QoE & Sell-Side Prep for Veterinary Practices
Veterinary consolidators have spent the last decade buying practices at multiples that make human medicine jealous. The prices are real. So is the diligence — and the first thing they normalize is what it costs to replace you at the exam table.
What a buyer is really paying for
A veterinary buyer is paying for the practice's earnings after every doctor, including you, is paid a market production wage. In an owner-run hospital, your compensation and the practice's profit blur together, and normalizing DVM comp is the adjustment that moves adjusted EBITDA — and therefore the price — more than any other single line.
They're also paying for durability: wellness plans, the recheck and recall cadence, a bonded active-client base, and associate doctors who keep producing whether or not the owner is in the building. Recurring wellness-plan revenue and a practice that isn't one departure from a cliff are what justify the multiples this sector is known for.
EBITDA is what the multiple attaches to, but for a veterinary practice the DVM-comp normalization and associate coverage decide whether that EBITDA survives the buyer's model.
Add-backs and DVM dependency
The usual legitimate add-backs apply — personal vehicles, a relative on payroll, one-time equipment, conference travel that leaned heavily on the word conference. Each raises adjusted EBITDA when documented well. But the dominant adjustments are compensation and dependency: normalizing every doctor's pay to a market production rate, and showing that the practice's revenue doesn't hinge entirely on the owner-vet's personal caseload.
We normalize DVM and staff compensation, correct any wellness-plan deferral, and quantify how production is spread across doctors — so a consolidator's biggest concerns are answered with numbers before they're even raised.
How Kaizen runs it
We run a diligence-grade scan of your trailing twelve months, normalize doctor and staff compensation, restate revenue into recurring wellness-plan versus fee-for-service, correct wellness-plan deferred revenue, and build the Reported-to-Adjusted EBITDA bridge a buyer's QoE firm will respect. You get a workbook, a narrative memo, and a clean-up list of the things to fix before the buyer's team finds them.
The goal: present earnings that already reflect market pay for every doctor, so a consolidator confirms your number instead of quietly rebuilding it.
What's included
- Trailing-twelve-month Reported → Adjusted EBITDA bridge with support for every add-back
- Doctor and staff compensation normalized to defensible market production rates
- Revenue restated into recurring wellness-plan vs. fee-for-service and services vs. product/pharmacy
- Wellness-plan deferred revenue corrected to match delivery
- Production spread across doctors quantified — how much depends on the owner-vet
- Active-client base and recall cadence quantified (buyers ask — have the answer ready)
- Working-capital peg estimate so the closing true-up doesn't ambush you
- Narrative QoE memo plus a defensible workbook you can hand to advisors
Pricing
Straight answers
Why is my own compensation the first thing they adjust?
Because a buyer must pay a doctor to handle your caseload after you leave, and that wage comes straight out of the earnings they're purchasing. A defensible, market-based DVM comp normalization is the difference between an EBITDA that holds and one diligence marks down.
The multiples I hear about sound too good to be true. Are they real?
For well-run practices with recurring revenue and associate depth, the sector really has traded high — but those multiples are underwritten on normalized earnings, not reported ones. The prep exists to make sure your normalized number is strong and defensible enough to earn a number in that range.
Isn't this what the buyer's QoE firm does anyway?
They do it to protect the buyer, and their assumptions run conservative. Sell-side prep runs it first, on your side, so you bring defensible numbers rather than accepting theirs.
How far ahead of a sale should we start?
Ideally 6–12 months, so there's time to firm up wellness-plan accounting and add or document associate coverage that reduces how much the practice leans on you.
Related
Free 20-minute books assessment
We'll show you the five things we'd fix first in your books — useful whether you hire us, hire someone, or do neither.
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