What Buyers Actually Read in Your QuickBooks
Most veterinary hospital owners assume a buyer reads their profit-and-loss statement the way they do — top line, bottom line, and a quick glance at the middle to see if anything looks weird.
That's not what happens. A serious buyer, and the analyst their lender sends behind them, opens your QuickBooks file with a checklist. They don't start with the annual P&L. They start with three reports you probably haven't looked at in months, and by the time they get to the number you're proud of, they've already decided whether to believe it.
Here's what they pull, in the order they pull it, and what each one tells them about you.
1. The Monthly P&L — Trailing 36 Months, Side by Side
The first report isn't your annual statement. It's a profit-and-loss by month, three years wide, with every month in its own column. That view is where your practice stops being a total and starts being a story.
They're looking for trend, not level. Is revenue climbing, flat, or sliding quarter over quarter? Is there seasonality that makes sense for your market — a summer bump, a January lull — or lumps that don't? A $40,000 revenue month in a run of $110,000 months gets circled. So does a December where "Supplies" is triple the average because you stocked up before year-end to shave the tax bill.
Consistency reads as competence. A hospital with $1.3 million in revenue that moves like a heartbeat is worth more than a $1.4 million hospital that moves like a seismograph, because the buyer can underwrite the first one and has to guess at the second.
Action Items / Food for Thought:
Run the report yourself: Reports, Profit & Loss, display columns by month, last three fiscal years. Print it. Circle anything you'd have to explain
Every anomaly needs a one-sentence explanation ready before the buyer asks. "We were closed two weeks for the flood" is fine. "I don't know" is not
If a stranger looked at your monthly trend line, would they see a business or a mood?
2. The General Ledger Detail Behind Every Add-Back
Here's the one owners underestimate. When you tell a buyer your SDE is $380,000 and that includes $52,000 of add-backs, the buyer doesn't take the $52,000. They ask for the general ledger detail on every account that fed it, transaction by transaction.
"Auto expense, $22,000" gets opened. If it's one truck and a fuel card, and the truck is in the practice's name, that's a real add-back. If it's three vehicles, one of which your kid drives to college, half of it dies in diligence and the rest gets discounted for the trouble. "Meals and entertainment, $9,000" — a buyer will scroll through the vendor list, and if it's a lot of Friday nights at the same steakhouse, they'll add back the part that's plausibly business and argue about the rest.
The rule in diligence is simple: an add-back survives when it is documented, non-recurring or clearly personal, and would not need to be replaced by the next owner. Everything else gets the haircut. And every add-back that gets cut isn't a $1 loss — it's a $1 loss times your multiple.
Action Items / Food for Thought:
Pull the GL detail on every account you plan to add back and read it the way a skeptic would. Tag every line: personal, one-time, or "I'd rather not discuss"
Start running personal expenses through your personal account now. Clean books for twelve months beat a persuasive add-back schedule every time
If you had to defend each add-back to your CPA's most annoying partner, which ones would you drop before the meeting?
3. Payroll by Employee — Especially the Doctors
The third report is payroll summary by employee for the same three years, and buyers read it for two things: what it costs to replace you, and whether anyone on the list shouldn't be there.
Doctor compensation is the big one. A buyer — particularly a group buyer — is going to restate your production at market associate rates, typically 20 to 23 percent of what you personally produce, plus a real management salary if you're the one running the building. If you produce $700,000 and pay yourself $90,000, your SDE is real but your EBITDA is a different, smaller number. Both buyers exist. They just pay differently.
Then the roster. A spouse on payroll at $65,000 who "does the books" two afternoons a month. An associate at 26 percent of production who's been with you so long you forgot that's above market. Three receptionists for a two-doctor hospital. Buyers benchmark support-staff cost at roughly 20 to 24 percent of revenue for a small-animal general practice, and when yours runs 30, they want to know why — and whether the fix is politically possible for a new owner.
Action Items / Food for Thought:
Calculate your own production and your own W-2. Then calculate what an associate would cost to produce the same number. That gap is the conversation every buyer will have with you
List every family member on payroll with hours and duties. If the duties are real, document them. If they aren't, that's an add-back — but it's a fragile one
Is anyone on your payroll there because of what they do, or because of when they started?
4. Cost of Goods and the Inventory Line
After the first three, they go to drugs, supplies, and lab. For most small-animal hospitals, drugs and medical supplies land in the 18 to 24 percent of revenue range, with in-house and reference lab another 4 to 7 percent. If you're above that, the buyer assumes leakage, poor purchasing, or a lot of product going out the door as "samples." If you're well below it, they assume you're understating it or booking supply purchases somewhere odd.
The month-to-month pattern matters here too. Big year-end purchases to drop taxable income are the single most common distortion I see, and every one of them makes December look terrible and January look like a miracle.
Action Items / Food for Thought:
Pull COGS as a percentage of revenue by month. Note every month that's more than five points off your average
If you don't take a physical inventory count at year-end, start. A buyer will ask what's on the shelf at closing, and "about $60,000, give or take" doesn't close a deal
Are you buying inventory when you need it, or when your CPA says it's a good month to spend?
5. The Reconciliation to Your Tax Returns
This one is short and unforgiving. Your QuickBooks P&L for each year gets laid next to the tax return for that year, and the numbers need to tie. Not roughly — tie, with a schedule explaining every difference.
They rarely tie perfectly, and small book-to-tax differences are normal — depreciation methods, timing of accruals, the like. What isn't normal is $90,000 of revenue that shows up in QuickBooks and not on the return, or vice versa. When a buyer sees a gap they can't explain, they don't average the two. They underwrite to the lower number and price the uncertainty into everything else.
Action Items / Food for Thought:
Ask your CPA for a book-to-tax reconciliation for the last three years. If they can't produce one quickly, that tells you something about the books
Fix the categorization mismatches now, while they're cheap to fix and nobody's watching
6. Revenue by Category — and Whether It Matches Your PIMS
The last thing a good buyer does is set your practice management software next to QuickBooks. If Cornerstone or AVImark says you produced $1.32 million and QuickBooks says $1.26 million, that $60,000 needs a name — discounts, write-offs, credit card fees booked net, a missing deposit run. If nobody can name it, the buyer names it for you, and it's never flattering.
They also want to see where the revenue comes from: exams and services, pharmacy, lab, surgery, dentistry, retail and food. A hospital with 70 percent professional services and strong dental and surgical lines reads as a medical practice. One with 40 percent of revenue in retail and diet reads as a store with a vet in it, and the multiple follows.
Action Items / Food for Thought:
Export revenue by category from your PIMS for the last twelve months and match it to deposits. Do it once. You'll learn something
If one category dominates in a way you didn't expect, decide whether that's a strength to sell or a concentration to fix before you list
Final Thought
A buyer doesn't fall in love with your bottom line. They fall in love with a set of books they don't have to argue with — a monthly trend that makes sense, add-backs that survive the GL, a payroll that explains itself, and a P&L that ties to the tax return without a story.
None of that requires a bigger practice. It requires twelve clean months and a willingness to look at your own QuickBooks the way a stranger would, before the stranger does.
Pull the three reports. Read them as a buyer. If you'd like a second set of eyes on what they'd see, the first conversation is on us.
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