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Are you a passionate veterinarian seeking to elevate your practice and make a lasting impact in the field?
Welcome to "The Vet'Ed Podcast". Join Steven Hermann, Kale Flaspohler and Lindo Zwane - industry experts and thought leaders, as they delve into tailored strategies and nurturing relationships to empower privately owned veterinary practices.
Tune in the first and third Wednesday of the month to gain invaluable insights, tips, and inspiration to thrive in your independent clinic. Together, let's build a community dedicated to advancing veterinary care. Subscribe now and embark on a journey towards lasting success in your practice.
Hey, listener. Welcome to the Vetter podcast and our final installment of the 3 part series on buying a veterinary practice. In this episode, we dive into the critical aspects of closing a business deal and making the transition as smooth and celebratory as possible. We discussed the importance of celebrating the successful purchase of a practice. We emphasized the significance of taking a moment to appreciate this major milestone even though the process might feel anticlimactic due to the digital nature of modern transactions.
Speaker 1:Celebrating the deal is not just about the new owner, but also about acknowledging and engaging the entire team involved in the practice. We explore strategies for reflecting on the transition, stressing the need for a moment of pause to alleviate stress and recharge. This reflection period benefits both the new owner and the staff, fostering a positive start to a new phase of the practice. The episode also covers the importance of actively marketing the new ownership. It's an excellent opportunity for the new owner to present their vision, reinforce continuity, and engage with the community.
Speaker 1:We highlight how effective marketing can set a positive tone and build enthusiasm among clients and staff alike. Additionally, we discuss a practical aspect of closing day, including managing inventory and finalizing paperwork. We suggest making the closing day itself a memorable event to boost morale and create a positive transition experience. We remind listeners to plan ahead for closing day, ensuring that all necessary parties are coordinated and that there is a clear schedule to avoid last minute stress. Hey.
Speaker 1:Finally, we at the VETTA podcast express gratitude to the audience listening for support over the past year, and we invite feedback and suggestions for future pot future topics. We emphasize our ongoing commitment to advocating for the veteran community and look forward to continue to provide valuable content. Tune in to gain insights on making the most of your practice acquisition and ensure a smooth transition while celebrating the new beginning with your team and community. We hope you enjoy this episode. Thanks so much.
Speaker 1:The joke. I'll tell you, we're we're, excited to be on here this morning on the VETTED podcast, episode 14, buying a practice part 3. And before we get in there, though, we've had some fun around the office. Linda, what's this thing I got around my neck right here? It's the champions, baby.
Speaker 1:The champions. You know? Where's yours? I don't have one. Oh.
Speaker 1:Oh, so we're gloating. You say you're supposed to, like, win with humility or something like that, but I I don't know about that in the office. You know? Why? What fun is that?
Speaker 1:No. Hey. We had a a great time at the Olympics. Doctor Lauren put on a wonderful day of of team sports. Had us in 2 teams.
Speaker 1:She had a setup ready to roll, and it came down to the last ping pong table.
Speaker 2:Yep. Out of 12 things.
Speaker 1:Yeah. Out of 12 things. It was really cool, and that ping pong table was a, a table with a ping pong net attached to it.
Speaker 2:It wasn't even a
Speaker 1:flat table. Bridges in it.
Speaker 2:It was made of wood. Yeah.
Speaker 1:I mean, it was random random
Speaker 2:random Random
Speaker 1:elevations. Yeah. No. That was that was a lot of fun to do that, and it's kinda it's kinda funny thinking about, like, that random the way that wood was was is ties in what we're talking about because buying a practice, people like, do you have a checklist? You know, like, I mean, yes, we have a a long list, but is it a checklist?
Speaker 1:It's more of like an if and or but either or maybe maybe checklist that that we have a lot of experience on that tells you what you need to go to next. And as we get into part 3 here, looking at and we've done some, you know, pretty important things in parts 12. Found out that yeah. Let's let's buy this thing that you, the business owner, are both in agreeance on what needs to happen there. Then you've gone through and figured out what it's worth and got to negotiate on what you're buying and the pricing and got that in stone.
Speaker 1:And so some pretty important stuff to to to do next. And so if we look at that, I think let's dive right into what's happened to Milestone 3 to get this thing closed and in your hands and transition the owner, current owner, to the previous owner. So what we got going on?
Speaker 2:Well, I think if we assume that, that we're not gonna discuss all the various intricate documents that people have to have to close it, We can just high level assume that we're gonna have to form a new entity. And so if we buy the assets of the company, you know, we'll have to create a company that buys those assets. And so, you know, creating an LLC is pretty simple. It's not that complicated. There's new requirements this
Speaker 1:year. Right.
Speaker 2:Right. You know, it's it's not that difficult.
Speaker 1:Yeah. We won't get into that. I'm just I'm just going, yeah, it's in court. It's being sued. It's crazy.
Speaker 1:But, yeah, don't keep going. Yeah. So Vincent. Yeah. F I n c e, that's what you're talking about.
Speaker 2:So, anyway, what we create that LLC, there's numbers that you have to have. Your your EIN, your state tax ID, those are both they're basically your Social Security number for your business. Yeah. And then the unemployment insurance number is one of the other few numbers that you have to have, but they never wanna give that to you until you owe payroll, which is super complicated because all the payroll systems wanna have it before they let you run payroll. And so, that's always a a really fun thing to have to get around inside of the payroll system, but it's not.
Speaker 1:That's why a checklist doesn't work for that because, like, even though you tell somebody that, they're gonna freak out. What do I do? You need someone to be like, it's okay. We've done this before. You're gonna be just fine.
Speaker 1:Yeah. It's
Speaker 2:alright. Yeah. You're gonna get through it. And so, you know, there's a lot of those kinda those kinda things that have to happen, and it's usually 45 days out is when you're gonna wanna start working on or get those accomplished.
Speaker 1:Good point. When when do we need to start that? It's 45 days out.
Speaker 2:Is when, you know, I wanna have the LLC 45 days out. You can get EIN state tax
Speaker 1:Product funding day, closing day, when you sit in the chair with the banker, with the title, whatever you you need done for that business, the signing door, it's gonna become yours. Right?
