Buying a Practice? Questions You MUST Ask
So you’ve found a practice you like- you might even think it’s "the one." Now what? The stakes are high; you’re planning on putting a lot of time, energy, blood, sweat and tears into this thing- the whole shebang! You have got to get it right. A great idea is to work with a professional broker at this point. There is nothing that will give you more peace of mind then having a professional appraise the practice and examine the financials and practice statistics for potential problems (and growth opportunities!) And of course, we often save our clients many times our buyers agent fee by negotiating down the purchase price based on our findings.
But whether you are our client or not, we have a little gift for you. Here are some of the questions we tell our buyers to ask when they have found a practice they are seriously interested in. These questions are designed to give you a leg up in the negotiation process, as well as insight into potential pitfalls and opportunities, so you can see if this particular practice is a great fit for you. Because, let’s face it, no business is going to be perfect. Knowing- and accepting- there will be problems and worries with any business is key to success, because when you go in with your eyes wide open, you can strategically address the problems, ideally with your key strengths.
1. What are your biggest challenges right now? What’s your primary concern? Beware the seller that gives you a glossed over answer or says there is nothing. Business owners are like parents; even if there are no current, active issues, they are worrying about how to address a potential problem that, if it popped up, would be a really big deal.
2. What would you have done differently? If you weren’t selling what would you do to increase profits? Think opportunities the previous owner passed up but wished he hadn’t, or opportunities she has identified but never had the time or resources to pursue.
3. What skills or qualities are key for being successful in your practice? Really listen to the response to see if this is a good match for you. If you honestly do not have the skills the current owner lists, can you outsource them? If you are lacking the personality traits, could you make up for it with strategically hired staff? Or would it be better to move on to something that is a better fit? Only you can answer this- but answer it candidly.
4. How long will it take me to learn the business? In an ideal world, when you acquire a practice you would learn how to personally operate all aspects of said practice- from treatment protocols to office management to staff-provided therapies to patient retention strategies performed by the front desk staff. While time consuming, it will open your eyes to any potential opportunities for growth or needed changes to maximize efficiency or profitability. Getting a realistic timeline for accomplishing this helps you strategize on timing for changes you’d like to make, and a justifiable idea of what kind of transition period you’d like to negotiate for.
5. How did you come up with your asking price? If the price is based on random criteria such as a “comparable” practice in their area or how much money they need for retirement, you may have some significant room for price negotiation. The only way you will know the true value, of course, is if you procure the services of a professional broker to appraise the practice.
6. When did you decide to sell your business? If the seller has had a long-term plan to sell at this point in time, they probably put a lot of time and effort into preparing the practice, which translates into a potentially better purchase for you. However, if the decision was recent, there may be a pressing reason they need to sell that they are not disclosing, which may give you more negotiating power in terms of price or creative finance options.
7. If you can’t sell the business, what will you do instead? What is their backup plan? How realistic is it? How much do they seem to like it? If they don’t have a plan that is laid out, realistic and provides them some kind of financial stability, you probably have more room to negotiate on the price or financing terms.
So this is just a start to the questions we give to the buyers we represent. If you are having an “aha” moment about what you didn’t know that you didn’t know, why don’t you take us up on a free consult. We can discuss what you are looking for, and how we can help you find an ideal fit, and get it for the best price.