What’s Your Canadian Veterinary Practice Worth? A Guide to Valuation
As the owner of a growing veterinary practice, your focus is on caring for animals and the people who love them. You are busy managing day-to-day operations, from patient care to staffing and inventory. But have you ever paused to consider what your business is worth? Understanding the value of your practice is not just for when you are ready to sell. It is a vital piece of information that helps you make better strategic decisions for the future.
Knowing your practice’s value can help you secure financing for expansion, plan for your retirement, or create a solid succession plan. It gives you a clear picture of your financial health and helps you use your financial numbers to make smarter growth decisions.
Key Factors That Determine Your Practice’s Value
Several key factors determine a veterinary practice’s value. Buyers, from individual veterinarians to larger corporate groups, look for a healthy and stable business.
1. Financial Performance
Strong, consistent profitability is a primary driver of value. Potential buyers will look closely at your earnings before interest, taxes, depreciation, and amortization (EBITDA). According to industry experts at Transitions Elite, veterinary practices in Canada often sell for 8 to 13 times their EBITDA. A history of steady revenue growth and healthy profit margins will always attract a premium valuation.
2. Location and Facility
A practice in a desirable, high-growth community is more attractive than one in a declining area. The size, condition, and layout of your facility also play a role. A modern, well-equipped clinic requires less immediate investment from a new owner, which increases its value.
3. Stable and Efficient Team
A strong, reliable team is a major asset. In the second quarter of 2022, there were 1,265 job vacancies for veterinarians in Canada, as noted by Statistics Canada. A practice with a stable, experienced team and efficient operational systems is highly sought after in a tight labour market. It demonstrates that the business can run smoothly without being entirely dependent on the owner.
4. Loyal Client Base
A large and loyal client base with high retention rates is another critical factor. This indicates consistent, recurring revenue and a strong reputation in the community. Buyers and valuators often look more favourably on practices with a high percentage of bonded clients.
How is a Veterinary Practice Valued?
Valuing a business is a complex process, but it generally involves one or a combination of three main approaches.
Market Approach:
This method compares your practice to similar veterinary clinics that have recently sold. This method is similar to how real estate is valued. The challenge is finding truly comparable data, which is why working with advisors who specialize in the veterinary industry is so important.
Income Approach:
This approach focuses on the income your practice is expected to generate in the future. It calculates a value based on projected cash flow, which is then discounted to a present-day value. This method directly links the value of the business to its ability to produce profit.
Asset-Based Approach:
This method calculates the total value of your practice’s assets, both tangible and intangible. Tangible assets include equipment, inventory, and property. Intangible assets can include your client list, brand reputation, and goodwill.
The Government of Canada recommends engaging professional advisors to help navigate this process. Certified Business Valuators have the expertise to apply these methods correctly, ensuring you get an accurate and defensible valuation.
Using Your Valuation for Strategic Growth
Understanding your practice’s valuation is the first step toward building a more valuable and sale-ready business. It helps you identify areas for improvement and provides a benchmark to measure your growth. With this knowledge, you can focus on strengthening the key drivers of value, from boosting profitability to improving operational efficiency.
At Envision Accounting, we specialize in CFO-level guidance to help you translate these complex financial details into a clear strategy for growth. If you are ready to understand the true value of your practice and plan for its future, our team can help. Consider booking a Financial Assessment with our team.
Frequently Asked Questions
- What is a good EBITDA multiple for a vet practice?
A typical range is between 8 and 13 times your EBITDA. Practices with strong financials, a great location, and a stable team can often command a higher multiple.
- What is the first step I should take if I am thinking about selling?
Your first step should be to get a professional valuation. This gives you a realistic understanding of what your practice is worth and a starting point for negotiations.
- How much does a staff shortage affect my practice’s value?
Significantly. A practice with a full, stable, and experienced team is far more valuable and attractive to buyers than one that is struggling with staffing issues.
- Can I just value my practice on my own?
While you can estimate, a formal valuation is a complex process. Professionals use specialized methodologies to calculate an accurate value that stands up to the scrutiny of buyers and banks.
