How to Value a Veterinary Practice

What is actually being valued?

Three things are fixed before any calculation: the subject, the basis and the date.

The subject is usually the business as a going concern: the active client base, the animal health records and reminder file, the consulting rooms and surgical fit-out, the trading name and the goodwill attaching to them. Where a company or trust owns the practice and a veterinarian is buying in or retiring out, what changes hands is a parcel of shares or units rather than the business itself, and the two are not the same asset. Enterprise value describes the operating hospital before borrowings; equity value is what the owners hold once interest-bearing debt is deducted and surplus cash and non-trading assets are added back. A parcel that cannot direct drawings, the purchase of a new ultrasound or dental machine, or the timing of a sale is not a simple proportion of that equity value.

The basis is normally market value, meaning the amount that would be agreed at arm's length between a buyer under no compulsion to buy and a seller under no compulsion to sell, each acting knowledgeably. Value is not price. Price is what one identified party actually paid on the terms actually agreed, and in veterinary transactions it is routinely shifted by vendor finance, a stocktake settled separately at cost, or consideration held back against client retention.

The purpose sets both the basis and the date. A capital gains tax event, a restructure, a family law property matter and a shareholder dispute may each call for a different date and a different level of interest, so the purpose is best settled with your accountant or lawyer at the outset. An associate resigning a fortnight either side of that date can change the answer. See veterinary practice valuations and valuing a healthcare business for tax purposes.

Where does the revenue actually come from?

Veterinary practice is a fully private-pay model. There is no Medicare, no bulk billing incentive and no third-party funder behind the fee. Every consultation, vaccination, dental, desexing, radiograph, blood panel, night of hospitalisation and box of tablets is billed to the animal's owner at the point of service. Veterinarians are registered by state and territory veterinary boards rather than by Ahpra, and no income depends on a provider number.

Demand is broad but exposed to household budgets. Animal Medicines Australia's national survey of pets and people, administered online between 25 February and 10 March 2025 with a sample of 2,450, estimated an Australian pet population of 31.6 million as at March 2025, held in 73 per cent of households, up from 69 per cent in 2022. The same survey reported that 86 per cent of cat owners and 76 per cent of dog owners had no pet insurance, that 12 per cent of pet-owning households had required financial assistance to cover veterinary care in the previous 12 months, and that 22 per cent of cat owners and 30 per cent of dog owners admitted to less frequent vet visits specifically because they could not afford it.

Pet insurance softens that constraint without changing who pays the practice. Moneysmart, published by the Australian Securities and Investments Commission, describes accident-only, accident and illness, and comprehensive cover, notes that insurers typically will not cover pre-existing conditions, and states that most insurers make the owner pay the vet fee in full and claim afterwards. Insurance improves an owner's willingness to authorise a full work-up; it does not create a funder the practice can rely on.

How is the revenue mix read?

A valuer separates the fee lines rather than working from turnover, because the margins differ. Consultations, surgery, dentistry, imaging, in-house pathology and hospitalisation are veterinarian and nurse time sold with equipment behind it. Dispensing carries a product margin attached to a clinical decision. Prescription diets, retail food, flea, tick and worming products and accessories are a retail margin competing with online sellers and pet retailers.

Dispensing is regulated, not merely stocked. NSW Health's guide to poisons and therapeutic goods legislation for veterinary practitioners, issued in February 2014 and still published at the time of writing, states that a restricted substance for animal use may be supplied or used only by the veterinary practitioner personally or by an assistant working under their direct personal supervision, and that it is illegal for an unregistered assistant such as a receptionist or veterinary nurse to supply such an item in the absence of the veterinary practitioner. The dispensing margin therefore moves with clinical capacity, not shelf space.

Mixed and production animal practices read differently again. Farm work concentrates revenue in fewer client businesses, is seasonal, and carries travel time and vehicles as a cost of delivery, so client concentration is tested there in a way it rarely needs to be in suburban small animal practice.

What are maintainable earnings once the principal is paid properly?

Maintainable earnings describe what the practice would repeat in an ordinary year, after the accounts are adjusted for items that are one-off, that reflect a related-party arrangement, or that exist only because of the way this particular owner runs the hospital. That adjustment exercise is normalisation. The result is stated before interest and tax, either after depreciation and amortisation (EBIT) or before them (EBITDA).

The largest normalisation is almost always the principal's own wage. An owner who consults four days a week, operates on the fifth and covers the phone at night is supplying labour a buyer must replace. The valuer deducts a market salary, superannuation and on-costs for those actual clinical and after-hours hours, taken from rosters and revenue by practitioner, and adds a market rate for management time. Where the owner is rewarded through a service entity or trust distributions rather than wages, the test applies to the substance, not the label.

