Setting up your first general practice? Here’s what you need to think about when transitioning from doctor to small business person.
03 October 2013
When you’ve put years of effort into building a dental or medical practice you want the sale price to reflect your hard work. But, unless you can prove that your business is a sound investment, you could be disappointed. Paul Freeman, Chief Executive Officer of Medfin Finance, suggests four steps that can help you to maximise the value of your practice and ensure the sale goes smoothly.
1. Make sure your books are in order
Most buyers will pay a premium for certainty. They’re looking for evidence of consistent revenue, expenses and financial performance over a number of years, through both good and challenging times.
They want to see well-kept, solid accounts that they can test and validate and you must be able to answer questions about patient numbers, the strengths and weaknesses of the business, throughput, competition and anything that differentiates your practice. They may also be interested in opportunities for growth.
Over the last few years there’s been a marked increase in the number of corporate-style purchasers. From their point of view they’re buying an income stream that happens to be a medical or dental practice, so they’re absolutely focused on the numbers and the way the business is managed.
The process may be less rigorous if you’re selling to someone already working in the business. They already have a real sense of how it’s operating but they’ll still want to see detailed figures.
2. Plan your exit
Think about when, why and how you’re going to leave your practice. Do you want to make a clean break or are you prepared to continue as an employee, either full time or part time, for an agreed period after the sale?
Staying on to shepherd through the transition of ownership can add to the value of the business and help you to attract a higher price. Many corporate purchasers insist on it, and they may want to start with a down payment and then make one or more milestone payments when the business achieves the projected returns.
3. Obtain good financial advice
It’s important to talk to your banker and other professional advisers from the outset so they have plenty of time to make any necessary adjustments. For example, as you’re selling an asset, you need to be very clear about your tax position. There may be a case for restructuring the business before you initiate the sale process.
Don’t be afraid to seek a second opinion.
4. Always be prepared
The discipline of sound financial management that will make your business attractive to a buyer will also help you to run your practice in the most efficient and profitable way.
Life is unpredictable – you could find yourself with no choice but to sell in a hurry. If your business is well run, it will always be ready for sale.
Find out how Medfin can help you improve the value of your practice.