In This Issue of the Simmons E-Times:

 

From the Desk of Byron Farquer, DVM
Practice Appraisals as a Management Tool
Where You Will Find Us
Welcome ~ Chris and Kathy Morris

 

---

Spring Is In The Air!
Byron Farquer, DVM
Simmons Pacific

It’s warming up everywhere.  For some that means snow melting for others it means turning up the A/C.  Either way, spring is on its way, and so too are the traditions we’ve come to accept; Spring Cleaning and Cabin Fever. 

Commonly applied at home these two items should extend over to your practice as well.  Weather can be harsh and landscaping, exterior paint, signage, and parking areas of your practice may need your attention.  Have you driven up to your practice and walked in the front door lately?  Does your facility look its best?  As much as we’d love clients to tolerate anything in order to receive excellent medical care they, like us, are subject to impressions.  If your building is in disrepair with a sagging rain gutter from heavy snows, chipped paint on your sign from windblown dirt, or a tree needs trimming now is the time to spend a couple of evenings or weekends getting things ship shape.  It will make an impression on your clients, and your staff. 

If you are in the process of selling or preparing your practice for sale, it’s doubly important to put forth a great first impression.  Like the housing market, we as veterinary brokers often see a surge in buyer activity and scheduled visits to practices in the spring especially in northern climates.  That’s all the more reason to get out the paint bucket and broom and give everything a quick tidy-up.  It will make a difference in buyer interest, and possibly purchase price.

---

Practice Appraisals as a Management Tool
David McCormick, Simmons Mid-Atlantic

Most practice owners are familiar with having their practice appraised when it is time to exit from ownership (transactions need to be based on a fair market value or it may not be successful for anyone.)   Unfortunately, having your practice appraised for reasons other than a sale is often overlooked completely and a properly done appraisal can be a powerful management tool.

The first step in a practice appraisal is to assess the practice’s profitability.  “Profitability” means something different to your veterinary appraiser than it does to most practice owners.  The profits (also referred to as earnings or cash flow) represent the revenues remaining after paying all the customary and legitimate operating expenses of the practice, after paying a fair market rent (even if the practice owner also owns the real estate) and after fairly compensating the owner for his/her work as a veterinarian.  The true profitability of the practice is the owner’s return for owning and operating the business. 

Practice tax returns and financial statements rarely reflect the operational profits.  Instead, they can vary widely depending on practice management and accounting policies.  Because of this, a thorough financial analysis must be done to assess the operational profitability on a normal and on-going basis.  This analysis is instrumental to the appraisal.  It is what makes a practice appraisal such a powerful diagnostic tool for the financial health of the practice.

The cash flow analysis puts a critical eye on the revenues, the expenses and the resulting operational profits.  If any element seems atypical or if the profits seem low, your veterinary appraiser can help to identify the issues.  All too often, these issues can be creeping quietly in the background while the owner is either unaware of their existence and/or unaware of what it means to the practice cash flow and the practice’s value. 

An appraisal for management purposes is a tool that can help increase your awareness of the financial health of your practice.  In general, it is recommended to value your practice every 3 to 5 years. 

If you are preparing for your exit from ownership, it is important to value the practice at least 3 years before your exit.  That way, if the value is low, there is time to make changes – while you have time and energy to do something about it.

Contact your veterinary practice appraiser.  Tell them that you want your practice appraised – not because you are ready to exit, but because you want the appraisal for management and planning purposes.

For a PDF of this article, click HERE

---

Welcome!

Dr. Christopher Morris and his wife Kathy have joined the Simmons Intermountain team.  As former president of the Colorado Veterinary Medical Association, an accomplished practitioner with a special interest in orthopedic surgery and a successful former practice owner, Dr. Morris is eminently qualified to help other veterinarians in their buying and selling decisions.  With her background in medical technology and accounting, Kathy brings both medical perspective and important financial skills to the team

Christopher Morris, MS, DVM
Kathryn Morris, BS
"We share a deep and abiding love affair with the Rocky Mountain States. We enjoy nothing more than grabbing our bikes and heading for the high country.
If you are planning to buy or sell a practice, we would be pleased and honored to help.  Please give us a call.  If you’re not ready to buy or sell, grab your bike and join us in the mountains."
800.982.8033
303.660.0793
intermountain@simmonsinc.com