10 Concepts We Can Learn About Buying Petcare Businesses From How2Exit's Interview W/ Kevin Moyer
Here is what my team and I learned from this interview: (These are notes from team members, writers, sometimes AI, and even listeners who submitted what i learned loosely edited and shared here) - If it seems a bit unrefined, you're reading our notes, so. yeah. -Ron
Concept 1: Adjust Out Personal Expenses
When it comes to buying or selling a business, adjusting out personal expenses is an important part of the process. This is because personal expenses can be mischaracterized as business expenses, which can lead to inaccurate financial statements and ultimately lead to a bad deal.
In order to adjust out personal expenses, it is important to understand the difference between what is considered a personal expense and what is considered a business expense. Personal expenses are those that are not related to the business, such as vacations, entertainment, and other non-business related activities. Business expenses, on the other hand, are those that are necessary to run the business and are related to the operations of the business.
When it comes to adjusting out personal expenses, it is important to have a thorough understanding of the business's financials. This includes analyzing the income statement, balance sheet, and cash flow statement to identify any discrepancies or inaccuracies that may be present. Additionally, it is important to look for any non-recurring or one-time items that may have been mischaracterized as business expenses.
Once the financials have been analyzed, the next step is to adjust out any personal expenses that have been identified. This can be done by making adjustments to the income statement, balance sheet, and cash flow statement to remove any personal expenses. This process is important to ensure that the financials accurately reflect the true cost of running the business.
Adjusting out personal expenses is an important part of the process when it comes to buying or selling a business. It is important to have a thorough understanding of the financials and to make adjustments to the financial statements to ensure that the financials accurately reflect the true cost of running the business. Doing so will help to ensure that the deal is fair and that the buyer and seller are getting the best possible outcome.
Concept 2: Invest In Pet Businesses
When it comes to investing, pet businesses can be a great option. We are seeing an increasing amount of private equity entering the veterinary space, both at the clinic level and the pet product level. This is due to the increasing demand for pet care and the fact that there are only 32 vet schools in the U.S., making it highly competitive to get into. Pet owners now are spending more on pet care, from organic foods to vet care, and this trend is expected to continue.
The pet industry is relatively recession-proof as well. During times of economic uncertainty, people tend to look for something safe and secure to invest in. Pet owners also may be more likely to get a pet during times of uncertainty, as it can provide companionship and comfort.
Investing in pet businesses can be a great option for those looking for a secure and recession-proof investment. Private equity is already investing heavily in the pet industry, and it is expected to continue to grow. With the increasing demand for pet care and the relatively secure nature of the industry, pet businesses can be a great investment opportunity.
Concept 3: Veterinarians Want To Treat Animals
One of the most popular areas of pet businesses is the veterinary sector. In many states, owning a veterinary clinic requires that the owner be a veterinarian. However, this can be circumvented by setting up a medical service organization (MSO). This allows the owner to own the facility while the veterinarian is employed by them. It is important to note that while the owner cannot dictate the treatment, medicine, or other aspects of the clinic, they can still benefit from the increased revenue of a larger clinic.
The average DBM clinic can bring in anywhere from six to seven hundred thousand dollars in revenue per year. This number can increase significantly with the addition of more clinics, as the owner can benefit from a media multiple accretion. Additionally, since much of the pet care industry is private pay, it is not as affected by insurance companies and can be a more secure investment.
Veterinarians who are considering selling their clinics may have mixed feelings about the process. Private equity can be seen as the “big bad wolf”, but there are benefits to selling to a corporate aggregator or private equity consultant. By doing so, a veterinarian can focus more on the clinical side of the job, which is likely what they are most passionate about. Additionally, it can free them from the responsibilities of managing employees, finances, and other aspects of the business.
Overall, veterinarians want to treat animals and help them in any way they can. Private equity can provide them with the freedom to do just that, while still benefiting from the increased revenue of a larger clinic. It is a great opportunity for those looking for a secure and recession-proof investment.
Concept 4: Aggregators Can Modernize Vet Care
Aggregators are a great way to modernize vet care. They can bring in new technologies and operational levers to improve performance. This can include things like charting out next-day appointments, scheduling patients more tactically, and even using telehealth to treat more minor symptoms. By using these tools, vets can increase the pace of each visit, allowing them to see more patients in a shorter amount of time.
