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From the VetPartners Experts: What’s a No-Lo Practice?

frustrated veterinarian up late at computer
Dec 21, 2018 at 6:03 pm
Karen Felsted

A no-lo practice is one that has no dollar value, or an exceptionally low value, from the perspective of a buyer or investor (i.e., they aren’t going to be willing to pay much for this practice). There have always been a few no-lo practices around, but the number of these has been increasing, and the type of practice that falls into this category has been changing as well. 

Historically, no-lo practices were single-doctor practices offering dated medicine from marginal facilities. Today, any practice—large or small, general or specialty, urban or suburban, etc.—could be a no-lo practice. The value of a veterinary hospital is largely driven by its profitability, and any practice can have a low level of profit, even those who practice great medicine in beautiful facilities. 

Why you need to know what a no-lo practice is

The taxable income or net income on a practice’s tax return or profit-and-loss statement almost never represents the true operating profitability of a practice. Because of this, many practice owners have no idea whether their practice is profitable or not until they are ready to sell and they have the hospital appraised. At that point, it’s too late for most sellers to make significant improvements to their practice profits and practice value. This is why it’s critical for a practice owner to understand profitability in general—and the profitability of their practice in particular—long before they are ready to sell.

Truly understanding your practice’s value isn’t something that has to keep you up at night.

It’s obvious that a practice owner would want to have this information, but who else should be interested?

  • Potential buyers need to know, because profits drive the value and what they should be willing to pay for a practice. 
  • Practice managers need to know, if part of their job is to make or keep the practice profitable.
  • Practice consultants need to know, so they can talk to their clients about the concept and direct them to a financial expert who can determine the profitability and/or value.

How to avoid becoming a no-lo practice

An excellent starting point in getting the information you need is the updated version of VetPartners’ “The No-Lo Practice: Avoiding a Practice Worth Less.” This document will help you understand some key elements of the no-lo concept, including:

  • A definition of a no-lo practice
  • How profitability is calculated
  • Key drivers of profitability
  • Recommendations for growing revenue and controlling expenses

Also included is the No-Lo Practice Threat Advisory Worksheet to help you calculate your own profit margin. And, the whole thing is free! What more could you want? Make a New Year’s resolution to download “The No-Lo Practice: Avoiding a Practice Worth Less,” read it, and complete the worksheet for your practice.

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Karen Felsted
Karen Felsted, CPA, MS, DVM, CVPM, CVA has spent the last 20 years working as a financial and operational consultant to veterinary practices and the animal health industry. She also spent three years with the National Commission on Veterinary Economic Issues as CEO. She is active in multiple veterinary organizations, has written an extensive number of articles for a wide range of veterinary publications, and speaks regularly at national and international veterinary meetings. In 2011 and 2017, she was awarded the Western Veterinary Conference Practice Management Continuing Educator of the Year and in 2014, the VetPartners Distinguished Life Member Award. She owns PantheraT Veterinary Management Consulting. For more information, visit pantherat.com.
Karen Felsted

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