By Jim Vander Mey

​People love benchmarks.  They want to know how many glasses of water we should drink each day.  How much we should work out every week.  Or, how many miles per gallon our cars can achieve.  

There are also benchmarks to look at when you are buying a practice.  They may not necessarily be deal breakers, but they help determine what you will need to do to get to your target.  Here are some of the benchmarks you should look at and calculate when buying a practice:

• Staff overhead as a percentage of collections - 20% to 25%.  If it's higher, the practice is overpaying staff, underperforming collections, or too many staff.
• Facilities Expense - 7% to 9% of collections - Too high and the practice is either paying high rent, space is underutilized or production is too low.
• Supplies - 5% to 7% of collections - If this is too high, it could be that the practice is using high-end supplies, or the supplies inventory (or vendor) is not managed properly.
• Marketing expense - 3% to 5% depending on the growth stage.  A practice that is looking to grow will have a high percentage.  A static practice may not spend much on marketing at all.
• Collection Rate - Minimum of 98% for a well-run practice.  A low rate means the front desk is not keeping up or managing the accounts receivables very well.  
• Total Overhead (all expenses less owner and associate pay) - Ideally should be less than 85%.

These are just a few benchmarks to analyze when looking at a practice.  Remember, if the practice you are analyzing does not meet or exceed these benchmarks, it does not mean it's a bad practice, it simply means you have work to do in those specific areas. 

Contact me if you would like more information - [email protected].

You Don't Have To Retire If You Sell Your Practice
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By Rod Johnston, MBA, CMA
 
A few years ago, I decided to sell my house in Kirkland, WA.  I wasn’t planning on moving anywhere.  I still planned on living for quite a while longer.  I didn’t have any health issues, nor was I downsizing from my 1,100 square foot house to a smaller house.  I purchased the house almost 20 years prior and it was nearly paid off, so I had quite a bit of equity built up into it.  I had just decided it was time to harvest the equity I had built up in the house and use part of the equity to buy something else, part of it to put towards retirement, and part of it to have as a safety cushion for a rainy day.  I’m glad I sold the house as it was over 1/3 of an acre and had a lot of flower beds and landscaping.  It was also getting older and required quite a bit of maintenance. 
I’m telling you this story because you can do the same thing with your practice.  You have put in many years of hard work in your practice.  It may need maintenance every year that you may be tired of taking care of.  After 20 years of staff issues, they may be getting to you.  Maybe you just had a new corporate move in down the street, and you’re worried about competing against them.  It could be that you just want to be a veterinarian and just want to see patients - not manage staff, clean the office, pay the bills, deal with the leaking roof, post to the office Facebook or Twitter pages, come up with new ads to get clients in the door, or any of the other 100 items that’s required of a veterinary practice owner.  I know, as I’m also a business owner - and who do you think cleans our toilets on the weekends?  
No laws say you must own a practice to be a veterinarian.  You can Harvest your Equity from your practice and continue to be a veterinarian.  Imagine getting hundreds of thousands, if not millions, out of your practice, continue to work in your own practice, or go to work in a different practice if you choose and no longer have to manage a practice.  You can put the money you receive to work for you in a retirement or investment account.   You can free up some of your time to enjoy your family.  You can buy a vacation home that you’ve always dreamed of, or just simply put the money away for a rainy day and continue to work.
So, what are the steps to Harvesting Your Practice Equity?

1. Set up a free consultation with one of our advisors.
2. Have a practice valuation done on your practice.
3. Meet with your financial advisor to discuss your plan and the valuation.
4. Meet again with an Omni Advisor to discuss possible options in selling your practice and the feasibility of working back in the practice.
5. Let Omni take over the selling process and find a buyer that matches your needs.  The “your” is vitally important as we are matchmakers and want to find a buyer who will be a near perfect fit for you, your practice staff, clients and the community.
6. Close on the sale of your practice and plan your new, less stressful life.

That’s all there is to it to take back control of your life.  Of course, there will be some work between steps such as running reports, meeting with a potential buyer(s) and discussing options with your advisors.  But if you rely on Omni and other experts, the process can be simple. 
 
We have helped numerous veterinarians who sold their practice and are working back in their practice or are working for someone else and appreciating their newfound joy again being a veterinarian and helping animals get better.  The first step is the easiest.  Just give us a call at 360-941-2341.