Other adjustments recur in almost every veterinary file: a spouse on reception costed at what an unrelated employee would be paid, rent brought to a market rate where the owner's own entity holds title to the building, locum cover treated as a standing cost of keeping the roster filled rather than an aberration, and equipment bought through the profit and loss restated as capital. Because imaging, monitoring and dental equipment wears out and is replaced, EBITDA can flatter a veterinary practice, so EBIT, or EBITDA read against a realistic replacement capital expenditure allowance, is often the more honest base. See what is maintainable earnings.

How dependent is the practice on the principal veterinarian?

Small animal practice sits between the highly personal and the institutional. Routine care is often attached to the practice through location, medical records, reminders and reception staff who know the animal, while complex medicine, referral surgery and long-running cases attach to a named veterinarian. The valuer therefore reads revenue by practitioner rather than practice totals, and asks whether the business trades under the principal's own name, where new clients come from, and how much surgical work only one person performs.

Naming can lock that dependence into the brand. The Veterinary Practitioners Registration Board of Victoria's guidelines, dated 9 April 2024, state that the trading name of a practice must not contain the word "specialist" or any derivation of it unless at least one practitioner employed there is a registered veterinary specialist who can be consulted by other practitioners. A referral practice whose name rests on a single endorsed specialist carries key-person risk, the exposure of earnings to a single departure, in its brand as well as its diary. See how practitioner dependence affects business value.

What does the workforce shortage do to value?

It constrains capacity before it touches cost. On the 2025 Occupation Shortage List published by Jobs and Skills Australia, both Veterinarian and Veterinary Nurse are rated as in shortage nationally and in every state and territory. Jobs and Skills Australia reported on 3 December 2024 that veterinarian employment had grown by 32.1 per cent over the preceding five years, close to three times the national average, and that, on industry data, the average time to fill a veterinarian vacancy had risen from eight weeks in 2014 to 25 weeks in 2023.

An unfilled consulting position is therefore lost revenue for a long period, so a practice trading below its physical capacity is not necessarily a practice with upside, and wage assumptions must be set at what recruitment would cost rather than at what the current team happens to earn. Team stability becomes part of what a buyer acquires.

Nurse leverage sits in the same analysis. Nurses who take histories, monitor anaesthesia, prepare dentals, run in-house laboratory work and hold nursing consultations release veterinarian time into billable work. The Victorian Board's guidelines require a practitioner to take reasonable measures to ensure all persons assisting have the knowledge, skills and capacity for the activity, and NSW Health treats a veterinary nurse as an unregistered assistant for supplying restricted substances. Nursing therefore lifts earnings without removing the need for a veterinarian on site. See how the clinical workforce affects healthcare business value.

How are equipment, stock, working capital and the premises handled?

Equipment is a real part of a veterinary balance sheet: digital radiography, ultrasound, in-house analysers, anaesthetic machines and monitoring, dental units, surgical instruments, autoclaves and, in mixed practice, fitted-out farm vehicles. Plant is ordinarily taken at market value in use or depreciated replacement cost, and financed or leased items are recognised as the liabilities they are.

The Victorian Board's guidelines set out what a facility is expected to provide, including premises clean and hygienic at all times, drug storage compliant with the Drugs, Poisons and Controlled Substances Act 1981, and separation of hospitalisation areas from those used for surgery. Deferred work on any of it is a cost the buyer brings forward.

Stock is counted, not estimated: drugs, vaccines, prescription diets, retail lines and consumables are ordinarily settled separately at an agreed basis such as cost, and composition matters more than the total, because short-dated and slow-moving lines are not worth invoice cost. Working capital looks unlike the rest of healthcare, because fees are taken at the counter, so debtors are small and the money sits in stock and wholesaler creditors. A capitalised earnings conclusion assumes the business transfers with a normal level of it, so a deep drug holding or a stretched creditor ledger is a separate adjustment rather than goodwill.

Premises are frequently owned by the veterinarian or a related entity. Where they are, rent is normalised to market and the property valued separately, so the business is not credited with a subsidy the buyer will not receive. Where they are leased, the term, options, permitted use and the practicality of relocating within the catchment bear on value. See premises and lease terms in healthcare valuations.

Licensing attaches to premises as well, and it constrains who may own the business. The Australian Business Licence and Information Service states that a New South Wales veterinary hospital licence is required to perform major surgery on animals at any location or to advertise premises as an animal or veterinary hospital, and that the holder must be a registered veterinary practitioner or a corporation in which one or more veterinary practitioners have a controlling interest, with a registered veterinary practitioner nominated as superintendent. Requirements differ between jurisdictions, so the applicable ones and the transferability of the approval are confirmed.

