You have worked long hours for many years. You have missed your children’s recitals or other events because your clients wanted or needed you to treat their horses. You have sacrificed a lot to build a successful veterinary business. But what is the value of your hard work? Was it worth the time, energy and emotional efforts you put into it?
Here are 20 questions you can ask yourself to find out. Each question has five possible answers. Choose the answer that best describes your practice. You will notice there is a number next to each answer. When you have finished, add up those numbers to get your score, then I will give you quick summary as to what it means.
1. Which one best describes your gross profits over the last five years?
- (5) Improved every year
- (4) Improved overall, but not every year
- (3) Remained steady over the span of five years
- (2) Gross profits have been erratic over the years
- (1) They have gone down over the span of five years
2. Assess historical revenue?
- (5) Increased every year by more than 5%
- (4) Increased over the five years but modestly
- (3) Remained constant every year
- (2) Annual revenues have gone down in two of the last five years
- (1) Annual revenues have gone down steadily over the last five years
3. Assess the overall market stability within your community?
- (5) Stable and has gown every year for all our products and services
- (4) Our market has grown over the last five years, but not every year
- (3) Our market has remained constant, but no real growth
- (2) Our market has been erratic with some products losing ground
- (1) The market has shrunk overall
4. Describe your historical footprint within your market(s) over five years?
- (5) Our share has increased every year
- (4) Our share has gone up two or more years of the five years
- (3) Our share has retained the same
- (2) Our share has been erratic over the five years
- (1) Our share has gone down over the last five years
5. What percentage of your client base has been with you three or more years?
- (5) 80% or more
- (4) 60-80%
- (3) 40-60%
- (2) 20-40%
- (1) 20% or less
6. What percentage of your revenue comes from your largest client?
- (5) 15% or less
- (4) 15-25%
- (3) 25-50%
- (2) 50-75%
- (1) 75% or more
7. Which one best describes the competition in your market place?
- (5) We are clearly the dominate player and competition is decreasing
- (4) We share that dominance with another competition
- (3) A handful control 80% of the market
- (2) Competition has been increasing
- (1) Our margins have been decreasing due to increased competition
8. What has been your experience with product or service obsolescence?
- (5) We have had little to none over the last five years
- (4) We have increased spending to counter future obsolescence
- (3) We find markets elsewhere to prevent obsolescence
- (2) We have experienced inventory losses as a result of obsolescence
- (1) Our rate of obsolescence has been increasing each year
9. Which one best describes your overhead expenses the last three years?
- (5) We have reduced this as a percentage of sales the last few years
- (4) They have remained consistent as a percentage of sales
- (3) We have had selective increases in areas we cannot control
- (2) Cost increase are pressuring our prices
- (1) Cost are increasing faster than our pricing power can compensate
10. Which best describes your use of capital expenditures for equipment?
- (5) We have very little capital expenditures required in our company
- (4) We have updated equipment with no capital expenditure requirements for now
- (3) We are currently upgrading equipment we had budgeted for
- (2) We are spending more than our yearly average
- (1) We need to spend a lot and we can’t get the financing
11. Which one best describes your experience with outside lenders?
- (5) No debt, and we don’t intend to borrow in the near future
- (4) We have had a bank line for years, but have used it rarely
- (3) We regularly use a bank line
- (2) We continuously use the bank line
- (1) We are in breach of our loan terms and restricted on advances
12. Which best describes the stability of your organization?
- (5) There is no single employee that could materially affect our business with their sudden absence
- (4) We have backup in critical positions
- (3) Not all critical positions are backed up
- (2) We lack the depth to backup
- (1) We are totally dependent on one individual
13. Which one best describes the regulatory environment of your business?
- (5) We are under the radar because we are very compliant
- (4) We have a few compliance laws to be concerned about, but never have been in breach
- (3) We have had numerous inspections, but never have been written up
- (2) We have many regulations to deal with and are not very compliant
- (1) We are currently under investigation for regulation violations
14. Describe your environmental and/or OSHA risks?
- (5) We have no OSHA or environmental issues with our business
- (4) We had to make adjustments for new property laws and OSHA requirements
- (3) Our business requires continuous monitoring from outside agencies
- (2) We are in current regulation audits by agencies
- (1) We have regulatory issues which could materially affect the business
15. Which best describes the business’s maintenance of medical records?
- (5) We have extensive controls on all medical records
- (4) We have only a limited amount of control
- (3) We have no control or protection
- (2) We assume our medical records are safe and defensible
- (1) We have no controls in place and are not planning on adding any
16. Which one properly describes the planning process of your business?
- (5) We have frequent planning meetings with all management level employees and make adjustments as needed
- (4) We have a business plan, which originates with the owner and the management team and is reviewed on a periodic basis
- (3) We have department plans, but no master plan
- (2) We have a budget or revenue forecast and that is the extent of planning
- (1) The owner has the plan in his head and on occasion informs the staff of his plans
17. What and how do we use marketing tools?
- (5) We use our website as the hub for social media, continuing education, and written aids for our clients and it is effective
- (4) We have a website and add content on a regular basis, and periodically use social media to reach clients
- (3) We have a website and on occasion add new content
- (2) We have a website
- (1) We have no marketing tools
18. Describe your Financial Acumen and do you use any of these tools?
- (5) We know and use financial statements to manage our business
- (4) We understand financial statements, but review them infrequently
- (3) We rely on someone else to review them and advise the business
- (2) We receive financial statements and place them in a drawer and never use them
- (1) Rely on the checkbook for all of my financial information
19. Which best describes your Transition Plan?
- (5) We have a Transition Plan for exiting the practice in place and continually update the plan
- (4) We have started the process by having valuations performed and meeting with a Financial Planner
- (3) We know about it, but just have not had the time to start the process
- (2) We believe that when the time is right we will sell the business and that is our plan
- (1) I plan to work until I have to give up practice, then I will consider some type of plan
20. Do you use and understand valuations for improving your business
- (5) We use a valuations for strategic planning, buy-sell agreements, and financial planning
- (4) We had a valuation done for the purpose of a buy-sell agreement
- (3) We know about valuations, but are not sure why we should have it done on a regular basis
- (2) We are planning on getting one in the next five years because the owner is planning on retiring and wants to sell the business
- (1) We have never had a valuation for our business because we know it is worth last year’s gross revenue
What is your score? Business owners who score at least 80 points are ready to transition both themselves and their business to the next wave of entrepreneurs. If you scored less than 80 you have some work to do to prepare your business for transitioning.
In my next article we will discuss strategies on what you can do to put your veterinary business back on track to improve. I will say right now it will take you several years of working on your business to see the positive results, and valuations are a part of this process.