If you are a practice owner, you should know that, in most cases, getting in is easier than getting out. That is, exiting a practice is often more difficult than building it. Exiting is a process, not an event, that should be planned far in advance of the day you turn the keys over to someone else.
The factors that make your practice salable include a good management team, steady profits, patient/client loyalty, a solid reputation, predictable transferability and much more.
With these factors in mind, let’s look closely at ten vital actions that you should take NOW, so that when the time arrives, you will have developed a truly marketable and valuable practice.
- MAINTAIN STRONG REFERRAL SOURCES
Professional relationships add tremendous value to a practice. Do professionals in your community routinely refer their patients/clients to you? If so, are those relationships so strong that you can bridge them over to a new owner?
For example, if you have several professionals who reliably refer a significant number of patients/clients to you, you would want to ensure that those referral sources will continue to send patients/clients to the new owner. Otherwise, your prospective buyer might want to factor in a sale price reduction that takes into account the loss of the projected income represented by those referral sources.
Most professionals will continue to refer to the practice after your departure, as long as they are assured that the clients/patients they refer will receive the same good care that you currently provide them. It is also important for your referral sources to know that the new owner will reciprocate with referrals to them (if that is the type of relationship you currently have).
Maintaining your referral relationships and then transferring them to a new owner during transition will help your patients/clients too. By doing so, you maintain both continuity and quality of care for them, and that fosters tremendous goodwill.
- MAINTAIN FACILITIES AND EQUIPMENT
Generally speaking, people are inclined to pay more for something if it looks attractive. The same principle applies when buying a practice. If your facilities are pleasing to the eye, you might be able to command a higher price. While a clean carpet is only just that, it might demonstrate to the buyer that every aspect of your facility and practice is probably well maintained.
Well-maintained, state-of-the-art equipment also speaks well of you. It says that you have a growing practice that is keeping in step with technology.
- INCREASE YOUR GROSS SALES
The best indicator of the value of a practice is its cash flow. Your successor will want assurance that he is acquiring a reliable income stream. Now is the time to concentrate on reactivation of old patients/clients, increasing your marketing budget to attract new patients/clients, setting goals for the staff and moving the practice toward maximum productivity.
- IMPROVE YOUR BOOKKEEPING RECORDS
Part of selling a practice requires that you develop and present an accurate picture of what you have accomplished. In order to command the best possible price, you must be able to prove that the practice is highly profitable.
Plan to have at least five years’ worth of strong financials as the buyer wants predictability. Have an accountant prepare “compiled statements.” That lends credibility. The practice buyer will want well-maintained, accurate accounting records to help with future planning. Additionally, thorough records can even help you explain a slump period.
- DECREASE OVERHEAD EXPENSES
Analyze your payroll, department by department, function by function, employee by employee. If personnel are underutilized, eliminate a job position and reassign its duties to other employees.
Improve your bookkeeping procedures so that you can readily and accurately track your expenses and potentially cut them. Eliminate nonessential monthly expenses, taking care not to hinder expansion activities. Keep a close eye on your discretionary expenditures, such as advertising, travel, new equipment, seminars, utilities, telephone, etc. By decreasing the overhead of the practice, you will consequently improve cash flow and thus be likely to sell your practice for a higher price. You gain a tremendous amount of control by just knowing where your money is coming from and where it is going.
Fill out the form to the right to read “Looking Toward the Future: How to Make Your Practice Salable”(highly recommended).