Aggregators can also help vets find the right young veterinarian to take over their clinic. By joining an aggregator in a close geographic area, vets can leverage the staffing model that the aggregator consolidators set up. This can help them find the right person to take over their clinic and ensure that they are leaving it in good hands.
Overall, aggregators can be a great way to modernize vet care. They can bring in new technologies and operational levers to improve performance, as well as help vets find the right young veterinarian to take over their clinic. By utilizing these tools, vets can increase the pace of each visit, allowing them to see more patients in a shorter amount of time. This is a great opportunity for those looking for a secure and recession-proof investment.
Concept 5: Understand The Human Element
However, when it comes to vet care, it's important to understand the human element. Many vets have dedicated their lives to caring for animals and built up their practice over many years. When it comes time to sell, it can be difficult for them to let go of the identity they have created. They may be hesitant to give up this identity and the emotional attachment that comes with it. This is why it's important for advisors, bankers, and diligence professionals to understand their clients and the target, and to take the time to help them understand the entire process.
When it comes to selling a practice, it's important to take the time to understand the seller's needs and concerns. Advisors, bankers, and diligence professionals should be prepared to slow down the process if needed, and to provide support and assurance to the seller. It's also important to remember that sellers are human beings and that they may be struggling with the idea of letting go of their identity. By understanding the human element, advisors, bankers, and diligence professionals can help sellers make an informed decision and feel comfortable with the process.
Concept 6: SBA Loans Value People, Not Numbers
One of the most important factors to consider when selling a practice is the value of the people involved. Private equity firms may be focused on the numbers and the transaction, but it's important to remember that the people behind the business are what makes it successful. Without the human capital, a business would not be able to function. That's why it's so important to recognize the human element when selling a practice.
When it comes to SBA loans, the value of the people involved is even more important. Small businesses may not have the resources to attract large private equity firms, so they need to look for alternative financing solutions. SBA loans are an excellent option for small businesses because they value people over numbers. The loan process is designed to be more mindful and empathetic to the seller's situation. The lender is more likely to take into account the seller's unique circumstances and provide a loan that is tailored to their needs.
Ultimately, it's important to remember that SBA loans value people, not numbers. By understanding the human element, advisors, bankers, and diligence professionals can help sellers make an informed decision and feel comfortable with the process. This is especially important for small businesses, as they may not have the resources to attract large private equity firms. With an SBA loan, small businesses can feel confident that their unique needs and concerns will be taken into account.
Concept 7: Maximize Value To Attract PE
To maximize value and attract private equity firms, it is important to understand the factors that influence a PE firm’s decision to invest in a business. These factors include the size and scale of the business, the revenue potential, the competitive landscape, and the potential for value-add opportunities. For example, if a business is located in a major metropolitan area, it may be more attractive to a PE firm than a business located in a rural area. Additionally, if the business has potential for growth or expansion, this may be an attractive factor for a PE firm.
Moreover, it is important to understand the different deal structures that PE firms offer. Generally speaking, PE firms will offer a cash up front payment, followed by an earn-out structure. Additionally, PE firms may offer a three to five-year exit plan or a long-term investment strategy. Knowing the different deal structures available can help sellers understand what will be most beneficial for their business.
Finally, it is important to understand the value of a business and how it can be maximized. This includes assessing the competitive landscape, the potential for value-add opportunities, and the potential for growth or expansion. Additionally, understanding the economic uncertainty of the market and the interest rate sensitivity can help sellers make an informed decision.
Overall, understanding the factors that influence a PE firm’s decision to invest in a business, the different deal structures available, and the value of a business can help sellers maximize value and attract private equity firms. By taking the time to understand the human element, sellers can make an informed decision and feel comfortable with the process.
Concept 8: Vertically Integrated Pet Care
Vertically integrated pet care is an emerging trend in the pet industry. With the rise of pet owners seeking more comprehensive care for their furry friends, private equity firms have been investing in a variety of businesses that provide pet care services. From pet supplies, pet products, pet foods, to pet lifestyle brands, private equity firms are looking for ways to become vertically integrated and create a comprehensive pet care experience.
