and construction teams.
Note: Elevators are considered zero distance in healthcare patient flow planning.
With a centrally managed, multi-specialty facility, most of the inpatient, treatment, and ward staff can be a shared resource, thereby saving the individual tenants manpower costs.
Cowboy says: Food for thought often gives some folks indigestion.
Consultant says: Discovery of variances should cause discomfort with the data.
The options provided earlier for new practice configurations were not meant to confuse, but rather expand the options available to the practice owner or the new veterinarian, who wants to establish a facility investment, such as a mortgage. If you are a paraprofessional, wanting to start a practice, this exercise is essential for you. It will reveal some values and bias at the same time. In many cases, the veterinary paradigm is to ask, "Which is best for me?", as if the other person should be able to see inside your value system, as well as the future. This is not how it works. You must pull out a yellow, legal-sized, lined pad, draw a line down the center, and at the top of the left column, write "pros", while above the right column, write "cons". Then go above the "pros and cons", and write the scenario being considered. Be as specific as possible in writing the "model" that you want to address in this exercise.
After you have independently completed the full page, with something on every line in each column, and no, it is not fair to write in big letters, covering multiple lines, make copies for each person on your business team, such as the CPA, CFP, JD, consultant, banker, etc. Ask them to assess, add, and modify the two columns from their own perspectives. To save time, if there are two or three scenarios, complete one page for each scenario, then pass them all at one time to your business team.
A large companion animal practice facility can utilize its inpatient space better by offering the inpatient facility space to house-call or outpatient facilities. This allows those practices to have full-service capabilities, while "renting" space and staff from the fixed, full-service, veterinary facility.
An outpatient practice saves most of the inpatient overhead, thereby raising the net excess income by twenty percent or more.
Every practice must be able to assess the community demands, the changes, and the demographic trends. Chapter 2 of the text Beyond The Successful Veterinary Practice: Succession Planning & Other Legal Issues explores the risk assessments of veterinary practice. But in this text, Appendix C: Empowerment of Outcome or Process? actually shares the strategic assessment model required to make rapid changes to the dynamic communities of the new millennium.
Cowboy says: It is the little things that get tangled in your spurs that trip you up.
Consultant says: In money matters, there is no such thing as a "small" unknown.
The Valuation Standards Task Force of the Association of Veterinary Practice Management Consultants and Advisors (AVPMCA) spent over a year developing specific risk factors for companion animal practices, which greatly affect the capitalization rate, thus the practice's value, by the net sensitive valuation formulas in use in veterinary medicine. The various adaptations of the existing veterinary practice valuation formulas are not published by the current veterinary valuation services, except for Veterinary Consulting International® (VCI®), in the text Beyond the Successful Veterinary Practice: Succession Planning & Other Legal Issues. This text provides chapters on the practice value elements, as well as demographic assessments. Appendix A shares the valuation formula we use. This text was published before AVPMCA was organized and the Valuation Task Force Risk Factors finalized.
Since the AVPMCA task force published the twelve risk factors, they have gone on to develop weighting factors and additional valuation process tools. There are some insights added to the definitions below, to better explain where I perceive the future trends lie. So, here are the twelve factors, as written by the task force, reproduced as published in 2002 without editing, and without adding the recent AVPMCA task force weighting factors, or other valuation tools available to the AVPMCA membership. All personal comments and insights that augment these factors are made exclusively by Thomas E. Catanzaro, DVM, MHA, FACHE, and, therefore, not a VCI® corporate position:
1. Growth adjusted profitability: Measures the pattern of growth in adjusted profitability, net income after owner's adjusted compensation, customary practice benefits, employment taxes, and a consideration for management. This risk factor becomes a default scenario in the absence of any protection of the buyer.
Lower Risk: Steady, consistent growth in adjusted profit, as defined above, annually, and after owner(s)' compensation, for at least the last three years.
Moderate Risk: Growth in adjusted profit after owner(s)' compensation in some, but not all, of the last three years.
