Practice Valuation What Should I Pay?

If you are buying a veterinary practice, it is essential to know what the practice is worth. Given the challenges in arriving at the correct valuation of a practice, it takes an experienced veterinary attorney to help you make the best deal. That's where Mahan Law comes in.

We represent veterinary professionals throughout the nation on all aspects of veterinary law, from practice acquisitions to practice transitions. Well-versed in a variety of valuation methods, we will work closely with you to determine what you should pay for the veterinary practice you intend to purchase. 

Our legal team is familiar with veterinary markets in regions across the country and regularly works with a respected network of valuation experts (appraisers, accountants, financial professionals) to determine what the market will bear for a veterinary practice. 

As the owner of a veterinary clinic, principal attorney Anthony Mahan leverages his direct experience to guide clients through every step of buying a veterinary practice. When you consult with us, we will work closely with you to help you achieve your objectives in the veterinary space. 

Trust Mahan Law to always work in your best interests, establish a fair and reasonable valuation, and help you build your veterinary practice. Please contact our office today for a consultation with an experienced veterinary attorney. 

Common Valuation Methods for a Veterinary Practice

As with any business, three basic valuation methods apply to veterinary practices: the income approach, market approach, and asset approach.

  • The income approach analyzes both past earnings and projected revenue, based on cash flow and capitalization, which helps you to determine the practice's present and future value, its growth prospects, and level of risk (e.g. geographic risk, size risk). Ultimately, the income approach is the most widely used and preferred valuation method.
  • The market approach is an analysis of recent practice sales in the geographical area, based on size, duration, and market risk. Because veterinary practice acquisitions are private transactions, obtaining reliable data can be challenging, which makes it difficult to arrive at an accurate valuation. 
  • The asset approach is an analysis of the net asset value of the practice, as well as other factors, such as goodwill, an intangible asset based on the reputation of the practice, its clientele, and the value of future patronage.

In the final analysis, the best way to determine the profitability of a veterinary practice is to accurately assess earnings before interest, taxes, depreciation, and amortization or EBITDA, which also shows the ability to repay debt. 

Although EBITDA is not based on any accounting standards (e.g. GAAP), it shows earnings before accounting and financial deductions. Ultimately, EBITDA provides a better picture for a buyer because it excludes owner benefits, rent, and other factors unrelated to the actual profit of the practice. 

What Factors Contribute to the Value of a Veterinary Practice?

While no two veterinary practices are the same, key drivers of practice value include:

  • Practice size -- A veterinary practice with multiple doctors tends to be more valuable than a solo-practitioner clinic.
  • Location -- Practices in urban areas typically command higher valuations than rural areas due to business volume.
  • Specialty -- Small practices are generally more marketable than large veterinary clinics, which means small veterinary practice valuations are typically higher.
  • Assets -- Because most practice sales are asset-based sales (not share-based sales), a veterinary practice with significant furniture, fixtures, and state-of-the-art equipment is likely to command a higher valuation.
  • Market position -- A well-established veterinary practice generates considerable goodwill, which bolsters client profitability and retention, leading to higher valuations than the industry norm.

With so much to consider, it is wise to work with a veterinary attorney who is well-versed in practice valuations.

How Mahan Law Can Help

Through a nationwide network of co-counsel, we provide trustworthy advice and guidance to veterinarians who are seeking access to the veterinary space as well as established practices pursuing growth opportunities. When you consult with us, we will guide you through each phase of a practice acquisition. If you have not already identified a target practice, we can help you locate one through our respected network of veterinary brokers.

By collaborating with a group of valuation experts, we will work diligently to arrive at a fair and accurate value of the target practice and help you engage in a successful transaction. Our comprehensive legal services include negotiating and preparing transaction documents, exploring financing options, and representing clients at closings. Above all, we are committed to helping you achieve your objectives in the veterinary space.

Contact Our Experienced Veterinary Practice Valuation Attorneys

If you are buying a veterinary practice, you need the informed representation that Mahan Law provides. As a fellow veterinary professional, Tony knows how to value veterinary practices and work to achieve successful outcomes for buyers and sellers alike. When you become our client, you will have confidence, knowing our experienced veterinary attorneys are in your corner. Please reach out to our office today to schedule a consultation.