PRACTICE MANAGEMENT
Your Business or Practice
May Not Be Sold Anywhere Close
to it’s Actual Value
This is the introduction to a series of articles by Mr Deon Nel * addressing retirement and estate planning for vets.
You will have to sell your business at some stage whether you are
planning to or not and the chances are very good that your practice
is not worth anything near what you think it is!
Sadly most sales are “forced”. The unprepared sale
normally happens under circumstances such as
death, disability, illness or divorce. Somehow we believe that we are infallible and that “it will never happen to me”. Not all business owners or practitioners
think about preparing their business or practice for
sale in case the unforeseen happens.
Even a planned sale will not fetch the true worth of
the practice if the practice is not prepared for sale.
Statistically practices are not sold (disposed of) for
the value they are worth, particularly when the practitioner is no longer around. Would a spouse, children
or any dependant really know what the real value of
the practice is?
A forced sale is the time when the buyer has the
power to determine the price of the practice. You will
have to accept the best offer that you can get at the
time. This need not be the case as advance planning
could determine your buyer well in advance of the
sale.
In South Africa a veterinary practice must be sold
within six months of the practitioners’ death and it
can only be sold to another qualified vet. This means
that a veterinary assistant, friend, family member or
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a spouse cannot take over the practice. Not only
are the chances of finding a qualified buyer within 6
months remote, but you will probably not be able to
get a good price for the practice because the new
buyer holds all the cards.
There is a need for the business owner or practitioner
to safeguard their dependants’ and family’s futures by
preparing the practice for a sale or disposal, so that in
the event of a calamity the selling decisions can be
made and acted upon by people not normally in control.
When you do make the sale – forced or otherwise –
the proceeds or liquidity is your prime concern. But
please, please, please do not forget your silent partner
in all of this…
The tax man!
I have known many practices that have had to pay the
lion’s share of the proceeds to the tax man, often leaving the vet or his dependants unable to support themselves because the practice was not worth what the
vet thought it was.
And the tax man has many tentacles. South Africa may
be a third world country but we have one of the strictest and most complicated tax regimes in the world.