Business, Main Street / SMB

How to Underwrite a Veterinary Practice

Underwrite a veterinary practice by measuring production per veterinarian, active patient count and revenue mix across wellness, diagnostics, surgery and pharmacy, then normalizing EBITDA for a market salary to the owner veterinarian. The metrics that matter most are doctor production, active client trends, associate retention, and adjusted EBITDA after paying every DVM at market.

What makes veterinary practice underwriting different

A veterinary practice earns revenue from veterinarians examining, diagnosing and treating patients, plus diagnostics, pharmacy and boarding or grooming. Value depends on the number of active clients, visit frequency and the productivity of each doctor. The constraint is veterinarians, who are in short supply in many markets, and support staff. Owner veterinarians often produce a large share of revenue and also take profit distributions, so separating clinical pay from ownership return is the key normalization. Pharmacy revenue faces competition from online sellers, and emergency and specialty hospitals have different staffing and margin profiles than general practices.

Lenders that specialize in professional practices are comfortable lending at high leverage to veterinarians buying practices, focusing on historical cash flow, the buyer's clinical credentials and whether clients stay after transition. Corporate consolidators and private equity backed groups value practices on adjusted EBITDA after replacing the owner's clinical work with a market salary, and they pay for growth markets and doctor depth. Equity buyers may pay higher multiples than an individual veterinarian can finance, but they depend on retaining the selling doctor for several years, often through rollover equity and employment agreements.

Key metrics

How to underwrite it, step by step

1. Export practice management system data for active patients, visits, new clients and revenue by category.
2. Allocate production by veterinarian and identify owner-dependent revenue.
3. Replace the owner's clinical compensation with a market salary and normalize other owner expenses.
4. Review associate contracts, non-compete terms and compensation structure.
5. Inspect equipment, including imaging, lab analyzers and surgical tools, and estimate replacement capex.
6. Review controlled substance records, state licensing and inspection history.
7. Model cash flow with transition risk and size debt with a seller employment agreement in place.

Due diligence checklist

• Practice management system reports
• Production by veterinarian for three years
• Active client and patient counts
• Revenue by service category
• Associate veterinarian employment agreements
• Staff roster and payroll
• Facility lease or real estate documents
• Equipment list and maintenance records
• DEA registration and controlled substance logs
• State licenses and inspection reports
• Three years of tax returns and P&L

Key risks and mitigants

Typical financing and deal structure

Individual veterinarians buying practices often use specialized practice lenders or SBA 7(a) loans with long amortization and modest down payments, sometimes with real estate financed through SBA 504. Seller notes and transition agreements are common. Corporate consolidators finance acquisitions with private credit or corporate facilities and typically require selling doctors to roll equity and sign multi-year employment agreements. Earnouts may tie part of the price to post-close production. Lenders commonly require life and disability insurance on the buyer veterinarian and covenants on DSCR or leverage. Emergency and specialty hospitals are often underwritten with extra attention to overnight staffing costs and specialist retention.

Red flags

• Owner produces most revenue and plans to leave immediately.
• Active client count declining while revenue rises through price increases only.
• Associate veterinarians on short contracts with no non-compete.
• Controlled substance discrepancies or recent regulatory findings.
• EBITDA calculated without a market salary for the owner's clinical work.

Frequently asked questions

Related terms

Educational content, not investment, credit, legal or tax advice. Benchmarks are common practitioner rules of thumb and vary by lender, market and cycle.