The process

What actually happens, step by step, when I sell my practice?

Selling a veterinary practice runs four to eight months. It begins with a mutual non-disclosure and a representation agreement, then data collection and an in-house valuation, then a confidential run to a wide set of qualified buying groups, then negotiation of competing letters of intent, and finally sixty to ninety days from signed letter of intent to closing.

Five stages, and what actually holds each one up.

The five stages of selling a veterinary practice through TriStar, and how long each one typically takes: four to eight months in total.
  1. 3–6 weeksSign and gather

    NDA, representation agreement, and collecting your data. Usually the slowest part, and it is on your side.

    Why

    The wait here is almost never us. Pulling tax returns, profit-and-loss statements and doctor production out of a practice management system takes most owners longer than they expect, and nothing downstream can start until that data is complete.

  2. 2–4 weeksWe underwrite

    Our analyst builds a defendable EBITDA so we know the value before a buyer tells us theirs.

    Why

    We want our own number before anyone offers us theirs. Knowing what the practice is worth first is what makes it possible to argue with an offer rather than simply receive one.

  3. 3–6 weeksOut to market

    A generic profile to the buying groups, then data-room access for anyone with a current NDA.

    Why

    Each group underwrites the practice itself, and each one comes back with questions. That back-and-forth is the schedule — there is no version of this where every buyer moves at once.

  4. No fixed windowLetters of intent

    Multiple LOIs arrive. We negotiate them against each other for highest and best.

    Why

    This stage ends when the offers stop improving rather than when a clock runs out. The competition between them is the leverage.

  5. 60–90 daysLOI to closing

    Attorney, purchase agreement, employment terms, lease. Then close.

    Why

    Attorneys, landlords and the buying group's own pace set this window, not us. Year-end is the slowest stretch of the calendar.

4–8 months end to end, and longer by choice if we are improving the practice before market.

Sean on the processSix minutes with Sean. The longest of the four, and the one the previous site put on this page.
A man stacks split firewood against a weathered shed on a gray afternoon

How will TriStar's services increase the value of my practice?

In short

Competition across 87 buying groups, aiming to finish with five, six or seven letters of intent bidding against each other. Then capturing every add-back that raises the EBITDA a multiple is applied to, and knowing where each buyer sits in its own cycle — they tend to pay most near a recapitalization, and they buy the same goods 30 to 40% cheaper, part of which can be credited to your earnings.

Read the full answer

First, we create competition. There are 87 buying groups active right now, and most owners have no idea that many exist. You could not run all of them at once. We can, because we have the systems for it, and the goal is to finish with five, six or seven letters of intent competing against each other.

Second, the quality of earnings — the number the multiple is actually applied to. That is not last year's taxable income. It is understanding what you run through the business that will not be there for the next owner, because every legitimate add-back raises your EBITDA. The biggest mistake we see is leaving some of them on the table.

Third, we know where each buyer sits in its own cycle. When did they last recapitalize, and when will they do it again? Groups approaching a recap pay the highest multiples, because they are adding on at the end of a cycle.

Then there are the levers on your side of the table. We might also talk about bringing in a doctor two days a week, which could be worth an extra turn or two on the multiple. It depends on your situation, but one or two turns on a $400,000 or $500,000 EBITDA is a lot of money on the back end. These groups also buy the same goods 30 to 40% cheaper than you do, and we push to have part of that saving credited to your EBITDA. You would not know to ask. You have been treating animals; this is what we do all day.

Four levers that change what a practice sells for, sorted by which half of the calculation they touch. Add-backs and cost of goods change the earnings figure. Timing the right buyer changes the multiple applied to it. Adding a part-time doctor does both.

Moves your earnings

The figure being multiplied

Add-backsEverything running through the business that will not be there next year. One of the biggest mistakes he sees is not capturing all of them.
Cost of goodsBuying groups purchase the same goods 30 to 40 percent cheaper. Part of that saving can often be credited to your EBITDA rather than theirs.
A part-time doctorMoves bothTwo days a week raises what the practice earns, and can be worth an extra one or two turns on the multiple as well. On a $400,000 or $500,000 EBITDA that is real money on the back end.

