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Veterinary practice valuation

May 31, 2021 AABP
Have You Herd? AABP PodCasts
Veterinary practice valuation
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Have You Herd? AABP PodCasts
Veterinary practice valuation
May 31, 2021
AABP

In this episode of Have You Herd? Dr. Fred Gingrich, AABP Executive Director discussed veterinary practice valuation with David McCormick from Simmons and Associates. David has worked with AABP in the practice management workshops as well as presented in the Practice Management sessions at the AABP Annual Conference. We discuss that the three methods of valuing practices which are asset valuation, market valuation, and income valuation. Income valuation is the most used method to value veterinary practices and is based on a multiple of the profit of the practice. David states that it is the responsibility of the seller of the practice to provide a valuation and he suggests utilizing a third-party evaluator to establish that value. A good rule of thumb is to have veterinary practices valued every three years as a “financial health physical exam”. Once the value is established, practice owners can work with appraisers to identify areas to improve the value of the practice which will not only increase profits, but also increase the sale price of the practice when the owners are ready to sell. “Good will” is the intangible assets of the practice. David states that every practice has good will but not all good will has value because the overall value of the practice is based on the profit and how likely that profit will continue after the transition to a new owner. David also states that the number one disease in a veterinary practice is inventory management. Learning to manage your inventory will increase your profit. He also identified three pitfalls he has seen during practice transitions: lack of preparedness; unrealistic timeline expectations; and hiring family to advise during the transition. David will be offering a pre-conference seminar on practice valuation where owners and those seeking to own a practice can learn about practice valuation and improving practice profitability. Learn more about attending this seminar, which will be held at the AABP conference in Salt Lake City, Utah on October 6, 2022 at this link. Not an AABP member? You can join us today by going to this link so that you can attend our pre-conference seminars, get free unlimited on-demand access to our recorded conference sessions and webinars, and get discounted registration rates to our conferences! 

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Show Notes

In this episode of Have You Herd? Dr. Fred Gingrich, AABP Executive Director discussed veterinary practice valuation with David McCormick from Simmons and Associates. David has worked with AABP in the practice management workshops as well as presented in the Practice Management sessions at the AABP Annual Conference. We discuss that the three methods of valuing practices which are asset valuation, market valuation, and income valuation. Income valuation is the most used method to value veterinary practices and is based on a multiple of the profit of the practice. David states that it is the responsibility of the seller of the practice to provide a valuation and he suggests utilizing a third-party evaluator to establish that value. A good rule of thumb is to have veterinary practices valued every three years as a “financial health physical exam”. Once the value is established, practice owners can work with appraisers to identify areas to improve the value of the practice which will not only increase profits, but also increase the sale price of the practice when the owners are ready to sell. “Good will” is the intangible assets of the practice. David states that every practice has good will but not all good will has value because the overall value of the practice is based on the profit and how likely that profit will continue after the transition to a new owner. David also states that the number one disease in a veterinary practice is inventory management. Learning to manage your inventory will increase your profit. He also identified three pitfalls he has seen during practice transitions: lack of preparedness; unrealistic timeline expectations; and hiring family to advise during the transition. David will be offering a pre-conference seminar on practice valuation where owners and those seeking to own a practice can learn about practice valuation and improving practice profitability. Learn more about attending this seminar, which will be held at the AABP conference in Salt Lake City, Utah on October 6, 2022 at this link. Not an AABP member? You can join us today by going to this link so that you can attend our pre-conference seminars, get free unlimited on-demand access to our recorded conference sessions and webinars, and get discounted registration rates to our conferences!