How Does the National DVM Shortage Impact the Value of Your Practice?

Busy Waiting Room In Veterinary SurgeryLosing an associate impacts veterinary practice owners in a variety of ways. Enormous demand and a shortage of DVMs is putting many vet clinics around the country in dire situations. Even if this hasn’t hit your practice, you can bet that your associates are getting several job offers a month, and this type of outside pressure outside of your control can adversely impact you in multiple ways.

Have you ever thought about how losing an associate will affect your practice and you  personally as well? We have seen that in most cases the owner winds up working double time to continue to meet patient needs while trying to recruit and hire a new DVM at the same time. Revenue typically dips and stress increases greatly, making this one of the biggest fears practice owners face today. The shortage of DVMs only exacerbates this fear.

Now how does this situation impact the value of a practice? If you are looking to exit your business, obviously you want to get the maximum value from it. The loss of a key staff member can have a profound and negative impact your valuation.

The first thing a potential buyer wants to know is why the associate left. If it was something completely out of your control, the impact may not be as great. However, if the buyer sees it as a sign of poor hiring decisions, an unhealthy culture, or sign of larger retention issues, it immediately raises a red flag for the buyer. In this case, many buyers will lower their offer or lose interest entirely.

Another issue of concern to potential buyers is the loss of production, and in most cases, revenue. Have you been able to maintain revenue? Have you hired a replacement DVM? And if not, how soon will you be able to? Losing a DVM can delay a practice sale by a year or more since it will inevitably lower EBITDA, production and revenue. Buyers interested in purchasing your practice will request a valuation for a trailing twelve-month period, so stability is important. The reduction in EBITDA due to the loss of a DVM makes your practice look risky to potential buyers and reducing its value in the buyer’s mind.

Typically, the risk associated with losing an associate can be overcome with time, but if you are actively considering selling your practice it can raise concern about your ability to retain talent and have dire consequences. If you have questions about preparing your practice for a sale, or want advice on how to get ready for this process, reach out to schedule a call with us.

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