Preparing to Sell

Timing. The most common, and biggest, mistake practice owners make with regard to transitioning their practice is the timing of such. Far too often, practice owners wait until after he or she cuts back on office hours and patient volume, gearing towards retirement, to begin preparing to sell. The most successful exit strategy aims to transition a practice at or close to its peak operating potential and profitability. This will fetch a far greater valuation, sale, or buy-in price than a practice trending downwards. 

Keep intentions to sell confidential. This is another common mistake. To maintain "practice as usual," and ultimately not experience any decline in your bottom line, keeping intentions to sell is of critical importance. Telling staff, patients, or even friends that you are considering selling will result in staff looking for new positions, patients looking for a new provider, and referral sources sending patients elsewhere. Make sure that those who support your practice, such as a CPA, as well as your significant other and your children, realize the importance of non-disclosure. The value of your practice depends upon it.

Marketing: Continue all marketing efforts for your office. Maintain your website presence, ensure online reviews remain positive and address negative ones, continue patient acquisition efforts, asking friends, staff, and patients for referrals, beef up your social media presence, engage a marketing agency for help if experiencing any decline, etc. It is much easier to sell a thriving practice than one on the down swing.

Get your "house " in order. Most practice owners have every intention of getting their "house" in order but far too often never find the time to do it. Order can be compared to compounding interest. The earlier your practice is operating optimally, the greater your returns become now and the greater return you will receive upon selling. Have your staff clean up the "books," from accounts receivable, to treatment plans, to your active patient/client list, to charts being clean and well organized, whether electronic or paper, to the recall system, so forth and so on. Most computer programs will guide your staff through this process. 

Ask yourself the following questions:

1. Are you prepared for outsiders to examine your books and records?
2. Are you comfortable with what they will find?
3. Are you running personal expenses      through the practice?
4. Are you properly classifying employees and independent contractors?
5. Do you have the required      employee policies in place?
6. Do you have a proper lease      agreement, if renting, with adequate renewal periods and no      restrictions/stipulations with transfer of ownership?

Finances. The closer your overhead is to 50%, the more profitable and more attractive your practice will be to a buyer. This also helps you save money for retirement.  

Common "To Dos:"

1. Examine your current profit and loss statement. List percentages of income to the right of the actual expense, and check percentages of your supplies, lab costs, staff compensation, benefits, etc. to make sure these expenses are not excessive. Need comparison data, contact us today!
2. Create a spreadsheet of your assets and liabilities.
3. Pay off all debt (both personal and business debt), or establish a plan aiming to do so at least 3 years prior to wanting to transition your practice.
4. Allow Practice Transition Network to conduct a practice valuation.
5. If you own your building and plan to sell it in the future, get a commercial appraisal. If you intend to lease the space to the new owner, conduct market analysis to determine the going rate for similar space in your area. Need help? Contact us today!
6. Calculate your annual living expenses to prepare for retirement needs.
7. Determine if you have enough money to retire or if you will need to work in your office or elsewhere after the sale of your practice.

Planning on practicing three years or more? Upgrading equipment will make your office more productive prior to the sale and may make your office more attractive to buyers. Most upgrades, however, will not appreciably “add to the value” of your practice, but they will make your practice easier to sell. If planning to practice three or more years, then you may consider making the necessary investments to keep your practice up to date. Review equipment lease agreements. Ask for upgrades when and where allowed.

Intend to practice less than three more years? Only purchase equipment that you have time to use prior to the sale. You will not recover dollar for dollar the money you spend on equipment during this timeframe. Plus, a buyer may wish to use different equipment.  

Planning on working less than two more years? Do not buy large ticket items or “go digital.”  

Necessary "To Dos" (regardless of timing):

1. Discard broken equipment and instruments.
2. Replacing broken, tattered, worn furniture, pictures, and fixtures.
3. Thoroughly clean your office and storage rooms.
4. Give your office a cosmetic update,  such as a fresh coat of paint, replace stained or damaged flooring, but do not spend money thinking you will recover your expenses.
5. If office is leased, have landlord make any outstanding repairs.