Higher Risk: Practice shows a decline, no growth, or erratic growth in adjusted profit after owner(s)' compensation.
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Author's Note: Some traditional valuation services compute growth before owner's compensation, which is ridiculous. Some use an "adjusted owner's compensation", which has no national definition, which is MORE ridiculous.
The owner's production must be converted to productivity compensation, such as twenty-five percent of personal production. If the owner was not in the practice, a veterinarian would need to be paid, and not included in net income.
Some valuations use five years, but with the three-year rabies vaccination cycle, five years is considered an arbitrary buyer's method to reduce the value of a growing practice. |
2. Ability to effectively transfer practice goodwill: Evaluates the risk associated with the practice's and the seller(s)' ability to cause a change of ownership unperceived by clients, or perceived as a neutral or positive event, with an uninterrupted flow of services. The sale includes the time and the method to secure the bonding of the clients to the new "owner". This includes the expectations that the practice is not in a state of contraction, losing clients, or facing a threat of collapse in the near term. Assumes appropriate non-compete covenants or equivalent agreements with the seller, associates, and key personnel are in place.
Lower Risk: Transfer of the practice able to be effected with the absolute minimum of disruption to clients and staff relative to operations. Seller willing and able to work towards transfer of the business operation and goodwill to the buyer evidenced by acts, such as letters of introduction, personal introductions, etc. Seller willingness and ability to remain employed in the practice, following sale, would be a positive influence towards lower risk.
Moderate Risk: Seller willing and able to work towards transfer of the business operation and goodwill, but client loyalty to seller less transferrable, because of perceived problems within the practice, with the seller, or with the buyer. Some risk of client erosion to lesser extent than discussed above, or seller availability to help transition practice is limited to a short period after the sale.
Higher Risk: Seller leaves immediately or has already left. No transfer of operations, introductions, announcements, or on-going consultations to assist in transfer of operations or goodwill.
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Author's Note: The role of the "seller" is not as critical as the lead veterinarian, and the level of production as a percentage of total production must be assessed, if the seller has been a significant income producer in the practice, during the three years used in the valuation.
The above definitions use "goodwill", which cannot be used toward any money from any bank, and, therefore, is an antiquated concept in valuations. A letter of introduction is of no value in most all cases, as are mail-out announcements of an ownership change, as explained in the initial risk issue definition of the task force, italicized above.
A restrictive clause in the contract that prohibits covert or overt, direct or indirect, solicitation of staff and/or clients, with a dollar value assessed for each infraction, is far less risk than any covenant not to compete. |
3. Revenue growth: Measures the pattern of growth in gross fees, analyzes whether the practice's fee schedule is keeping pace with rising costs, analyzes the source of growth in gross fees; reflects that while practices with low fees may represent an opportunity to a buyer, they also have more inherent risk; reflects that growth in product sales, boarding, and grooming, which exceeds growth in professional services, makes a practice more vulnerable to non-veterinarian competition.
Lower Risk: Steady or consistent high annual growth for at least the last three years significantly in excess of the consumer price index (CPI). Growth in professional services is higher than growth in product sales, boarding, and grooming. Practice's fee schedule is adjusted regularly and appears to keep pace with inflation and rising costs.
Moderate Risk: Moderate annual growth in revenue, somewhat greater than CPI, for at least the last three years. Growth in professional services is equal to or less than growth in product sales, boarding and grooming. Fee schedule adjusted periodically, but at least annually.
Higher Risk: Practice shows no growth or erratic growth and less than the CPI, OR fee schedule has not been adjusted within the past twelve months, OR fee schedule seems significantly low.
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Author's Note: Whenever using the gross income, there are major loopholes in the valuation logic. In the reality of practice ownership, you can only spend "net income" to pay off the liabilities.
CPI is published by the Wall Street Journal, yet the "medical price index" is an internal practice figure, which must be calculated and assessed for trends, since it is often double that of the CPI.
