What is the difference between a Transition Advisor and a Business Broker?

The difference between a business broker and a Transition Advisor is stark. As a strategic Transition Advisor, we partner with you to help you discover, and then secure, the full value of your practice in the market, a key element of a truly successful practice transition  Business brokers, conversely, operate more like real-estate brokers.  They help you set an asking price, “list” your practice and invite buyers to bid the offered price.  

This latter approach used by business brokers is a self-limiting approach to optimizing practice value, in our opinion.  Unlike brokers, we do not create listings.  Instead, we attract interested strategic partners that compete with each other in a carefully managed, curated auction process, enabling you to get the best transition alternative available in the market for your practice.  Moreover, this process also enables you more control, both over how/if you move forward and over granting access to your private practice information.    

Why hire a Transition Advisor?

Although a strategic practice transition advisor will help a practice owner effect any type of strategic practice transition, including one to associate doctors, it is a simple fact these days that the highest values, by far, are available from corporate consolidators. Any corporate consolidator will have completed dozens of transitions. It is crucial to assemble a team of experienced professionals who can represent you when selling to a sophisticated buyer.

Your transition advisor is the lynchpin of that team. We use our experience to help manage, harmonize and optimize the efforts of any other advisors, such as your legal advisors and/or accountants. We lead the charge and we have your back the entire way. We are your guiding partner from pre-start to post-finish.

Our highly motivated team has the skills and experience to support your team during all phases of the transition, including preparation, due diligence, transaction documentation and, if appropriate, the post-closing stages.

What Fees does a Transition Advisor earn?

Like any business broker, a transition advisor is paid a success fee, proportional to the value of the transaction closed.  The success fee is only paid at the time you, the client, get your transaction proceeds.  There is typically a monthly retainer fee, as well, during the engagement, which is non-refundable, but is creditable against the success fee ultimately earned.  

Most brokers will charge a success fee that is a fixed percentage of transaction proceeds (7 to 10% is typical in the veterinary services market). Our fees are designed to better align with your success. If we do not succeed in finding a deal that significantly exceeds your expectations for value, we will receive a below-market success fee, less than what you would pay a broker for comparable performance.

Whether or not you use a business broker or a strategic financial advisor, you will need independent legal counsel to complete a transition of any type. Legal advisors are typically paid by the hour, whether a transition closes or not. We will enable you to avoid hiring (and paying for) an attorney until the process is far enough along to have a high likelihood of success.  We also save you legal fees by assisting the lawyers in doing their work. Remember, we are not paid by the hour so our extra value-add only reduces your overall transaction costs. 

The total cost of the right transition advisor is typically a fraction — usually 1/3 to 1/5  in the veterinary services market to date — of the incremental value it delivers on your behalf. Over the past 6 years, our partner Brian has delivered, on average, additional value to his clients equal to 9 times the total amount of fees charged.

How do I pick the right transition advisor?

What steps should an owner take to best decide which advisor to retain?  Do your homework

  • Ask the advisor what range of practice value it expects you might be able to achieve in a transition transaction.  The reality is that no advisor knows, for sure, what you might secure when you go to market with the right type of price discovery process, but the most experienced advisor will have the best estimate of what your likely valuation range might be.
  • Understand the fee structure of the advisor.  Does it appear to align the interests of the advisor with your interests as an owner?  Trust, on such an important transaction, is established on the fundamental alignment of financial interests between client and advisor.
  • Meet with the advisor, even if remotely.  Is the advisor credible as the expert in the veterinary services market?  Does that advisor appear to fully understand the marketplace for transition transactions in the veterinary services market and do they fundamentally understand the ownership structure of the industry and how it has been, and is likely to continue, evolving?  If you seek the best guide, its’ important to know that they are working with the best map.
  • Have that advisor discuss exactly how it proposes to run a transition evaluation and transaction process and how that same process has served other practice owners in the past, both quantitatively and qualitatively.  Importantly, develop a clear understanding of how the incremental value achieved with the advisor compares to the fees charged by the advisor.
  • Check references. Actually, get the perspective of multiple practice owners that have used the advisor, so you can understand how their perspective on the advisor and process itself evolved over the course of the entire transition process.  Get confirmation, if possible, of the ratio between incremental value secured by using the advisor and the fees paid to the advisor.  You want to understand how good an investment selecting this advisor has been for other practice owners.
  • Finally, don’t fall victim to selecting an advisor that is great in some other market, but not in the only market that matters to you, the market for representing veterinary practice owners in transition transactions.