Speaker 2:Yep. Yep. Sales tax number, which again is sometimes complicated to get for a brand new company. Yeah. As James Erika said in his podcast here, he's like, hey.
Speaker 2:We're just gonna keep using yours if that's cool until they give us ours and Right. We'll pay it. We'll make sure we don't owe any money, but it's just gonna we'll have to deal with it that way.
Speaker 1:Yeah. Yeah. They make it interesting. Sometimes state representative needs to get involved to get that moving.
Speaker 2:Which is so silly. It doesn't make any sense why we would make that easy.
Speaker 1:I have no I haven't yeah. It's interesting. I haven't looked into it. Something we should probably look into and figure out the history on it so we can understand it. But sometimes even when we do that, no one even knows.
Speaker 2:Yeah. No one it's like the ham that we cut the end off of to fit in the pan Yeah. 2 generations ago. So now we still cut the end off the ham.
Speaker 1:Yeah. That's the deal with the pan size. Right? Yeah. The old pan size versus the new pan size?
Speaker 2:Yeah. Yeah. The only thing that changed was the size of the pan. Yeah.
Speaker 1:So we don't need to cut the other ham off.
Speaker 2:Yeah. But, anyway
Speaker 1:I think on the entity formation, though, so that people talk about I have an LLC, but and and that's what you need for your your corporate documents, those things. And, you know, most people don't need to incorporate. It's like a c corporation or incorporated as an s corporation or incorporated as a partnership. What they do, they start an LLC. And then on the taxation side, there's different sides.
Speaker 1:There's the taxation side where they choose, am I a c corp? Am I an s corp? Am I a partnership? Or, you know, am I just a single member entities owned sole, you know, proprietorship setup? And that that is important to get right, because between the s corp and the partnership, question is is how do you wanna pay out profits?
Speaker 1:If you got an s corp, you're gonna pay out profits amongst everybody equally. It's required to, you know, to do that. Partnership gives you more flexibility of cash flow based on what the business needs to do, based on, you know, some unique agreements, things like that. And then, of course, the the the c corp, I mean, that that really is if you're gonna be a stock issuing company at the end of the day. And and so I I a c corp really shouldn't consider unless that you're a big company looking to do stock, looking, you know, go go public even.
Speaker 1:Right? Mhmm. That kind of deal. But really, we see mostly most of our our clients and S corp fits them because it's got the tax structure set right for how Social Security taxes are paid, how you pay taxes on income going through the business goes on to your personal versus paying corporate taxes, which is c corp. You would pay corporate taxes.
Speaker 1:And so there really what it comes down to is is the taxation fit for you? Now all these things have different taxation results upon a sale of a practice or a merger with someone else. So there's lots of things to consider, but really, if you're buying the practice, I think the most important thing you're looking at is cash flow for the next 3 to 5 years. How do I maximize cash flow? And really, that's going to be the S Corp most likely.
Speaker 1:And for most of you, a partnership, you know, I've got people going in might want to look at that structure. But partnership isn't good on the payroll side, the way the taxation works that way. So you sometimes have to get, like, a payroll company or other things to handle that taxation. It's a little more complicated. So the really simplest way to set it up is is an s corp.
Speaker 1:What would you add to that?
Speaker 2:I don't think I would complicate it any further for the sake of this discussion. There's a lot of different ways to set it up, but it doesn't have to be terribly complicated. The LLC taxed as an s corp is probably the most common thing that we see. Right. And it yeah.
Speaker 2:I I don't think c we see some c corps that are generally old. You know, they've been in business for some very long time. Eighties. Mhmm. And so, yeah, as as a as a small private clinic, 2 or 3 locate I mean, there's no reason to be a c corp.
Speaker 2:No.
Speaker 1:That's that's that's to get some people to have a checklist. Yeah. We could put checklists together on that, but how are you gonna decide which one to use? And and sometimes the accountant you're using or the lawyer you're using may not know either because they may not know the industry well. So Yeah.
Speaker 1:Absolutely. That's the thing to to know and look at.
Speaker 2:I think that I think one of the things that everyone always has questions about, and myself included to a point, what does it take all outside of all the legal documents, outside of the attorneys, outside of everything, what does it take to open the doors in the transition period from, okay, we're gonna close Saturday at noon, Monday morning, I'm the owner. Like and so Yeah. There's a lot of things that have to occur in that small tiny window that you have to be prepared for, have a plan for, and I think that's kinda what I'd like to talk about more than anything is because there's always something that gets left left behind.
Speaker 1:Well, yeah, I understand that, but the the entity formation is very important because to undo the entity formation into another one's costly. It's good to get that set up and going, you know, right in the beginning. And so, yeah, I know not not to belabor that at all, but I I think, yeah, that's what that's what you have to get done right. And and so as we as we look through that, it's it's just gotta it's gotta be done right. So, don't you know, one important thing on that is when you the state you're registering with, the question is is the purpose of the LLC and the perp the owner of the LLC or who is running the veterinary practice part.
Speaker 1:That's one thing that's interesting is you have to spell that out in that paperwork too. Because we've seen that where people filed with the state, And the state veterinary board comes back and says, well, it just says there's some owners here. Is there a veterinarian that is running this business? And that could be hang up. So you gotta make sure you get those right and get started.
Speaker 1:Because if you don't get that part right, you're say bored is gonna give you a hard time on giving you a license to run that business. So, you know me. I'm a look at those technical details and then get that done and get that foundation set and then go on to, yeah, what you're talking about? What are those things? You're not saying and the way I understood you, you're not talking about from signing that paper that day to the next day, like 12 to 24 hours.
Speaker 1:You're talking about these 45 days still. Right?
Speaker 2:Well, yeah. I'm talking about Yeah. I wasn't I wasn't sliding the importance of that
Speaker 1:at all.
Speaker 2:I was I was I was trying to make a smooth transition to I
Speaker 1:wasn't ready. I wasn't ready.
Speaker 2:Well, you you we need a button. We need a button. I wanna keep talking. Like the Flash is just sitting like see what
Speaker 1:I'm talking about.