If the seller's valuation uses gross sales in presenting the practice value, ensure you take a very good look at the cash flow history and net income histories, as well as the overhead percentages. Most well-managed, mature, companion animal practices, can keep their income statement, the P&L statement, showing fifty percent or less overhead, computed as all expenses on the P&L, except for doctor monies, rent, and ROI.
The second factor to assess is the W-2 compensation level of the practice. A mature, well-managed, companion animal practice has a salary and wage component (W-2) of less than forty-three percent for doctors and staff combined. This includes an appropriate owner's wage for the position that person fills in the practice, which would be the human resource replacement price. |
4. Location: The risk associated with the physical location of the practice facility within the trade area, with considerations for visibility or exposure of facility; quality of highway or street access to the facility; and ease of ingress or egress directly into or from the facility.
Lower Risk: Excellent exposure: facility is readily visible by passers-by from street or highway. Access: if primary access is vehicular, optimal quality road systems that allow easy access, non-congested streets, presence of turn lanes or side streets that allow easy ingress and egress. If primary access is pedestrian, safe, well-lighted streets and sidewalks.
Moderate Risk: Moderate exposure: facility is visible, but with some difficulty from access roads. Access: vehicular access is less than optimal, moderate vehicular congestion; ingress and egress to facility is moderately difficult or less than optimal. If primary access is pedestrian, street lighting of moderate quality.
Higher Risk: Poor visibility from highway or street. Local knowledge of community required to find location. Difficult highway or street access to practice. Poor quality road/streets, congested traffic, high-speed traffic, no turning lanes. Difficult/hazardous ingress or egress. Pedestrian access poor or no sidewalks, poor or no lighting.
5. Quality of staff: The risk associated with presence and transfer of the practice staff with consideration of the following: the staff demonstrates an enthusiastic involvement in practice and community; palpable pride in the practice coupled to long tenure (> 2 years); the likelihood of losing staff members and concurrently good will through decreased client satisfactions and loyalty and/or the risk of poor day-to-day operations after ownership transfer because poorly trained staff cannot organize past schedules and routines.
Lower Risk: Low staff turnover and high level of competency. Positive attitude. High-level training, such as traditional CE, distance learning, certificate program, etc.
Moderate Risk: High staff turnover, but a core of competent staff is present, or low staff turnover, but lack of sufficient competency. Complacent attitude. On-the-job training by practice personnel.
Higher Risk: High staff turnover and evidence of a lack of competency. Poor or negative attitude. No staff training program in place.
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Author's Note: These definitions are linked to the core values and standards of care, and if the buyer disagrees with the seller in these areas, staff retention will be a headache at the very least.
We know staff must be hired for attitude, and then trained to skill and knowledge competency and productivity. If their "attitude" and "loyalty" is to the seller, and the buyer plans to change the mission focus, staff retention could be a far bigger problem than staff rotation.
Client satisfaction is linked to the extent that veterinary extenders have been used. In a team-based veterinary healthcare facility, there is a major staff-to-client influence, while in a doctor-centered practice, the importance of the staff has seldom been elevated in the client's mind, so it is not a key valuation formula issue. |
6. Mix of services: The risk associated with the types of services being provided relative to their ability to persist and support the income stream under new ownership. Assess the scope of services provided and the likelihood of erosion or loss of ability to provide a particular service in the practice's environment. Evaluates the risk associated with revenue stream that are particularly vulnerable in this practice or are anticipated to change as a result of a change of ownership.
Lower Risk: Provides a broad scope of services, including professional services. In-house diagnostics. Doctors cross-trained in service niches. Product sales tied to services. Levels of boarding/grooming appropriate for area. Practice derives significant revenue from medical and surgical services and has minimal dependency on vulnerable profit centers, such as vaccines, pharmacy, and other ancillary services.
Moderate Risk: Provides a reasonably broad scope of services. Some cross-training in service niches. Some reliance on recurring front desk sales of product and/or boarding/grooming independent of professional services. Practice derives acceptable revenue from medical and surgical services and has modest level of dependency on vulnerable profit centers, such as vaccines, pharmacy, and other ancillary services.