Is after-hours work an obligation or a choice?

It is a commercial choice in most cases, and it should be valued as one. The Victorian Board's guidelines state that neither the Board nor statutory obligations require a veterinary practitioner to provide veterinary services outside normal business hours, while acknowledging the public expectation that such services can be obtained in an emergency. Practitioners are expected to communicate what they do offer outside those hours.

Three practices can therefore look identical by day and be quite different assets. One refers after-hours work to an emergency centre and carries a smaller but cleaner earnings base. One runs a paid roster, which produces revenue and costs staff goodwill. One relies on the principal answering the phone at midnight, which produces earnings the valuer normalises by costing that roster.

What does corporate consolidation mean for the number?

Corporate groups are an established feature of the sector, relevant as buyers and as competitors for staff rather than as a benchmark. The Australian Competition and Consumer Commission, in its public merger review register, describes Greencross as owning and operating specialty pet retail stores through the Petbarn and City Farmers banners together with veterinary clinics and hospital businesses across Australia.

Their presence changes the buyer pool, not the method. A group may realise benefits a single-site purchaser cannot, including procurement, rostering across sites and internal referral, and those benefits belong to that buyer. Market value is assessed for a hypothetical willing buyer rather than a special purchaser, which is one reason an assessed value and an achieved price can differ.

How much of the goodwill would transfer?

Goodwill is whatever a buyer pays beyond the identifiable assets net of liabilities: the client following, the reminder file, the standing of the hospital in its catchment. Part of it belongs to a person and walks out when they do. Part belongs to the premises, the records and the name, and can be conveyed. Only the second part is being bought.

The indicators a valuer weighs include how many active clients transacted in the last 12 months, average transaction value and its trend, the share of revenue produced by veterinarians other than the vendor, whether clients book with the practice or with a person, and the state of the records and reminder systems behind them.

Personal goodwill is not fixed. Transaction terms convert part of it, and those terms are priced in the valuation: an introduction period alongside the incoming veterinarian, a restraint whose radius and term suit the catchment, and retention-based consideration or a period of continued employment. See does a practice have transferable goodwill.

Which methods produce the number?

Capitalisation of future maintainable earnings does most of the work where the hospital trades steadily and enough consulting and surgery is performed by veterinarians other than the vendor to leave a return once the principal is paid properly. The earnings are converted to a capital sum using a multiple, which is the inverse of the return a buyer demands for the risk accepted: the greater the perceived risk, the smaller the multiple. What raises and lowers it is set out in EBITDA multiples for healthcare businesses. Two hospitals billing the same fees can carry very different multiples, because one has a rostered team of four and the other has one veterinarian and a locum agency on speed dial.

Discounted cash flow forecasts the cash the practice will generate and brings each year back to today at a rate carrying both the cost of waiting and the chance the forecast is wrong. Reach for it when the recent past is a poor guide to the near future: a branch clinic opened last year, a principal stepping back to three consulting days, a referral surgeon recruited and not yet at capacity, or an after-hours roster about to be handed to an emergency centre. The conclusion is only ever as good as the forecast underneath it.

Where the earnings will not support a goodwill value, the practice is measured on what it owns: equipment and fit-out at market or depreciated replacement cost, stock at an agreed basis, debtors at recoverable amounts, less liabilities. That figure is sometimes tested against what it would cost to fit out, licence and staff an equivalent hospital from scratch. For a solo small animal or mixed practice in which the owner is effectively the practice, this is a legitimate answer, not a failure of method. Recorded transactions inform the conclusion without deciding it, because veterinary sales are infrequent and the terms, particularly stock, premises and retention clauses, are seldom disclosed. See healthcare business valuation methods.

What information does the valuer need?

Accounts and tax returns for the last several completed financial years, current-year management figures, and practice management reports showing active clients, average transaction value and revenue by veterinarian and by category, reconciled to those accounts. Then stock listings, an equipment schedule, the lease or title for the premises, hospital licences, employment and contractor agreements with their restraints, the roster and after-hours arrangements, and the constitution, trust deed or partnership agreement. A list tailored to the practice is issued at the outset: see what information is needed for a business valuation.

Whether the trigger is a sale, an associate buying in, a retiring partner or a family law matter, tell us what the valuation is for and we will settle the scope, the valuation date and the information list before any work starts. Request a valuation, or read more about veterinary practice valuations.