Speaker 2:I know. Absolutely. Got that wrong
Speaker 1:and missed that, and that's a big deal. So I think one of the big parts is on that formation, it is simple. It's not that hard, but you need to know what you to put in there.
Speaker 2:Yeah. If you know if you know what you're what you need, it's it's simple. You get the right attorney. You get the right people on your team. It's it's really pretty straightforward.
Speaker 1:Yep. Yep. So no. So, yeah, so you're you're talking about, like, what what's gotta get set up beyond that. Right?
Speaker 1:Beyond what are those little intricacies to set up? So, yeah, we're what you need that formation set up to these next things. You do. So how
Speaker 2:do you get a bank account, Stephen?
Speaker 1:What do you
Speaker 2:have to bring to the bank?
Speaker 1:Well, you have to bring in yourself.
Speaker 2:Yeah. That's probably pretty important.
Speaker 1:You guys bring a little money. A
Speaker 2:little money.
Speaker 1:A little bit of money. And your EIN documents, your formation documents. And, you know, it's funny when you go in the bank, you probably should bring every document you have because it seems like different banks ask different questions for the most part. Yeah. Your driver's license, your your EIN, and and your organization documents should get your ability to open bank account and walk out that day with the bank account.
Speaker 2:Yeah. And you wanna do that as quick as possible once you have those other documents in your hand because the last thing you wanna be stressing about is where's this money gonna be deposited on Monday when I start operating this practice or not, you know, not like we're doing this the week before, but like that first day when we're operating the practice. Yeah. Where's that money going?
Speaker 1:Yep.
Speaker 2:And so it also leads to credit card processing questions.
Speaker 1:Yes. You need to
Speaker 2:get have those conversations, you know, 45 days out because there's several different companies you can choose from. You probably have more experiences with anybody than anybody. But Definitely. You know, a couple percent or a couple like tenths of a percent
Speaker 1:Make a difference. Make a difference over time. Yeah. When 90 plus percent of your revenue is being put on a credit card, the fees are a big deal. And and I generally, on that, if you're working with, like, if you say you have Bank of America like Chris Howard, they're processing.
Speaker 1:They've got low fees and, you know, pretty straightforward, big national company. There's a lot of companies out there that are coming in going, oh, we can get your fees down to 0. And here's what it is. They actually have software that charges the client the the credit card fee. So it's not free.
Speaker 1:You're just passing the buck on to that person. And that's a for a different discussion, right, the credit card fees. But I think when you do set up the credit card processing, if you're using a big bank, usually, they have that solution for you, and they'd like you to use that solution. And sometimes, like Bank of America, they'll give you a discount on your rate using their services. They'll have a whole sheet set up that if you use these three services, that you get 25 basis points.
Speaker 1:And Chris might shoot me if that's you know, I'm not quoting Chris here Chris here at Make America by any means, but that's things they can do. So, important thing to get that right because a quarter percent on a $1,000,000, you know, you're talking about this $25100, but that's that's real money.
Speaker 2:I'd like to keep it.
Speaker 1:Yeah. You like to keep it. Right?
Speaker 2:Yeah. So There's lots of cool things you can do with that. So Yeah. Absolutely. You know, also ahead of time that you're gonna wanna do, are you keeping the same payroll system that you've been using?
Speaker 2:A lot of times, what we see with the transition is there's a big modernization of the practice. And so there's not that not that the old process didn't work, but there's a lot of of software updates that can happen. There's a lot of things that can happen
Speaker 1:at these Yeah.
Speaker 2:That that generally the new owner's excited about. Yeah. And so, you know, are you updating the payroll system? And if so, that can be if you're if you're starting in the middle of a year doing other things that can be, you know, tedious to do. So you need to make sure that you get that out ahead of time and and say, hey, we're gonna be switching this platform.
Speaker 2:Here's the stuff I need from you. All your employees, the size of the hospital can make that difficult depending on, you know, whether you got 40 employees or you got 3.
Speaker 1:Yes.
Speaker 2:You know, there's a major difference there in in getting that set up. So all those all those different things are are important too.
Speaker 1:Well, and diving into payroll too because as you know, as we've seen, there's payroll companies out there.
Speaker 2:Mhmm.
Speaker 1:They wanna charge you to the payroll and the, there's a there was a point where that was important, but there's things like QuickBooks online, the payroll system that that it's set up. It'll it'll pay your taxes for you. You know, you need a little help on the setup. That's the most important part. But as you know, that what's crazy is that you pay this company to do your payroll, that you send them all the payroll data that would take you the same amount of time to enter it in your own system and have controls over it.
Speaker 1:And we've seen worst case scenarios where local regional payroll systems have embezzled the money and said they paid your taxes, paid your 401ks. We've had some clients that we didn't recommend these companies. We've helped them undo from these companies that have cost them 100, $200,000 because the government looks at you and goes, I'm sorry that they embezzled from you and kept that money. You still owe it. Or the 401 k.
Speaker 1:I'm sorry that they didn't contribute the 41 k contributions, but you still owe it. So you don't lose that liability, and you don't really gain any efficiencies and actually gain some struggles because when we want to get reports on payroll from that company or the format they give it to you in is like you have to, like, computer programmer to do anything with. Mhmm. So so payroll, keep it simple. I think you can in house it.
Speaker 1:I'm a
Speaker 2:I'm a strong believer in in housing payroll. Yep.
Speaker 1:Just have a little support on getting it set up right and get rolling with it. Mhmm. Yeah. No. That that's good.
Speaker 2:No reason to outsource it, in my opinion.
Speaker 1:No. No. Not at all. I think that one thing is is interesting utility bills, and, hey, throw throw telephone in there. You You got someone who's got a landline.
Speaker 1:You know? Or is there or they don't have the right Internet. That's always an interesting, part too, but you gotta get right on electricity, gas, water, what utilities are in your area, and and make sure those are right because, you guys switch that over. And and on day 1, you don't want any interruptions No. On that side.
Speaker 1:Yeah. And you
Speaker 2:don't want you don't want somebody to walk up to the front desk of your of your clinic and be like, hey. They haven't paid the water bill in a long time. Yeah. What's going on? Yeah.