Higher Risk: Provides a restricted or limited scope of services. Not as in-depth or broad as expected in this community. Significant portion of revenue is from boarding/grooming or product sales, with no associated professional service. Significant revenue concentrated in one doctor's service niche, with minimal cross-training. Practice derives inadequate revenue from medical and surgical services and has significant dependency on vulnerable profit centers, such as vaccines, pharmacy, and other ancillary services.
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Author's Note: This is one of the best written "risk factor" summaries in the set of twelve.
Like many other factors, the task force focused on doctor-centered production and not team-based healthcare delivery. An average, mature companion animal practice, without significant boarding or grooming, and defined as less than three percent of the gross in each area, should have about thirty percent of the revenue not allocated to a specific doctor, but rather to the practice, allowing some significant leverage in the income stream.
The historical balance between product sales and service sales is critical, since most of the net income is in service sales. |
7. Facility: The risk associated with the long-term stability and expansion potential in the present location, considering zoning, environmental, and comprehensive plan issues; the appearance, floor plan. Site plan, parking, signage, and general utility; economic and physical obsolescence.
Lower Risk: Has such characteristics as a modern, appealing, architecturally well-designed. facility. No known or recognized environmental or zoning problems. On a large lot for expansion. Facility is in excellent condition.
Moderate Risk: Has such characteristics as a serviceable building in good condition, though in need of cosmetic repair. On a smaller lot, with no foreseeable changes in neighborhood usage. Facility somewhat dated in design and layout.
Higher Risk: Has such characteristics as an old, poorly designed building, with significant deferred maintenance. Very small lot, with no possibility for expansion. Plan for the area may require moving the practice.
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Author's Note: Often a poorly sized facility can be "saved", with a different use pattern, but that does not change the "risk factor".
We expect to find about a one acre lot for a free-standing veterinary companion animal practice to put it into a lower risk category.
In some large retail complexes, the veterinary practice sits on only its own footprint (site plan) in some far corner of the complex. Parking is available as common space in a very large parking lot. In this type case, the option to expand the foot print of the facility must be in the initial contract, or negotiated by the existing owner at a reasonable rate, if they wanted a lower risk factor in the valuation. |
8. Demographics: The risk associated with demographic factors such as changes in population numbers, income levels, single sector or diverse economy, unemployment trends, movement of population in practice neighborhood as well as in community, levels of education attainment, the mix of household types and the presence of a significant transient/nonresident population (e.g., vacation community).
Lower Risk: Has such characteristics as a multi-industry and expanding economy. Higher per capita or household income, well-educated, and above-average growth projections. Positive employment predictions. Predominance of single family dwellings.
Moderate Risk: Has such characteristics as a stable, slightly growing economy. Mix of blue and white-collar workers. Static to slightly growing population. Steady unemployment rate. Significant number of multi-family dwellings.
Higher Risk: Has such characteristics as a single sector and/or faltering economy, with rising unstable unemployment. Mostly blue-collar jobs. Decreasing population within the practice trade area and in the metropolitan area. Static or decreasing per capita income. Predominance of multi-family dwellings.
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Author's Note: We do demographic assessments for banks and buy-sell all the time, and this risk factor description would confuse anyone. The area to be surveyed is about three to five miles around the companion animal practice, barring any geographic barriers, such as rivers, expressways, green-belt park systems, etc. The fifteen to twenty-minute driving time for American families is suburban-based, and the businesses with demographics similar to veterinary practices include dry cleaners, day care centers, and free-standing drug stores.
All these other businesses have a home-to-business basis, rather than an impulse-buy like fast foods or gasoline stations, which is why traffic counts are misleading at best. In the text Beyond the Successful Veterinary Practice: Succession Planning & Other Legal Issues, Chapter 2 provides insights into most of the veterinary practice demographic concerns for valuations and buy-sell situations.
