Where due diligence fits in the purchase
Mamalis wrote that many sellers treat the signed letter of intent (LOI) as the end of the process, when it is "actually one of the first" steps [1]. The Simmons guide by Sherry Everhart and David King gives an order for a buyer:
- Check whether the asking price deserves a closer look.
- Interview veterinary lenders and attorneys and confirm financing.
- Have the attorney draft the LOI [4].
The Simmons authors say an LOI covers the practice description, the offering price and what it includes, the due diligence period, financial terms, employment agreements, and a projected closing date. It often includes an exclusivity clause that keeps both sides from negotiating with others while due diligence runs [4]. Tanella describes the LOI as "not a legally binding contract." In his view it should spell out timing, money, financing, contingencies, how risk is shared, the transition, and which side prepares the documents [2].
Once the LOI is accepted, the attorney drafts the asset purchase agreement, including the seller's commitment not to compete. The buyer then does deeper due diligence on operations and finances [4]. The Simmons authors caution buyers against quitting a job, selling a house, or buying one before closing. They say a seller who knows the buyer depends on the deal may raise the price or harden the terms [4].
What buyers review
None of the cited sources gives a complete, document-by-document checklist. Taken together, they name the following areas.
| Area | What the sources mention | Source |
|---|
| Finances | Assets and liabilities, tax returns, financial statements, accounts receivable, creditors, liens on assets | [2][5] |
| Operations | Productivity, fee schedule, equipment and its condition, regulatory compliance | [4][5] |
| People | Personnel files, employment agreements, benefit plans, quality and experience of the team | [2][4] |
| Clients and records | Client charts checked against billings and procedures, client records | [2][5] |
| Premises | Lease viability; building inspection and appraisal if real estate is included | [2][4] |
| Market | Local demographics, competition, growth potential | [5] |
Tanella also lists insurance policies and any government approvals the practice needs to operate [2]. Allie Rawl, an associate loan officer at Live Oak Bank, suggests buyers talk with the practice's current clients and staff about their experiences [5].
Mamalis describes the requests corporate consolidators make. Her list includes:
- incorporation documents;
- professional and DEA licenses;
- two or three years of monthly bank statements;
- notes payable;
- supplier purchase histories;
- equipment service records;
- employee handbooks;
- OSHA reports and workers' compensation claims;
- data security policies [1].
She was writing for sellers facing corporate buyers, but the list shows how far a careful review can reach. She also notes that in private sales, "the bank financing the loan will perform most of the due diligence" [1].
Testing the price with a feasibility analysis
The Simmons authors argue that a buyer's own appraisal tends to produce a competing opinion of value rather than useful information. They recommend a feasibility analysis instead. It should answer "Is there adequate cash flow to fund this deal?" and "Can I afford this purchase opportunity?" [4]. Per the same guide, the analysis accounts for projected revenue, operating costs, capital spending, taxes, and debt payments. If the price fails that test, negotiation then rests on the practice's financial data [4].
Dick Goebel, in a Simmons guide updated in 2025, cautioned that a low-priced practice may have cash flow too weak to support the owner or attract a lender. He wrote that a practice's price is largely justified by its profitability [3]. The cited sources do not give debt service coverage ratios or other lender thresholds for this test.
Lease, receivables, covenants and transition
Tanella advises buyers to request the lease as soon as they become interested and to start talking with the landlord. He also cautions against assuming a long-standing lease is secure [2]. The Simmons authors note that the purchase price assumes a particular rent expense. If a newly negotiated lease departs from that figure, the price may need to change [4].
On accounts receivable, Tanella describes three common arrangements:
- The seller keeps the receivables and the buyer collects them as a courtesy or for a fee.
- The seller both collects and keeps them.
- The buyer pays a negotiated amount and collects them after closing.
He warns that a seller who pursues debtors aggressively can damage goodwill [2].
Tanella considers it reasonable for the seller to accept a restrictive covenant with "substantial time and geography limitations" [2]. The Simmons authors say non-compete terms vary by practice type, such as mixed, companion, specialty, rural, or urban [4].
On transition, Tanella suggests the seller answer questions and introduce the buyer to clients and staff for little or no pay. He adds that the buyer should be able to end the arrangement if the working relationship fails [2].
Financing the purchase
Goebel's 2025 Simmons guide says buyers with work experience and clean credit can get 80 to 100 percent financing from commercial lenders active in the veterinary market. Where a lender covers 90 percent and the buyer brings 1 to 2 percent, he wrote, sellers will often finance the remaining 8 to 9 percent [3].
He contrasts two lending approaches. Commercial lenders use "cash flow financing," based on the practice's ability to repay. Local banks often use asset-based lending secured by the tangible assets [3]. He also cites commercial lender statistics showing low default rates on veterinary practice loans, though he gives no figures [3].
The Simmons authors say lenders judge the buyer and the practice together. They add that many successful buyers carried student debt and had little savings but held a high credit score [4].
The SBA describes 7(a) as its primary business loan program. The SBA guarantees loans made by lenders rather than lending directly. Allowed uses include changes of ownership, either complete or partial [6]. According to the SBA, a business is eligible only if it:
- is small under SBA size rules;
- is not an ineligible business type;
- cannot get the credit on reasonable terms from non-government sources; and
- is creditworthy, with a reasonable ability to repay.
Applications go through a participating lender [6]. Most 7(a) term loans are repaid monthly from business cash flow. Payments stay fixed on fixed-rate loans and may change on variable-rate loans [6]. The SBA page reviewed here gives no interest rates or loan terms.
Readers should keep in mind the sources' affiliations. Simmons advertises practice listings for sale and its own advisory services. Rawl is a loan officer at Live Oak Bank, which finances veterinary acquisitions [3][5].
How the sources frame the owner's return
Goebel describes four "paychecks" for an owner [3]:
- Production-based pay, typically 20 to 22 percent.
- At least 1 percent of practice gross, which may be allocated for leadership.
- A return on investment "above 10%."
- For owners who also hold the real estate, a return of 8 to 10 percent of its fair market value under triple net lease terms, where the tenant pays taxes, insurance, and maintenance.
The Everhart and King guide offers a hypothetical example. A buyer pays $800,000 for a practice grossing $1,000,000, financed over 10 years at 6.5 percent, while earning the same $125,000 an associate would. Under the guide's assumptions, including 2 percent annual growth in practice value, the owner's net worth after 10 years is $1,237,490, compared with $262,295 for the associate. The guide adds that roughly $109,000 a year in principal and interest then goes to the owner [4].
This is a modeled illustration, not observed data. The same authors list management time, debt risk, and responsibility for clients and staff as risks of ownership [4].