Speaker 2:That doesn't give somebody much confidence in your new leadership abilities.
Speaker 1:I think and, again, on those, it's really easy. Get a list of utility companies. I mean, the owners got bills they're paying. Who are they? And it's as simple as just calling the company because it don't shank about how do you do it?
Speaker 1:Because the those utility companies know when you call them, hey. We're switching business owners here. And okay. What day? What's going on?
Speaker 1:Here's give me your information on your company and get rolling. Mhmm. You'll be ready to go. It's pretty simple.
Speaker 2:Yeah. Absolutely. One thing we don't have on our list, but I think is is an interesting thing to think about is accounts receivable.
Speaker 1:They are? Yeah. Yeah. What are you gonna do with it? Yeah.
Speaker 1:Well, yeah. What are
Speaker 2:you gonna do with it? Because, you know, as
Speaker 1:Or are you gonna do it?
Speaker 2:Well, what I'm saying is, like, if we already have it
Speaker 1:Yeah.
Speaker 2:And, you know, if if I'm the new owner and you're the previous owner, you know, you've performed these services and have people that owe you money, but you no longer have the payment processors in the clinic to accept the money or whatever. So how does that how does that work?
Speaker 1:Oh, yeah. So, I mean, ideally, you can negotiate that out what you're gonna do with AR. Right? Are you gonna include, let's say, you have a $100,000, $50,000 of AR outstanding as the owner. And sometimes the the owner will say, you collect it, you keep it.
Speaker 1:I want 60¢ on the dollar in the purchase price. Right? So you you just collect it and be and keep on your side. Or we have it to say, hey, you need to send out new billing to all your all these clients and they need to send it to a different address on those things in that way. But, yeah, the question is to go, are you going to continue to extend credit to people?
Speaker 1:Mhmm. And I think that depends on what kind of practice you are too. Right? If you're a mixed animal practice, large animal practice, which runs a lot on credit, they are through a r. That's going to probably stay the same, but just know the credit where it's it's an opportunity also to to make a change, to to look at the clientele and look at credit worth creditworthiness and say, hey.
Speaker 1:We're gonna keep these, not these. And then also we're going to not extend credit. Because at the end of the day, people have credit cards. People have Venmo. People have ways to pay without having you to be the bank Mhmm.
Speaker 1:And the credit on it. Because it's expensive to do AR because you have to track it. And it takes people and time, and then people don't pay. And going after it, it's probably a lot more expensive than that 2% charge on that credit card
Speaker 2:Mhmm.
Speaker 1:To take care of AR. Oh,
Speaker 2:absolutely. Absolutely. So was
Speaker 1:that getting to the point you're thinking about?
Speaker 2:Yeah. That was. I was I was there's various ways to deal with accounts receivable, and I think a lot that comes up a lot of times later in the process. What are we doing with AR? You know?
Speaker 2:We didn't really think about that or something like that. And and so what I've seen people do is it's like, hey. Here's the list of people. If they pay in the next 30 days, cut me a check.
Speaker 1:Mhmm.
Speaker 2:If not, cheers. Yeah. You know? Yeah. Or something like that.
Speaker 1:Yeah. They put a time on it and say after 60, 30, 60, 90 days, whatever that is, or We're done. We're done. And hopefully they've pre negotiated that. But, yeah, there's times where they don't where they go, oh, crap.
Speaker 1:What about that? And, essentially, it's like cash in the bank. Mhmm. You know, it's that it's that current owner's money due to them. How are you gonna handle it?
Speaker 1:So yeah. No. Great great point there. Insurance. If you're on the building, you need that insurance for that.
Speaker 1:Of course, you need liability insurance for everyone in the practice. You've gotta have your own employer liability insurance. And so I think my opinion, talking to the AVMA PLIT crew is just the best way to do it. To start out with, I know we talk about just like Bank of America, where that's not a local bank, but they're specialized for the local practice. And the AVMA PLIT is not your local insurance agent.
Speaker 1:It might be your brother, uncle, cousin, best friend from high school. AVMA PLIT is specifically designed for veterinary practices. And And we talk about a checklist. They actually have the checklist that makes sense for veterinary practice, what they need, don't need, and how to best, you know, make sure they're they're ready to roll and that they're covered. Because the worst thing that can happen is that you're not covered properly and and when something does happen.
Speaker 1:So when I think about the the business insurance needs is most people have, have POIT insurance just as a veterinarian anyways, on the, you know, liability side, but they can go and get ahold of them and and get set up and get rolling. And but that's something that you say 45 days out. Yeah. That's the this is like we need to have these things done by that, like, 45 to 30 days out period. Not like starting 45 days out.
Speaker 1:It's like we should have that stuff. Mhmm. This stuff needs to be in process, not just started the process. So because insurance quotes could take a couple weeks, and then you're gonna look through this. You've never seen this before.
Speaker 1:This whole stack of things, am I covered right, and all that? So that that's an important part of of looking all all through that. What's interesting though is is a workman comp insurance. Do are you able to if that workman comp, you know, works off experience ratings, that meaning the more claims you've had on workman's comp, the higher your workman comp insurance is gonna be. Just I mean, it's like any insurance.
Speaker 1:Right? But there's over time an experience rating. And if the prior employer has a good experience rating, can you take that experience rating going forward? Go with the same crew, which will bring down the cost of work comp. Or if you had to start a brand new work comp insurance, it's gonna have a higher rating because they don't know where you're at.
Speaker 1:So that's something to to really look at through through insurance on that side. And and so but POIT getting with them, they should know what they're doing. What what would you add on the insurance side?
Speaker 2:The only other piece is, do you need is the is the previous owner gonna be working in the practice? Are they do you need some form of insurance on them Mhmm. As a key employee of
Speaker 1:some type?
Speaker 2:Yeah. And so that's very specific to each case. Sometimes you need it. Sometimes you don't need it at all. Right.
Speaker 2:But that's something definitely to consider in your situation. Does it make sense? And does does is that person so vital to this organization that I have to have insurance on them? Because if they weren't here, it'd be catastrophic.