There has not been a rate linkage between white-collar and blue-collar families on accessing veterinary care, while there is a linkage between families with children, as eighty percent have pets, compared to fifty-eight percent pet ownership in the total population. Single family dwelling units have a higher percentage of multiple pets. About forty percent of the dog households have cats, and most cat-only households average more than two cats per household.
Demographic services like CACI, Claritis, Equifax, National Decisions, and others provided a demographic report for any intersection and specific circumference for less than $200 in the 2003 market. The Chamber of Commerce in some localities will provide the community's basic business demographic report at no cost to the small business that desires to enter their tax base. |
9. Practice stability: Assesses the consistency and permanence of a practice and its earnings, e.g., employee stability, length of time in the community, and at this location, consistency of growth trends in gross fees and net income as a result of adding new services and products as appropriate.
Lower Risk: Consistent growth trends in gross fees and net income. Growth in Average Transaction of Client (ATC). Practice location unchanged in the last three years. No indication of excessive personnel turnover. Current owner(s) capable of, and willing to, transfer goodwill to a new owner.
Moderate Risk: Some fluctuations in growth patterns of gross fees and net income, but due to known nonrecurring circumstances. Growth in ATC. Practice location stable in the last three years. No indication of excessive personnel turnover. Current owner(s) capable of, and willing to, transfer goodwill to a new owner.
Higher Risk: Lack of adequate information on growth in gross fees and net income, OR growth pattern is erratic for unknown reasons. Falling ATC. Practice not in current location for last three years or likely to relocate in the next two years. Employee turnover higher than expected at either doctor or staff level. Owner(s) unable to transition goodwill, as perhaps the owner is deceased. Significant risk of internal instability.
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Author's Note: Is it just me, or do you read multiple "other risk factors" in this risk factor? The problem of using a task force is that someone has this factor in a personal valuation formula and does not want to lose it from the master list at AVPMCA. Therefore, a compromise within the group is made, redundancy is entered, and it becomes entrenched.
As far as the ACT rising or falling, this is outdated logic, especially when the number of visits per year per pet is being addressed as a practice mission focus. Which would you prefer? One visit a year at $176, two visits a year at $129 each, or four visits a year at $90 each, plus a courtesy nurse appointment visit at no cost? In a recessionary economy, or an economy heavy with fixed income families, more visits at a lower fee is far more acceptable, and in senior communities, far more desired, as the veterinary visit may be their big outing for the week.
This is a hard risk factor to evaluate, since it overlaps into so many others. But someone is using it, so stay aware as you read valuation reports. |
10. Veterinary competitive environment: The risk associated with the loss of clients and therefore goodwill from current or potential competing veterinary practices. Analysis of the risk factor should include both the quantity and quality of competing practices; additional consideration given toward positive impact of a cooperative veterinary environment.
Lower Risk: The potential to lose clients/goodwill to competing practices is low. Stable competitive environment with the likelihood of significant new competition being low. Practice being valued excels, when compared with competing practices, in quality of medicine/surgery and client service.
Moderate Risk: Moderate risk of losing clients/goodwill to competing practices. Competitive environment currently stable, but there is a risk of new competition. Practice being valued currently compares favorably with other practices in quality of medicine/surgery and client service.
Higher Risk: Large number of competitors with significant potential to lose clients/goodwill to competition. Practice being valued does not compare favorably with other practices in quality of medicine/surgery and client service.
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Author's Note: This assessment of other practices for quality and quantity is virtually impossible. Valuators, who say they have been in all the competing practices to assess this factor, are either lying or doing a very poor job of assessment. The reality is that this factor is a perception of the clients and not an arbitrary valuation of an outside number cruncher.
Client bonding can be assessed, as illustrated in the medical record valuation audit in the text Beyond The Successful Veterinary Practice: Succession Planning & Other Legal Issues, Appendix A.
