Operating a veterinary practice can be a rewarding experience, but the time will come when you are ready to sell your business and move on to the next stage of your life. There are broadly two options for doing so: internal succession and external succession.
Both of these options have their own advantages and disadvantages, so understanding them can help you decide which is best and begin planning now. Mahan Law is ready to help you make an informed decision of how to proceed.
Internal and External Succession
Business succession occurs when someone else buys a person’s business or their ownership interest in a business. A specific form of this is internal succession, which is selling the business to another business owner or member such as a partner or associate. It essentially maintains ownership of the business with those who are already involved with the company rather than bringing in an outsider.
Conversely, external succession means selling the practice (or at least one’s ownership interest in it) to a third party, such as another company or an individual who was not originally involved with it. In some cases it involves mergers and acquisitions with competitors or larger corporations.
Pros and Cons of Both
There are reasons to carefully consider both approaches when it comes to selling your veterinary practice. As you weigh your decision, keep in mind the following:
Advantages of internal succession
- Maintaining the culture of the practice: Every business has its own culture and way of doing things, so selling to someone already in the company can facilitate a smooth transition.
- Selling to a known group: A major advantage is that you already know your other partners or associates, and don’t have to risk the “unknown” factor.
- Drawing from a high-talent pool: If your business has other talented individuals running it, you can draw from this pool of talent by selling the practice to them.
Disadvantages of internal succession
- Risk of stale ideas: Your existing culture is important, but are you maintaining it at the expense of new modes of thinking that could benefit your practice and all who are involved with it?
- Internal rivalries: The other owners or associates who may want to buy your practice (or your share in it) might not agree on who should buy it and under what terms, sparking conflict.
- Not ideal for low-talent pools: If you have doubts about the business acumen of the ones wanting to buy your practice, this should give you pause.
Advantages of external succession
- Injecting new life into your business: Perhaps your dental practice has stagnated and is in need of new energy and enthusiasm; this may motivate you to shake things up by selling it to an outsider.
- New skill sets and experiences: Allowing a third party to buy your practice may mean that someone with different skills, resources, and experiences will enrich your business.
- Avoids internal strife: You don’t want the other owners or associates fighting over who gets to buy your practice or share of it, so going to an outsider skips this problem.
Disadvantages of external succession
- The “unknown” quantity: There is always a risk that by bringing in someone from the outside to purchase your dental practice or ownership share, you may be inviting a host of unknown problems.
- Longer sale process: It usually takes longer to sell a dental practice to someone outside the business, which could impede growth and drain resources.
- Possible additional expenses: Selling to an outsider may require your practice to incur additional costs, such as relocation expenses, so factor these in.
Ready to Sell Your Practice? Turn to Mahan Law
The team at Mahan Law knows that the decision of selling your dental practice is a major life event for you. We can review your business and personal objectives, discuss the differences between internal and external succession, and help you select the option that is right for you. Contact us now to start working on your personalized plan.