Speaker 1:Right. The other thing you wanna do too is ask the bank. Mhmm. I mean, the bank should tell you what insurance they have requirements wise. Is it life insurance?
Speaker 1:Is it disability insurance? There's that business overhead expense insurance, which is if the owner's disabled, that will take care of business expenses for a certain amount of time. So, yeah, there's all those things. And
Speaker 2:What about to your family?
Speaker 1:Yeah. To your family. Right. Most things too because you've got debt outstanding out there. But and that big part of it is, though, is that what does happen on closing day, a lot of times, we've heard this.
Speaker 1:We have it on our list to make sure we cover it, but we've heard from other people where we've gotten phone calls, I need insurance. I'm closing next week. And you're like, that's not gonna happen most likely. Life insurance, if you need that, you better be at least 45 days out, maybe 60 days out on that because you gotta go through underwriting and make sure you got all that covered. And the bank's gonna want that.
Speaker 1:Gonna want that because worst case scenario, if you're not there, they won't pay back.
Speaker 2:Mhmm.
Speaker 1:And so you gotta make sure not only is it business insurance requirements, it's those person insurance requirements that need to be met to make sure you close on time. Because time's money.
Speaker 2:Absolutely. What about vendor contracts, Steven?
Speaker 1:Those are always fun, aren't they? Well, question is, if we go back to the negotiation asset agreement part, did you acquire any of those contracts in that purchase? Or do we have some contracts there that maybe got missed even in it that get unearthed that happens? And so are we assuming a current contract, or are we able to go to that vendor and say, hey. I'm a new practice owner.
Speaker 1:I like a new contract. And typically, you can. Right? Typically, you can go to that vendor and get some new contract deals, which is really important. So that's important for cash flow because not only will they give you better price on the product for maybe 3 to 6 months, but they'll delay billing 3 to 6 months so you can get enough cash flow flowing and be able to pay that, you know, and and stay.
Speaker 1:That just makes you feel a lot better when your bank accounts higher.
Speaker 2:You build it up. Absolutely.
Speaker 1:So I think that's a big part of the vendor contracts and and an understanding, you know, you don't wanna rock the boat right now either. Kinda like keep things the same unless you know something that's glaring, like, I can change. Like, I have 15 products of the same thing on the shelf. I can cut back products. You may not be able to do that walking into that area, but there's a chance to look at it.
Speaker 1:There's a chance to, you know, use competitors, vendors against each other. Hey. Why should I keep you as the as the vendor here on those things? So, yeah, that's a I think it's gonna depend on your time, and you have ability to do that at that point. If you have the ability to do it, negotiate and get it right.
Speaker 1:If you don't, we'll put it on the goals for, let's get that done the next 6 months to a year to figure out the vendor setup.
Speaker 2:I think you'd be surprised at how you can actually get a little bit of a deal if you just ask.
Speaker 1:Oh, yeah.
Speaker 2:Most people just never ask. Right.
Speaker 1:It's like,
Speaker 2:oh, that's what it is.
Speaker 1:Yeah. You never asked.
Speaker 2:And you might get a percent or something. You know? And a percent is a big deal on a $1,000,000.
Speaker 1:It is.
Speaker 2:You know? And so I think I think just ask. There's no what are they gonna say? No?
Speaker 1:Yeah. I mean, great. And they're probably not they're probably not gonna say no. Yeah. Because they they wanna keep your business.
Speaker 1:They wanna keep you happy, especially as a new practice owner. That's something they know that will set with you for a long time. And and that's brings loyalty when you're willing to give. So no. I love that.
Speaker 1:Yeah. People don't ask and and just do that, and you never know what's gonna happen. Start that relationship up. So yeah. We're, you know, getting through this here on on this this buyer business needs and then, you know, licenses.
Speaker 1:We talked about, sales tax, you know, unemployment, all those things, but there's also the the business license, which that gets that's also interesting too, because they're like some of those business licenses. Have you been open? Like, I had to have business license to be open. How long you've been working? Like, there's some ambiguity there.
Speaker 1:So really when yeah. You talk about the checklist. Yeah. The checklist says you need that, but how do you navigate that ambiguity? And, really, that's a case by case business, you know, or a case by case look because we've seen different ways it's it's shaking out.
Speaker 1:I think it's interesting. It's like, you know, when you call the service line, if you called it 4 times, you're gonna get 4 different answers on the same question from 4 different people operator wise. So it's kinda like you might need to call a couple people. Yeah. Call a couple of times so you take it the right answer.
Speaker 1:Mhmm. But, yeah. No. I think that that's one that always, trips people up. It's different in states, different in counties, different in cities.
Speaker 1:You know, heck, we got Saint Louis has they've got the county outside the city or something like that. They've got the Saint Louis city that's not in the county.
Speaker 2:They got a deal.
Speaker 1:And so but that's that's all over, though. There's places like that all over the state of Missouri, all over, different different spots. Even heck, you got people on the border where they live in Illinois, work in Missouri, or like we got, you know, a client in Kentucky that has people living in Indiana that had different, taxation on where you live for your payroll and things like that. So there's checking Another
Speaker 2:reason to use QuickBooks online.
Speaker 1:Right. It'll it'll
Speaker 2:Because it'll catch it.
Speaker 1:It'll catch that. But on that, though, it's like, am I am I insured properly? Do I have the right things here? When I think about business licenses is is understand your lookout. Just get on the phone and call the government, local government on that area, and ask them what you need.
Speaker 1:I think that's the best thing to do. Don't try to figure out on your own. Don't try to Google it. Just call the people or even walk down there to the courthouse, the business, which or not courthouse, but the, you know, the the government is gonna be at the same spot. And, again, go into the business office and get what you need.
Speaker 1:So yeah. So there's there's quite a bit of stuff to set up.
Speaker 2:Absolutely. And I think the the thing to keep in mind is it's not gonna be perfect. You are going to miss something. Yes. There will be, there's a 100% of the time somebody misses something and 30 days in, somebody get a letter Yeah.
Speaker 2:To fix it. It is not the end of the world. Right. Everything is fixable to a point, not medically.
Speaker 1:But, you
Speaker 2:know, for business structure wise, business setup, utilities, bills, everything's fixable. People get it, and it's not a not a cause to freak out.
