Practice Sales 101: How Valuations Are Calculated

One of the first questions we’re often asked when we speak to practice owners exploring a sale is “what factors are important when calculating the valuation of my practice?”

When it comes to valuing a veterinary hospital, there are several key factors to consider. These include the hospital’s location, size and layout, equipment and technology, financial performance, and the reputation and experience of the hospital’s staff.

A hospital’s location is one of the very first factors we explore. Not only does it impact the hospital’s accessibility to clients and the number of potential clients in the area, but also the ability to successfully recruit new staff to the practice. A hospital located in a densely populated, pet-friendly area is likely to be more valuable than one located in a more rural or less pet-friendly area.

Financial performance is also a crucial factor in the valuation of a veterinary hospital. Hospitals that can show strong, consistent financial performance, including consistent profits and a healthy balance sheet, will generally be more valuable than those with weaker financial performance.

The size and layout of the hospital will also impact its value. A larger hospital with a well-organized layout is typically more valuable than a smaller, cramped hospital. The hospital’s equipment and technology are also important considerations, as these can impact the hospital’s ability to provide high-quality care to its patients. Hospitals with state-of-the-art equipment and technology that are able to practice higher-qualtiy medicine are generally more valuable than those with outdated or insufficient equipment.

Finally, the reputation and experience of the hospital’s staff can impact the value of the hospital. Hospitals with highly skilled and experienced veterinarians and staff tend to attract higher valuation multiples.

For us at EverVet, we’re also keenly interested in our relationship with the seller as well as important staff. Whether the hospital is joining the EverVet family as a Joint Venture, or as a 100% sale, we know we’ll be working side-by-side with the key staff in the hospital for years to come. The nature of our relationship with key staff is of the utmost importance when we consider the valuation.