Moves the multiple

What it gets multiplied by

A part-time doctorMoves bothTwo days a week raises what the practice earns, and can be worth an extra one or two turns on the multiple as well. On a $400,000 or $500,000 EBITDA that is real money on the back end.
Which buyer, and whenBuying groups tend to pay the highest multiples when they are closer to selling or recapitalizing, because they are trying to add practices towards the end of the cycle.

Which of these is worth doing depends entirely on the practice. Some are worth months of preparation before going to market; some do not apply at all.

What is the entire step-by-step process?

In short

NDA, representation agreement, data room, in-house valuation, a confidential run to the buying groups, competing letters of intent negotiated against each other, then attorneys and closing.

We start with a non-disclosure agreement, so nothing you share with us reaches anyone who has not signed one too. Then our representation agreement, which is short, fair, and does not lock you into a long-term contract.

Our team then builds your data room: profit and loss statements, past tax returns, doctor production, the things every buyer will ask for. Our in-house analyst values the practice against today's market.

Then we go to market. What goes out first is a generic flyer — a practice for sale in this general area, this many doctors, this much revenue, and nothing that identifies you. Every buying group must have a current non-disclosure with us, signed within the last 12 months, before it sees a single document. They review everything and come back with questions, as they always do.

Then the letters of intent arrive. On our last one we had 12 groups in the data room, three verbal offers on total enterprise value, and four letters of intent. We negotiated down to the top three and ran them against each other.

Once a letter is signed we bring in a transactional attorney for the asset purchase agreement, the employment agreement, and the lease if you own the building or are taking over the existing one. Then we close.

How long does the process typically take from start to finish?

In short

Generally four to eight months, and more often four to six. Longer by choice when there is value worth adding before going to market.

Read the full answer

Four to eight months end to end. Here is where the time actually goes.

Three to six weeks to sign the non-disclosure and the representation agreement and collect your data. Unless you know your practice software well, pulling every report takes longer than people expect.

Two to four weeks for us to work out what I call the defendable EBITDA, so we know what the market should pay for the practice.

Three to six weeks for the buying groups to underwrite it, with questions going back and forth throughout.

Then the letters of intent come in and we negotiate for the highest and best, running them against each other. Once one is signed it is 60 to 90 days to close. Some groups move faster and some slower, and the end of the year jams up.

It runs longer when longer is the better decision. If there is value to add first, whether that is a doctor, a technician or the cost of goods, we will tell you. We have had clients take three years because that was the plan. Most are in the four-to-six-month range.

What are the biggest mistakes people make when they decide to sell?

In short

Going it alone, earnings nobody can explain, no plan for keeping the doctors, and the wrong kind of attorney. That last one matters most: in our experience, over the past four or five years, we close more than 90% of deals once a letter of intent is signed, and the wrong attorney is the fastest way to lose that.

Read the full answer

Going it alone is the big one. I do not care whether you hire TriStar, but hire somebody. You cannot shop 87 groups at once. You will reach one or two, or take the buyer who approached you, and their job is to buy you as cheaply as possible however friendly they are about it.

Second, a quality of earnings nobody can explain. Your practice management software, your QuickBooks and your tax return should agree. Mostly they do not, and that is fine, but you have to know why and be able to say it out loud. If you cannot, a buyer assumes the expense carries on, and that comes straight off your EBITDA and your price.

Third, the doctors. If they are not under contract they usually expect something at a transition. We build a retention pool into the offers, and where there is an earnout I push sellers to assign part of it to the doctors, so the people who grow the revenue are paid for growing it.

Last, the attorney. In our experience over the past four or five years, once we sign a letter of intent we close more than 90% of the time, and the wrong attorney is the fastest way to lose that. The lawyer who drafted your lease or your will is not a transactional attorney. We will help you find one who knows veterinary deals and, where we can, help you negotiate a flat fee.

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