Speaker 1:Right. Right. You get
Speaker 2:a nasty gram thing IRS, you probably need to deal with that pretty
Speaker 1:quick. But
Speaker 2:Yeah. Small things. Yeah. All fixable.
Speaker 1:Yeah. They are. And that's what, again, gets back to why it is important, though, to to not just be handed a checklist. Have someone that can help you walk through the nuances of what goes on because you do want that blind side of protection. Try to minimize that that chance for that call.
Speaker 1:Mhmm. But that call comes in, generally, it's a misunderstanding. It's not that you did something wrong. It's a misunderstanding just like, you know, client you had that, bought a practice, is not a veterinarian, has a medical director, and has a vendor that thinks thought that they couldn't do the business anymore because they're they owned it as a nonvectionarian and completely just went with this blanket thought. Yeah.
Speaker 1:And and, really, I was worrying for our client and then also relationship damaging for that vendor. So, it's interesting. I tell you what, sometimes you learn something about your vendors through those kinds of processes. How are they gonna here they here to help me, or are they here to hurt me? And in that case, it was like, they're here to hurt you.
Speaker 2:Or they displaying they're terribly disorganized. Yeah. The flow of communication is terrible.
Speaker 1:Right. Well, it brings everyone thinks that these huge corporations must have all this stuff figured out. They'd probably have figured out less than the rest of us do. They don't know the details like we do. They just happen to have enough money and power to push people out of the way when they need to.
Speaker 2:Mhmm.
Speaker 1:So yeah. Yeah. That's interesting. Advocating for independent businesses there is, like
Speaker 2:I did. That's kind of our thing. I think
Speaker 1:it's a this is a gold medal I got.
Speaker 2:You're such a prick. So if we switch gears from buyer needs, owner needs, what do the employees need in this transition? You know, what
Speaker 1:well yeah. The question is, what do the employees know yet too? Yeah.
Speaker 2:I didn't think about that. It's it's That's a good good good point. I didn't even go there.
Speaker 1:Yeah. Have have the employees, you know, sometimes you keep it quiet until it gets to a certain point and then start letting people know because there could be some unease around this transition, depending on is this a new doctor coming in buying buying the practice? Is it a person that's worked there? So we gotta look at the nuances of the the current relationship. Let's assume the employees know everything's going smooth and whatnot.
Speaker 1:So it's the basic things of, hey. Are we continuing benefits that you've got now, adding benefits that you have? You know, are there are contracts? Alright. Doctor contracts.
Speaker 1:What is what does that look like? And and the handbook, does this place have policies and procedures, or do we need to add those in to modernize it to make people feel right? Culture, all those things. What's what's going on there? Not to rock the boat, not to change things overnight, but to start start working on those base basic things that make a difference in employment today.
Speaker 1:And and depending you know, a lot of times when you're buying a a practice, those benefits aren't there. The the Nuance benefits that help with recruitment, help with those things, that they aren't there. So taking a look at that is important. Now let's assume that people don't know. Like, how do you how do you paint the picture that we've got everything in place as a plan?
Speaker 1:I think it's what people wanna know. They're they're we have a plan. Right? We're working with the team that's done this, that's been successful in transitioning, that we have a plan. And, and then, you know, ask ask what feedback questions that the employees have.
Speaker 1:That's important. Get them involved in the process. Obviously, not in, like, you know, the nuance, but the process of, hey. What what what will, you know, reassure you moving forward that we're gonna be successful? What what things we wanna make sure that you feel good that, that day when new doctors, the new owner, is everything's good, rolling.
Speaker 1:So we continue to operate at a at a how we have. Mhmm.
Speaker 2:I wanna talk about the handbook for just a second. Yeah. I think when when we talk about handbook, it's excluding any medical procedure. Correct. When we talk about a handbook, it's saying It's not soaps.
Speaker 2:It's not soaps.
Speaker 1:What what
Speaker 2:time what time do we start? What time do we leave? You know, those kind of questions. And it doesn't have to be a 60 page fine print document. It can be 5 pages long.
Speaker 2:Yeah. It it just needs to spell out these this is what we expect from you. Right. And it needs to be digestible for somebody. Yeah.
Speaker 2:Because they're if it's 60 pages long, they're not gonna read the whole thing. Right. They're just not. They might be the best employee ever. They're not gonna read it.
Speaker 2:Yeah. And so, you know, I think it's important to make that digestible for somebody, that's just walking in the door. Here's the things that we do to be successful, and we need you to be on the same page with us.
Speaker 1:Yeah. Well and simple's better because the more detail you try to get with something, the actual more liability you could create. Because if you don't follow that detail exactly, they don't you know, it it gets nuanced. It's funny. I'm at a pool board meeting last night, and the things that you know, everybody's well intentioned on the board, but they're like, we need a policy for this.
Speaker 1:We need it's just the pool. We don't need a policy for all that stuff. Right? It's like we're you get way too deep in the weeds and then add some longer meetings, more headaches, more paperwork, all those things. Just it's usually, you know, like we have in our handbook.
Speaker 1:Don't do stupid things. It's pretty straightforward. Don't don't do stupid things. And so our handbook is more filled with, like, counter counter events about us. So, you know, organization chart, how companies lined out.
Speaker 1:And that's probably you know, it's a good thing to have too in there. Right? It's like from the service desk to the back end of the kennel help, all those things that they go along with that in that handbooks. And not only is it the the guidelines, but it's the what's going on and and lining out a benefits package, lining out the calendar for, like you said, yeah. When are we open?
Speaker 1:When do we shut down for holidays? All that kind of stuff. Makes people wanna know. Mhmm. So, yeah, it's a nice thing.
Speaker 1:And that probably, you know, that may not have been there before. If it was great. Continue that. If it's not and you hand that to somebody, that's gonna show them, wow. They're organized.
Speaker 1:They got a plan, and this is gonna be great. Mhmm. That simple little little piece of, of work you put together. So, yeah, I like that. I like that that, company handbook, whatever you wanna
Speaker 2:call it. The not handbook handbook?