The goal of vertically integrated pet care is to provide pet owners with a comprehensive experience. This includes providing veterinary services, pet supplies, pet products, pet food, pet lifestyle brands, and even pet ambulatory services. By creating an all-in-one experience, private equity firms are able to maximize value and create a more convenient and appealing experience for pet owners.
In addition to providing pet owners with a comprehensive experience, private equity firms are also looking to increase revenue generation. This includes increasing the number of cases seen per day, extending hours, shortening case visits, expanding staff, and relying more heavily on technology. By optimizing systems and software, streamlining the order to cash and procure to pay methods, and improving working capital management, private equity firms can maximize efficiency and maximize value.
Finally, private equity firms are looking to create a seamless financial reporting system that can be easily integrated into a private equity fund. By creating a comprehensive financial reporting system, private equity firms can ensure that their investments are secure and that they are able to maximize value.
Overall, vertically integrated pet care is an emerging trend in the pet industry. By understanding the different factors that influence a PE firm’s decision to invest, the different deal structures available, and the value of a business, sellers can maximize value and attract private equity firms. By taking the time to understand the human element, sellers can make an informed decision and feel comfortable with the process.
Concept 9: Finite Supply, Infinite Demand
One of the biggest challenges in the pet care industry is the finite supply of veterinary professionals and the seemingly infinite demand. With the US Bureau of Labor Statistics estimating that by 2030, there will be a need for 41,000 more veterinarians, it is becoming increasingly difficult to meet the demands of pet owners. Private equity firms are looking for ways to plug this gap and match the finite supply with the infinite demand.
One way to help bridge this gap is to invest in mobile veterinary clinics. By investing in mobile veterinary clinics, private equity firms are able to bring veterinary services to pet owners who may not have access to traditional veterinary services. Additionally, mobile veterinary clinics can help to reduce the cost of veterinary care, as they are often cheaper than traditional veterinary clinics. This is especially beneficial for pet owners who may not be able to afford traditional veterinary services.
Another way to bridge the gap between finite supply and infinite demand is to invest in veterinary schools. By investing in veterinary schools, private equity firms are able to increase the number of veterinary professionals in the market. This can help to increase the supply of veterinary professionals and reduce the demand. Additionally, investing in veterinary schools can help to reduce the cost of veterinary care, as it can help to decrease the cost of tuition.
Finally, private equity firms can invest in technology solutions that can help to bridge the gap between finite supply and infinite demand. Technology solutions such as telemedicine and online pet care services can help to reduce the need for traditional veterinary services. Additionally, technology solutions can help to reduce the cost of veterinary care, as they can help to reduce the cost of providing veterinary services.
Overall, private equity firms are looking for ways to bridge the gap between finite supply and infinite demand in the pet care industry. By investing in mobile veterinary clinics, veterinary schools, and technology solutions, private equity firms can help to increase the supply of veterinary professionals and reduce the demand. Additionally, these investments can help to reduce the cost of veterinary care, making it more accessible for pet owners.
Concept 10: Team Is Key For Success
When it comes to success in the pet care industry, team is key. Private equity firms should focus on building a team of experts that can help to bridge the gap between finite supply and infinite demand. This team should include individuals from a variety of backgrounds, including finance, operations, technology, marketing, and veterinary care. By having a team of experts, private equity firms will be able to identify and invest in the best opportunities in the pet care industry.
Additionally, private equity firms should focus on building a team of individuals that can provide the best customer service. This team should be made up of individuals that are knowledgeable about the pet care industry, as well as individuals that are passionate about helping pet owners get the best care for their pets. By having a team of individuals that are passionate about providing the best customer service, private equity firms can ensure that they are providing the best care to their customers.
Lastly, private equity firms should focus on building a team of individuals that can provide the best support for their investments. This team should include individuals with experience in the pet care industry, as well as individuals that are knowledgeable about the current state operating model. By having a team of experts, private equity firms can ensure that they are making the best decisions for their investments.
In conclusion, team is key for success in the pet care industry. Private equity firms should focus on building a team of experts that can help to bridge the gap between finite supply and infinite demand. Additionally, private equity firms should focus on building a team of individuals that can provide the best customer service and support for their investments. By having a team of experts, private equity firms can ensure that they are making the best decisions for their investments and providing the best care to their customers.
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