Follow these expert tips for a smooth and lucrative exit strategy!
Whether you’re interested in an outright sale, partial sale, or an associate buy-in of your practice, it’s a good idea to start planning it well in advance. So, what exactly does this mean? It really boils down to two things:
To maximize the value of your practice and optimize exit options, your practice needs to focus on increasing cash flow and growing.
While this may sound like an obvious point, the challenge is in the actual execution. Many medical practitioners envision “slowing down” as they near retirement, but this is rarely the best move from a pure exit strategy standpoint.
In fact, increasing your net income for at least five years leading up to the sale of the practice may significantly increase the practice’s value as well as provide more funds for your retirement plan.
Increasing Profitability & Efficiency
One way to maximize net income is by reducing the amount of deductions that you take on a yearly basis, as this will increase the profitability of your practice. You should also be focused on lowering the overhead of your practice – eliminating or reducing any expenses that don’t contribute to your top line growth.
At the same time, certain expenses are dollars well spent – for example, updating the look of your office and making sure your technology and equipment are up to date. Of course, before making a significant investment in technology or equipment upgrades, make sure they will deliver meaningful benefits to your practice. A worthy investment will maximize efficiencies so you can get more done in less time.
Another area that continued investment may make good sense is in marketing your practice. By investing in marketing your practice, you may even realize accelerated growth. Buyers rarely pay a premium for a “stale” practice, but the opposite is true as well. Showing you have a thriving practice with proven marketing strategies and healthy new patient acquisition rates is a HUGE PLUS.
Family Ties… They May Not be the Best Thing When it Comes to a Sale
It is not uncommon for practices to have employees who are family members or friends. This staffing situation can be a deterrent to a potential buyer, who would prefer to have an office staff that is not related to the outgoing owner. Your buyer wants to know that your practice is able to operate without any hitches and continue to generate immediate cash flow when they take the helm, so it may be ideal to train other employees to take over the family members positions.
Know Your Numbers. Have the Documentation.
Be sure you are keeping your financial records organized with full documentation of production levels, accounts receivable aging, expenses and receipts, bank deposits, payroll records and tax returns. Any discrepancies in your financials may lead to a potential negotiation of your practice price.
Below this post you will find a free resource that outlines the specific financials and other business information you’ll want to be monitoring in advance of courting any potential buyer.
Summing it Up…
A buyer will want to see a genuine opportunity to produce meaningful cash flow, so it will work in your favor to maintain production levels through your very last day at the office to preserve the practice value you’ve worked hard to build over the years.
When you focus on maximizing your practice’s value prior to a sale, you can be certain that you are getting the best price for your business.
FREE RESOURCE:
Download a guide of the specific financials and other business information you’ll need to support a lucrative exit strategy!
(It’s completely free, there’s no obligation, and we’ll NEVER share your information)