Speaker 1:Not handbook handbook. Yeah. Whatever you wanna call it. It's all good, but but, yeah, have that in there for for sure. So, yeah, employee needs, obviously, we believe the the team's the most important asset of of any business, especially the practice, the veterinary practice.
Speaker 1:So whatever you need to do to keep them, you know, happy and going. And, you know, it could be a chance also to if someone's not doesn't fit, maybe help move them along. Mhmm. So it it's a good opportunity.
Speaker 2:Absolutely. It is. So one more, Steven.
Speaker 1:Well, I I think that we just, you know, go back to through our 3 part series here. This is the end of the 3 part series. And so in part 1 was all about really it's like the fit. Right? Is this the right fit for someone to buy?
Speaker 1:And is this the right fit for the the owner to get out of business? Because they're gonna make a that you you don't get to call that back. You don't get a month later, we go, oh, I shouldn't have done that. As the as the foreign business owner, as the current business owner, you month later, you're like, I wish I hadn't done that. So really that milestone 1 is so important to get that right.
Speaker 1:Does it fit your needs, your lifestyle as the buyer and as the seller? So so that was a great part. And and we walked into alright. Once you get those things figured out, it's negotiation of of the purchase of the practice. What needs to happen there?
Speaker 1:We've talked some things that Nuance still like accounts receivable. Yeah. Hopefully that's been hit vendor contracts. Are you keeping your truck? The truck staying here, you know, nuances like that that need to need to be worked out.
Speaker 1:And then as you get into you know, hopefully, you've identified who's who's financing this thing. Right? And milestone 2 getting that figured out. And then once you get that, we're we're here part 3 where it's the it's the closing procedures. There's no reason you would have switched utilities and milestone 2.
Speaker 1:There's no reason you
Speaker 2:would have
Speaker 1:talked to insurance and milestone 2. There's There's no reason you would have talked to insurance and milestone 2. There's just those things don't happen. So we're we're at that point where it's like this is happening. Milestone 3 is like we're 99% sure this is going to cross the finish line.
Speaker 1:We've got all the pieces in place. I need to make this happen and be successful. So, you know, really it's getting down to what does a closing day look like? And so when do we close? What's an ideal time to close?
Speaker 1:I mean, really, it it seems for a current business owner, their their ideal date to close is December 31st, the end of the year, because, or, you know, what they can do is close it actually and and put the purchase in the next year, The the sale of the practice in the next year so that you don't have to the taxation on their side. Right? They they put on this big income on top of their current income, which raises taxes across the board. So tax minimization on their part. You know, the new owner, I don't know that it really matters when they would buy at the end of the day.
Speaker 1:They could buy any time taxation wise. It's really we're looking at that timing for that. So let's let's call December 31st is is closing day. And what's that look like? If you are if you're buying real estate, you're going to be at a title office going through closing procedures like you're buying a house.
Speaker 1:If you're buying the, just the business, I mean, it may be sitting in our office with a notary signing some bank papers or or, you know, an attorney's office somewhere else. You're not going to sit in a title office because there aren't title switching, switching hands. So it's kind of interesting what happens on on that day.
Speaker 2:Yeah. DocuSign.
Speaker 1:DocuSign. Right.
Speaker 2:You might be at your computer in between appointments. DocuSign out the door.
Speaker 1:Could be. Could be. Well, what's happening, though, too, is that that that your current owner's counting inventory, though. Because on that day, there's something that's important. That's that asset allocation.
Speaker 1:And I wrote it down because I don't want to transcribe the numbers, but there's an asset allocations form 8594. And what's really important about that is that those things are going to spell out how much inventory was in there, the equipment you purchased, the goodwill you purchased, all those things that are an asset purchase agreement on the buyer side and on the seller side need to match up because that's how government's going to look at taxation. And so that's why we do that asset allocation way back when and try to estimate taxes and those things, because that's going on that piece. Only thing that really changes that day could be, well, maybe AR. We did some of AR that, you know, we took over or, you know, what's inventory at?
Speaker 1:And ideally, as we're getting down towards that day, probably, you know, we talk about vendor contracts 45 days ago. I want to tell that current owner to draw inventory down as low as possible that we can because I want to buy new inventory cheaper price than I can buy from you. So those are the things had or happened on closing day. And then, you know, it's kind of nice the end of the year because December 31st That time, there's not a whole lot going on. I mean, holiday stuff, but animal stuff wise, January is a slower month too.
Speaker 1:So that's kind of maybe not a great thing cash flow wise, but if you've extended out terms of vendors and things like that, you may have done a whole lot of bills. You got operating capital from the bank coming in so you can you can make those things happen. So, yeah, I think is that we're looking at this closing days always is the same ambiguous thing as people. It's not like keys to a car where you sit down and
Speaker 2:you walk out, you got
Speaker 1:all the title in a car, you know, and you got something like a physical thing versus a business. If you even if you do buy the building, you're like, well, I've been working at it anyways, and now I own it. It kinda just doesn't feel like what transacted here was.
Speaker 2:I have most most of the time, people feel like it's anti climatic. Yes. Like, we've been working on this. This has been a super important thing. They they they say, I thought it would feel different.
Speaker 2:Yeah. Like, and not that it was bad Yeah. But it was like, this is it. Yeah. This is what we did.
Speaker 2:Yeah. And that's kinda why sometimes I wish we would just sign real papers because it it it does kinda make it a little bit more fulfilling, I guess.
Speaker 1:Yeah. Especially with DocuSign.
Speaker 2:Yeah. When it's DocuSign and you literally step out of an appointment to hit DocuSign and you're right back into an appointment, it's like, that's great, and I'm glad you're working hard, but it's there's an appreciation or significance to that moment that maybe maybe we miss by just clicking a button on a computer.
Speaker 1:Yeah. No. It it feels that. Plus, yeah, you don't you don't have something to, like, hold in your hands. Like, you don't get to go home with, like, like, look at this new car in the driveway.
Speaker 2:Look at this folder. Throw it down on the table. I got I own this now. Yeah.
