How To Prepare For Retirement As A Veterinary Practice Owner

As a veterinary practice owner, you’ve dedicated your life to caring for animals and building a successful business.

Now, as you approach retirement, it’s time to ensure your future is just as well cared for.

In 2016, the U.S. veterinary reference laboratories market was valued at $660 million for production animals and $315 million for companion animals.

This blog will walk you through the essential steps to prepare for retirement, from assessing your financial needs to navigating the complexities of selling your practice.

Start by Determining Your Financial Goals and Lifestyle Needs

Before diving into the logistics of retirement planning, it’s crucial to understand your financial requirements for the future. This foundational step will guide all your subsequent decisions.

Assess Your Retirement Income Needs

Studies have consistently found that retirees need 70-80 percent of pre-retirement income to maintain their desired lifestyle. When planning for your retirement, consider the following:

• Your ideal retirement lifestyle
• Potential healthcare costs
• Travel plans
• Hobbies and leisure activities

Evaluate Your Current Assets

Once you have a picture of your future needs, it’s time to take stock of your current financial situation. This includes:

• Personal savings
• Investment portfolios
• Real estate holdings
• Any other non-practice assets

Bridge the Gap

Any deficit that exists between forecast retirement needs and the current assets should be filled by your veterinary practice. Financial advisors say you need a retirement savings goal equal to 10 to 15 times the annual income for security in your retirement.

Valuing Your Veterinary Practice

Determining the value of your veterinary practice is one of the most important parts of retirement planning and, arguably, sale. Your valuation should be as detailed as possible to determine the true worth by considering revenue trends, the quality of equipment, the loyalty of the client base, and market competition.

Valuations should be conducted regularly basis because the nature of the veterinary sector is dynamic, and recently, numerous corporate groups have entered the fray. This helps in keeping track of their financial goals, finding areas for improvement, and adjusting retirement plans.

To increase your practice’s value, invest in modern equipment, expand services, and improve client retention. Practices with updated technology and strong client relationships often command higher values, lowering risks for buyers. For a more detailed understanding of how to sell my veterinary practice, valuation guides that encompass these factors and others can offer vital insights.

Legal and Tax Planning

Selling a veterinary practice can be complex in its issues, and professional advice is critical for that reason. Transactional lawyers can be hired to draft and review sale agreements concerning regulatory matters and limiting potential liabilities. It is also important to consult tax advisors on financial matters to achieve better tax efficiency.

They can also help structure the sale, explore options such as installment sales or tax-free exchanges, and manage post-sale tax obligations. Professional guidance will ensure a smooth sale and maximize your financial interests.

Explore Your Succession Options

With a clear understanding of your financial needs and practice value, it’s time to consider how you’ll transition out of ownership.

Sell to an Associate or Partner

Pros:

• Ensures continuity of care
• Maintains practice culture
• Allows for a gradual transition

Cons:

• Can take 3-5 years to complete
• May yield a lower immediate payout

If you choose this route, start involving potential successors in management decisions early to ensure a smooth transition.

Sell to a Corporate Buyer

Pros:

• Often provides faster, lump-sum payments
• Can offer higher valuations due to economies of scale
• Handles many administrative aspects post-sale

Cons:

• May require post-sale employment commitment
• This may lead to significant changes in how the practice operates

Corporate buyers are becoming active in the veterinary market, making this an attractive option for many practice owners.

Private Third-Party Sale

Pros:

• Can yield competitive financial terms
• Allows for a clean break if desired

Cons:

• Finding the right buyer can be challenging
• May lack the resources of corporate buyers

This option can be ideal if you find a buyer who shares your vision for the practice’s future.

Prepare for the Transition Process

Developing a Structured Transition Plan

• Components of the Plan:
• Create a clear timeline for the transition.
• Define roles and responsibilities during the handover.
• Implement training and knowledge transfer processes.
• Develop a client communication strategy.

Gradually Involve Successors

• Benefits:
• Reduce disruptions during the transition.
• Ensure continuity of care for patients.
• Maintain staff morale and retention.

Inform Your Team and Clients

• Importance of Transparency: Key to maintaining trust during a transition.
• Communication Strategies:
• Hold staff meetings to address any concerns.
• Send personalized letters to long-term clients.
• Gradually introduce the new owner(s) to the practice.

Maximize Retirement Savings

Consider Retirement Plans with High Contribution Limits

SEP-IRA Plans:

• Contribution Limit: This may allow even higher contributions in some scenarios.
• Advantage: May allow even higher contributions than SEP-IRAs in some cases.

Explore Tax Credits

• Eligibility: Available if your practice has fewer than 100 employees.
• Benefit: Receive tax credits for starting a retirement plan, benefiting both you and your employees.

Decide on Your Post-Retirement Role

Consider, as part of your retirement planning, what role you would like to play, if any, in your veterinary practice after the sale. You can consider part-time consulting or part-time relief, for example, which will keep you involved but cut back on the number of hours you devote to work.

Another rewarding avenue is mentoring young veterinarians, giving you a chance to share your knowledge and experience. Alternatively, you could retire totally and back away from the practice altogether. If you are selling to a corporate entity, remember that most transactions come with a transition period, where you are supposed to work further to ensure a smooth takeover.

Succession Options for Veterinary Practice Owners

Conclusion

Planning your retirement as a veterinary practice owner requires one to be cautious with planning, strategic in decision-making, and take the best professional advice. The sooner you start, the better you’ll understand your financial needs and the more options you’ll have to prepare for a rewarding retirement.

Not every practice or owner is exactly alike. Take time to consider every aspect of your retirement planning, and don’t hesitate to seek professional advice tailored to your situation.

FAQs

What age do vets retire?
Veterinarians generally retire in their early to mid-sixties, but many continue well beyond the typical retirement age in part-time or consulting roles.

What is the most profitable veterinary service?
Surgical procedures, in particular orthopedic surgeries, tend to be the most lucrative services in veterinary care due to the complexity involved and their higher price.

Do veterinarians have a retirement plan?
Yes, many veterinarians do have a retirement plan in place, like a 401(k) or SEP-IRA. Many veterinarians look for financial planners who can help to facilitate long-term retirement security.