When a veterinary practice owner considers selling their practice or bringing in investors, they will want to maximize the practice’s valuation to get the most for the work they’ve put into building their business. But what factors can increase or decrease the value of a practice? Knowing what affects valuation can help you negotiate a fair and favorable deal in a sale or partnership.
Revenue Quality and Financial Performance
One of the primary drivers of the value of a veterinary practice includes the practice’s financial performance and the nature of the revenue it generates. For example, factors that might increase a practice’s value include robust, consistent earnings before interest, taxes, depreciation, and amortization (EBITDA) over multiple years, predictable demand, high accounts receivable collection rates, and diversified revenue streams (e.g., preventive care, diagnostic services, pharmacy services, surgical or invasive procedures).
However, factors that can adversely affect a veterinary practice’s value include heavy reliance on owner goodwill (i.e., clients seek services from the owner rather than the practice), declining margins, inconsistent cash flow, and incomplete or messy financial records.
Workforce Stability and Associate Retention
A veterinary practice may seem more attractive and higher value for buyers if it has a stable workforce. A practice can enhance its value by achieving low staff turnover and high employee satisfaction. Practices can ensure staff and associate retention through competitive compensation structures, promoting employee work-life balance, and having comprehensive, enforceable employment or associate agreements.
Conversely, a veterinary practice may have less value to a buyer if it suffers from chronic understaffing or high turnover, which can lead to overreliance on high-cost temporary staffing. Furthermore, a lack of robust legal protections for the practice in employee and associate contracts, such as non-compete or non-solicitation clauses (where enforceable), may also cause buyers to worry about staff turnover after an acquisition.
Client Base and Marketplace Reputation
A veterinary practice can increase its value in a purchase and sale agreement by maintaining a loyal client base and sustaining growth. Factors such as positive online reviews, brand recognition in the local market, professional awards and recognition, favorable market demographics, and limited competition can support the continued growth of a practice’s client base. However, circumstances like high client turnover, increased client acquisition or retention costs, overreliance on one or a few referral or marketing avenues, and a poor marketplace reputation can harm a veterinary practice’s value in a sale.
Real Estate Assets and Facility Condition
Real estate matters can also have a significant effect on a veterinary practice’s valuation. For example, practices that own their locations may have substantially higher values than those that don’t, as real estate represents a valuable asset for any business to have. However, even practices that lease space can improve their value by negotiating long-term, assignable leases that provide flexibility and cost certainty. Whether a practice owns or leases its space, the facility’s condition will also influence the valuation. Factors that can negatively affect practice value include:
- Short-term or expiring leases without automatic renewal terms
- Leases that require landlord approval for assignment
- Deferred maintenance or state and local building code compliance issues
- Outdated facilities, equipment, and practice technology that require capital investment for renovations or replacement
Legal and Regulatory Issues
Various legal and regulatory matters can also play a role in determining a veterinary practice’s value. For example, having current and valid corporate documentation, no outstanding regulatory or licensing issues, and clear ownership structures to facilitate a smooth sale and transition can boost the valuation. However, buyers may shy away from veterinary practices with pending audits, regulatory investigations, code violations, tax problems, or lawsuits.
Contact Our Firm Today
Before you purchase or sell a veterinary practice in 2026, understanding what can influence the practice’s valuation can help you maximize the value of your career’s work or make sure you acquire a veterinary practice at a fair price. Contact Mahan Law – Veterinary Law Firm today for an initial consultation with a veterinary attorney to discuss what factors may affect your practice’s or a potential acquisition target’s value.