Again, do not get suckered-in on goodwill. Ensure this portion of the practice value has been placed in a tangible asset, like medical record value, which allows depreciation of the asset, as well as a firm replicable factor for the bank auditors. |
11. Lease terms: The risk associated with leasing the practice facility and includes consideration of the following: the components of the lease, such as price per square foot, length of lease, options to continue the lease, shared costs or CAM charges; the renewability of the lease; the existence of provisions for leasehold improvements; the presence or absence of use service/use restrictions; the ability of the current owner of the practice to transfer/assign the current lease to the buyer or the ability of the buyer to secure a new lease with favorable terms from the current lessor.
Lower Risk: A current lease exists with favorable rates and with favorable renewal terms that are transferrable/assignable to purchaser. The renewal terms ensure that the buyer will have the rights to continue use of the facility for a reasonable time-frame into the future.
Moderate Risk: A current lease exists that has less favorable terms and/or there is an uncertainty about the terms at future points of renewal. There is only moderate assurance that the buyer will be able to continue leasing the facility at a rate for a reasonable time-frame.
Higher Risk: Current lease has unfavorable terms and/or renewability is not assured. Difficult negotiations expected with landlord. Unlikely ability to secure reasonable lease rates, lease terms, and/or renewal periods. Lease restrictions are present that affect service delivery.
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Author's Note: A storefront veterinary facility has less client draw than a freestanding facility, if all other factors are equal, whether it is leased or owned.
In fact, since most smart practices are separating the building and land, into an LLC, and from the practice, usually as a Sub-S corporation, which requires deductible lease payments by the Sub-S to the LLC, most all practices are "leaseholds" now.
Some larger practices have placed all their equipment in an LLC, and the practice Sub-S also leases it as a deductible expense. Some have done this same "business segregation" with the boarding or grooming operations, and a few have done it with their resale boutique or behavior management trainers.
This was a very well-written description of the risk factors to assess, and need to be investigated. Even if it is the LLC(s) of the practice owner, these factors still apply to the LLC lease provisions to the potential buyer. |
12. Effective management systems: Addresses the risk associated with management information systems and risk management.
Lower Risk: Practice has functional computer system, which is substantially implemented and fully utilized. Practice fully compliant with regulatory requirements for OSHA, MSDS, medical waste disposal compliance, controlled substance management, etc. Cash control and at-risk inventory control measures are in place.
Moderate Risk: Computer system in place, but under-utilized. Controlled substance regulatory requirements in place. Partial compliance with other regulatory requirements.
Higher Risk: No or minimal computer systems. Inadequate regulatory compliance. Evidence of inadequate controlled substance regulation compliance.
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Author's Note: Amazing, isn't it? The areas most likely to distract any veterinarian from practicing medicine and earning money has the shortest write up and explanations.
This area is critical for maximum leverage of the earning potential of the practice, and this text is the starting point for the assessment of this factor.
Sure, it would be outstanding if the practice being offered had implemented most all of management references cited at http://www.drtomcat.com, but that is not about to happen. This is where the veterinary consultant on your business team can assure you what needs to be addressed and in what sequence. This matters, whether you are a seller and wanting to increase the value of the practice, or you are the buyer. |
As most knowledgeable readers of these twelve elements have noticed, while the "risk level" for each category has been divided into three levels, they are still subjective, rather than quantitative, in many areas. Compounding this subjective assessment, many of the terms inside the definitions for risk valuation have not yet been defined adequately by the AVPMCA task force. That is one of their "next projects". The "author's notes" reflects where this author believes better understanding is needed, but it does not dilute the importance of these twelve factors for the future value of a veterinary practice. This is what makes veterinary practice valuation an art, as well as a science. Inversely, if your practice has engaged a consultant, accountant, or financial advisor, who is not addressing these factors for the practice's inherent and essential future value, ensure they start too immediately. These elements are critical to the future value of your practice.
Cowboy says: Some folks follow old wagon tracks; others break new trail.
Consultant says: Lead the way and win, or follow the others to "also ran" status.