FULL DISCLOSURE AND DISCLAIMER:
The following episode is based on our experiences in practice to date. We are not tax experts or accountants. Please seek proper professional advice on the subject of taxes and accounting for your business.
When it comes to understanding financials for veterinary clinics, it pays to ask the greatest guiding question of all:
“If we bring in a dollar of revenue, what are we left with at the end that is going into the owner’s pocket?”
The financial statements provide you with the answer to this question, while along the way providing insights into how money is earned, how it is spent, how it is invested, and how it flows within your veterinary business.
In the first of two episodes on the subject, Dr. Michael Bugg and Dr. Jonathan Leicht provided a high-level overview of Profit & Loss Statements (otherwise known as P & L).
In this episode, the Co-Hosts are back again to dive into EBITDA – otherwise known as Earnings Before Interest, Taxes, Depreciation, and Amortization.
Dr. Leicht takes the lead on this subject through his personal experiences and knowledge in evaluating veterinary clinics. Topics covered include:
- The key takeaway for business owners and managers when looking at EBITDA is to focus on controlling what’s “above the line” – all the revenues and expenses within the business that we can control
- Why looking at EBITDA allows an apples to apples comparison between different practices
- Why EBITDA is being used as a model for evaluating a clinic’s effectiveness, and as a way to value the veterinary business
- The importance of keeping your financial statements clean
- Understanding normalization to compare clinic’s fairly to each other
- What first-time hopeful clinic buyers should do when evaluating the purchase of a veterinary clinic
- Tips for hopeful clinic sellers looking to sell a clinic
- Why EBITDA varies depending on type of practice / business
- Remembering that Interest, Taxes, Depreciation, and Amortization are “below the line” accounting items – seek professional help here!
- The answer to the question “if we bring in a dollar of revenue, what’s left that is going into the owner’s pocket?
As a final note: don’t be afraid of the numbers. The more you look at them, and the more you understand them, the more successful you’re going to be in the long run.
Was this episode helpful for you? We’d love to know – please feel free to drop a comment or send us an e-mail to [email protected] to let us know your thoughts.
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Any questions, comments, feedback, or requests for guests can also be sent to [email protected]. Thank you for listening and we look forward to seeing you next Wednesday for another episode of The Veterinary Project Podcast!
– Jonathan Leicht, DVM and Michael Bugg, DVM