By Courtney Murphy, CPA, CMA

You've spent years building up your veterinary practice. When it's time to think about selling that practice, it’s easy to assume that your hard work will readily translate into the optimal sales price.

But here's something that surprises many practice owners:the number on your tax return isn't what buyers are paying for. They want a business that will generate returns long after you're gone. And that distinction changes everything about how you should prepare for a sales transaction.

What Buyers Actually Look At

Buyer confidence comes from a handful of key areas:

 1.    Profitability is more than revenue. A practice doing $2 million in revenue with 18% profit margins is often worth more than one doing $2.5 million with 10% margins. Buyers apply a multiple to your earnings, so every dollar of profit you add gets magnified in your sale price.

2.    Revenue quality.  Not all revenue is created equal. ARR (AnnualRecurring Revenue) is always a big hitter for investors.  Recurring services like wellness plans, preventive care, and dental cleanings are more valuable than one-time emergency visits. Buyers love predictability.

3.    Client and revenue concentration. If your top 20 clients represent 40% of your revenue, that's a red flag. Another risk is if one referring veterinarian sends you most of your specialty cases.  What happens if that one referral source goes away?

4.    Your role in the practice. I hope I still have your attention.  This one may be the hardest to hear. If the practice can't function without you, the business will be worth less. For example, if the clients come specifically for you, if you're the only one who can handle complex cases, or if all staff decisions flow through you, you need to take a step back and re-evaluate. If you sell a practice completely sustained by you, how will it continue to be sustainable after you are gone? Your practice needs to be positioned to thrive with a new owner.

Practical Ways to Improve Your Numbers

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Get Clear on Your True Profitability

- Understand the metrics (gross margin, net profit margin) and compare your metrics to industry benchmarks.  Are you outperforming the industry?  If so, your practice is more attractive to potential buyers.

- Revenue per veterinarian: Are your DVMs producing at or above industry benchmarks? If one is significantly below, you have a training opportunity or a staffing issue to address. If you don’t track it, you don’t know where challenges and opportunities exist.

- Average transaction value: Small increases can compound quickly. This isn't about upselling unnecessarily; it's about ensuring you're recommending appropriate care and capturing all the services you're already providing.

- Labor cost as a percentage of revenue: Staff costs are a HUGE expense for vet practices. Total labor costs can be 40-45% of revenue in a healthy practice. If you're significantly above that, it's worth examining your scheduling and staffing model.  

Strengthen Your Revenue Mix

- Where does your revenue come from?  Do you know? Are you tracking it?  If you're heavily dependent on a few service lines or a small group of clients, work on diversification.

- Consider building out wellness plans if you haven't already. They create predictable monthly revenue, improve client retention, and encourage preventive care that's better for patients. For buyers, subscription-style revenue is extremely attractive.

- Also, take a look at the services you are referring to other providers. Could you provide some of those services rather than referring them out?

Reduce Your Indispensability

- This is the tough one, but it's an important one! Start delegating now, even if it feels uncomfortable.

- Document your processes. If your treatment protocols, client communication standards, and operational procedures all live in your head, they leave when you do. Organized practices with written systems make for easier transferability. This also gives your practice more credibility.  

- Develop your associate veterinarians. Give them opportunities to build client relationships, handle complex cases with your mentorship, and take ownership of outcomes. When a buyer sees a strong associate team, they see continuity.

- Empower your practice manager. The more your manager can handle day-to-day decisions, staffing issues, and client concerns, the less the practice depends on you being present.

Clean Up the Financials

- Buyers and their advisors will scrutinize your books. The cleaner your financials, the smoother your transaction—and the more credibility you have in negotiations. You may have a fantastic practice manager, but they may not be the best person to work on your accounting and financial reporting.  It’s worth the investment to use a professional to make sure there are no surprises during the due diligence and discovery phase.

- Separate personal expenses from business expenses. This is a common issue in small businesses, but co-mingling can create a lot of headaches during due diligence.

- Work with a financial professional who understands veterinary practices to identify and document legitimate add-backs(owner salary, one-time expenses, personal costs run through the business).These adjustments directly impact your adjusted EBITDA, which is typically the basis for your valuation multiple.

You may just be starting to think about selling your practice.  But acting now really can position your practice for the best outcome in the future.

The best part about making the above changes now?  Your practice will become more solid and more profitable because you’re really paying attention to key metrics.  And delegating tasks and empowering others to create a sustainable practice without you can give you a better work life balance as an owner.

So whether you're certain you'll sell in three to five years, or you just want to keep your options open, the best time to start building value is now. Your future self will thank you.

Courtney Murphy works as a Senior Manager at Blackman & Sloop Advisors, Inc, a full-service accounting firm.  Her team provides bookkeeping, Controller and CFO services.