Speaker 1:So so I think, you know, it's something we, just we could look at it at the ProPartners team here with our DDM transitions is to say, what can we do to make that a little more exciting? You know, what happens at the practice? What more, you know, I wanna call it grand reopening, but that trends you know, that that handing off of the keys make it more of a celebration between owner Mhmm. You know, to buyer and those things. So that's a great point you bring up as we look at that because it has felt like I mean, this is the biggest purchase you're probably gonna make in your life.
Speaker 1:Yeah. You're you might be, you know, looking at a million, 2,000,000, $3,000,000 deal here. Mhmm. You thought your student debt was a big deal. It's not anymore.
Speaker 1:No. Well, the good thing is now that you own a business, you're gonna make you're gonna bring in more money and pay that student debt off quicker. That student debt's not gonna feel like that big of a deal. That's kinda funny when you people like, I got $2,000 student debt. I'm gonna take it on $2,000,000 loan for business.
Speaker 1:You can.
Speaker 2:Mhmm.
Speaker 1:Once you do, they're like, that $200,000 student loan is no big deal anymore. Yeah. It's it's the least part of my liabilities, and I can afford to pay that off. So, yeah, that's a good point, Gail. How do we because you you want that energy and that fire going into it.
Speaker 1:You do. Yeah.
Speaker 2:The last couple I've done, I've had that kinda same DocuSign came through the computer. Sign. Okay. I'm the owner. Back to appointments.
Speaker 2:Like, it's like we kinda high fived and
Speaker 1:Yeah.
Speaker 2:Back to appointments. It's like
Speaker 1:there's weight. Even so it's kinda like you've been pregnant. Uh-huh. Right here? And, maybe it's a horrible correlation, but it came to mind.
Speaker 1:I'm gonna go with it.
Speaker 2:Let's just not.
Speaker 1:Let's go with it.
Speaker 2:I think I see where
Speaker 1:you're going with it. Right? Baby's born. That's what it is. It's like but you don't have this, like, baby to go show off to everybody, and grandma and grandpa and mom and dad aren't showing up to see a new baby and all that kind of stuff.
Speaker 1:So, yeah, how do you get maybe it's better. Like, how do you get family involved?
Speaker 2:Yeah. How do you have it? How do you celebrate it? How do
Speaker 1:you celebrate it? That is a that's a great point. I think as we're transparent on what we do here, we always want to find better ways to do that because, yeah, it's it's like it's that all this adrenaline, nervousness, anxiousness spent running the whole time, and also it's just like Here we are. And I'm still working same schedule I was before. What's changed here?
Speaker 2:Nothing other than who owns it. But, you know, the other thing that I can't stress enough, and whoever's quarterbacking this this for you, maybe it's yourself, have a plan for closing day.
Speaker 1:Mhmm. So
Speaker 2:like when the papers are coming out, where are we going, what are we doing, who's gonna be there, plan it out, write it out because it's you're we stressed the math. And so, you know, just make sure that you understand, I'm gonna expect this to come to my computer at 12:12 o'clock or 8 o'clock or whenever because you don't need that extra stress in your life to to just just have a plan for that day.
Speaker 1:Yeah.
Speaker 2:Line it out with whoever needs to be involved, the banker, the lawyer, the whoever's gonna be there. Right. Plan it out. Yeah. Because it's I I can't tell you how many times I've I've done this, and the person that's behind the clinic text me is like, when's it when's this coming?
Speaker 2:When's I'd be like, it's fine. Yeah. Don't worry about it.
Speaker 1:Yeah. It'll be okay.
Speaker 2:And, you know, so it's much easier to just have a plan in concrete of when these things are gonna happen long in advance so you're not worried about it.
Speaker 1:I I like the, I like the idea, though, of the, the business celebration. Mhmm. How do you how do you celebrate that day, on both sides for the person selling the practice, person buying the practice, and make it make it a deal. Yeah. Make it a deal.
Speaker 1:Get the community involved. There's some things you can do.
Speaker 2:We worked on one for over a year, and they got the DocuSign, signed the documents, and it was so not a big deal. They didn't even call me and say it was done. That was how that's how, like, how much we've removed from the, like, you know, the boardroom, the heavy pen, like the,
Speaker 1:you know, the stuff.
Speaker 2:So I
Speaker 1:think I think it's because how life moves the veterinary practice that they're just always going. I think that shows also that part of it. It's like you can't take 2 minutes to stop doing what you're doing to celebrate because you've got another animal to see. And that stress of that and that that we have to be able to take time to take a step back, reflect, enjoy those moments, and and because that will that will give you fuel. Mhmm.
Speaker 1:That'll that'll give you fuel whether you're extroverted or introverted. That's gonna give you fuel one way or another and figure out. And maybe that's part of it because a lot of people are introverted and don't wanna celebrate that. Kinda feel like I don't wanna put myself out there. But it you gotta think about not just you.
Speaker 1:It's the team too. It's everybody involved in it. So no. Well, hey. We got a closing day.
Speaker 1:We we found out. Not very exciting on closing day, but let's make that exciting. And and and so we could add that to, our milestone 3 Mhmm. Is, you know, closing excitement. Yeah.
Speaker 1:Make it a deal. Make it exciting. And I think that's yeah. Because we've kinda tried to also been, like, make that transition quiet because people people worry about what they've known I'm new owner. Well, people want a new owner.
Speaker 1:That's great. Why are we hiding behind anything? Let's just get it out there and promote it. You're a business owner now. And the best thing you can do is market you, your practice, your people.
Speaker 1:So I love it. That's a great way to finish part 3 today and put that out there for everyone to hear and see and and listen to. And so, you know, as always, hey, this has been a lot of fun. We're on episode 14, so we're gonna be pretty soon through a full year of doing this. And so we appreciate everyone's been listening, liking, subscribing to our channel.
Speaker 1:And and again, check out the better podcast.com and see what is on there. Contact us. Let us know anything you think we should cover, how we can advocate for the veterinary community. And, hey, we're just looking forward to continuing on with what we're doing. So Kale Flaspoeller, Steven Herman, Belinda Zawane over here working the controls.
Speaker 1:It's great to be on today, and look forward to the next one. Have a good one.
Speaker 2:Peace and blessings. Adios.