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Succession Planning for Veterinarians

18/08/2016


A Prognosis for a Strong Financial Future

Succession and transition planning are a critical part of the future success for any business. For veterinary practices however, the planning can be somewhat more complex. With an estimated 2/3 of all practicing veterinarians in their 50’s or 60’s, there is going to be a significant wave of professionals looking to exit or transition out of their practice in the very near future. While there are currently very few practices for sale, we are likely to see a considerable upswing in the market over the next few years, potentially creating a very competitive market.

Assuming there will be a buyer in place when you are ready could put the value of your practice – and all that you have risked and sacrificed in building it – at risk. Understandably, day-to-day operational demands can make it difficult to find the time to sit down and engage in a thorough exit planning process. While a proper strategy will increase the value of a business and reduce risk, more than 50% of owners admit they have no formal transition plan in place.

As a practice owner, exiting your business can also be an emotional experience in that you have not only built a profitable practice, but established meaningful relationships with many of your clients. Whether you plan on selling within the partnership or to an outside party, it’s important to design your exit strategy in a proactive, thoughtful way which continues to build on the reputation of your practice, ensuring you see the most returns possible and are truly able to exit on your own terms. After all, dreams don’t retire.

It’s important to develop a proper exit plan now, so it will be there when you need it most. To serve you best, your succession plan needs to not only address the myriad of issues involved in exiting your business, but lay the foundation to maximize the value of your practice in the short- and long-term. It needs to be flexible enough to deal with uncertainties while providing you with a clear path for the future.

Here are some questions you may want to consider as you consider what’s next for you and your practice:

What are your personal career goals?

  • Where are you at professionally? 
  • When do you see yourself exiting the practice and why?

What are your options?

  • Sale to third party – independent practitioner, consolidators (“investor vet”)
  • Sale to co-shareholder / partner, associate or employee
  • Succession to a family member, where applicable
  • Wind up your practice all together

If you decide to sell, how do you structure for a sale?

  • Asset sale (desired by many purchasers)
  • Share sale (assuming practice is incorporated, desired by most vendors)
  • What are the tax implications vary for each (e.g. capital gains, recaptured depreciation, lifetime Capital Gains Deduction, tax on goodwill, GST/HST, PST)?

Have you had an assessment of your practice? If so, what condition is it in from the perspective of a potential purchaser? 

A “Health Check” will help to assess:

  • Management
  • Operations (staff, equipment, technology, data security, business resilience)
  • Financial management
  • Where improvements are needed to get maximum value on exit

Have you done an assessment of your personal financial situation?

  • Where are you at financially now?
  • Where will you be when you want to exit?
  • A personal financial plan is critical to understanding whether you are able to exit when you wish

Your practice is more than your livelihood. In many cases, it represents a lifetime of hard work, dedication and commitment. To ensure the longevity of everything that you’ve built— and will build—and securing the personal future you want, it is important to begin thinking about succession planning today.

To learn more about succession planning and find out how MNP can help you to develop or maintain a succession plan customized to your needs, contact Calvin Carpenter, CPA, CA, Vice President, Professional Services at 780.451.4406 or [email protected]