Are You Wanting to Sell Your Medical Practice in a Few Years? Plan now.

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A business sale is a lengthy and complex process, and Texas Medical Practice Brokers helps sellers take that long view.   Contrary to capital equipment and real estate which can be quickly sold at a fair price, businesses require extensive preparation in order to maximize their value. We have had some of our best deals thanks to the perseverance and commitment of medical practice owners in preparing their businesses to sell at the right moment, for top dollar.

If your goal is to sell your medical office in the coming years, you can reap substantial benefits from planning ahead. Texas Medical Practice brokers is a professional business intermediary who will help you prepare your business for sale at the best possible time to maximize its value. This planning will allow us to:

  1. Assist you in building business value
  2. Maximize our knowledge of the business
  3. Identify the best potential buyers for your medical practice

This blog will concentrate on the first item – how to create business value.

Here are some key steps our brokers can support and advise you on in the years leading up to your business sale.

Understand the Types of Value

It is crucial to consider both types of values.  First is the academic value, which is determined using a professional valuation. We determine this value by a complex formula based on the business’s tangible assets, cash flow, industry averages, and multiples.  Next is the true market value. This value takes the academic value into consideration, but also looks at what buyers are actually ready and willing to pay in the marketplace.

Small and mid-sized companies may not have significant tangible assets such as vehicles or equipment. These businesses are mainly valued on their earnings and intangible resources. Things like reputation, market share, employees, proprietary process, intellectual property and patient lists. Your business’s true market value will be maximized if you capitalize on these intangible assets. Think like a buyer as you consider the tangible and intangible assets of your practice. Look at your practice’s tangible and intangible assets, and look for any potential value-enhancing opportunities.

An industry-savvy business intermediary will be able to provide valuable insight. Expert brokers are able to see your value through the eyes of the right buyer and combine this with their in-depth market knowledge to help you make a sale.

Find and Build Your Niche

You don’t need to be everything for every buyer. Buyers will pay extra for niches with high barriers to entry. These are the areas where intangibles can be of great value. Maybe you are a business that is located in a favorable area, offers a unique health service, has key employees who give you a competitive advantage, or has contracts with businesses that your competitors lack. Start identifying the niche that offers you the greatest competitive advantage, and then capitalize on it.

Clean Up Your Financials & Assets

Working with a professional business broker well in advance of placing your business on the market will help you recast your financials in the most faithful and positive light. As you’re cleaning up your financials, focus on the following:

  • Ensure your asset records are up to date.
  • Strengthen your ratios – working capital, debt-to-equity, price-to-earnings, return on equity, and more. This doesn’t happen overnight, so you may need to bring in financial advisors.
  • Rid your income statement of non-business expenses. Dubious moves to lower your tax bill can lead to negative outcomes when it’s time to sell.
  • Improve cash flows, because a prospective buyer will want to see true cash flow. Be sure you are driving all income to your bottom line.
  • Review your assets and sell off or dispose of unproductive assets or inventory. Remove or buy off any assets that are primarily for your personal use.
  • Organize business records including sales and expense reports, internal financial statements, and tax returns.

Develop Key Employees

Sellers are less likely to pay top dollar for businesses that are dependent too heavily on their owners. If you have not already, delegate responsibility to key staff members and include them in decision-making. If you can prove that your company’s continued success is dependent on your employees and not just you, it will pay off in the sale process.

Document What You Do

Operational processes, strategic plans, and job descriptions should be well documented so you can hand them off to the buyer. Written records and plans will give a buyer greater confidence that they will be able to emulate your business growth, and they can also help your buyer obtain financing.

Build Relationships & Reputation

Your reputation, business relationships, customer awareness and name recognition all play a significant role in increasing your medical practice’s value. These are intangible resources that can be even more valuable to your medical practice than hard assets. Consider your business relationships and if you feel you are dependent on just a few referral sources, work to diversify your accounts before it’s time to sell.

Remodel, Clean and Organize

The first things any home seller does when they put their house on the market is clean up clutter, make simple fixes, and freshen up how the house looks.  Although business sellers may not think about these things, we have seen that well-maintained buildings will fetch the highest prices. Even if you are leasing your facility rather than owning it, you should still clean and organize it. This will give your facility a feeling that it is clean and efficient, which will help you get the most value from your sale.

Reduce Risk

A buyer’s interest and willingness to pay top dollar for your business is greatly influenced by their perception of risk. As you’re preparing to sell your practice, focus on these areas that often raise a red flag for potential risk:

  • Provider or payor concentration
  • Referral source dependency
  • Absence of contracts with key employees
  • Competition
  • Lack of regulatory compliance
  • Legal challenges

Get Started Today!

We recognize that you may not be ready to sell your business today, but you can see that the list of things to consider as you sell your medical practice is extensive! If you get started on these key steps well before you’re hoping to sell, you can be confident that you’ll maximize your selling price.

During this period of preparation, Texas Medical Practice brokers can help guide you.   We will assist you through the process so you know what to do. As we work together, we will gain valuable insight about your medical practice which will help us position it in the marketplace when it is time to sell.

Contact us via phone or email today to set up a discovery call to learn more.

 

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