All business owners- including the potential business owners who are currently perusing this site hoping to find their dream practice- need to be thinking of their exit strategy. Seriously, this is a critical step in business planning. You may be just starting out. Or you may love your clinic and you just know that you will want to practice forever. But the only 100% guarantee in life is that some- if not most!- aspects of your present situation are going to change over time. And very often those changes necessitate a want- or a need- for you to stop working at your present level. And hands down, the absolute best way to ensure you leave your practice when and how you want (and with top dollar) is to plan for this exit as far in advance as possible (aka today!)
To help get you started, here are a few thoughts for you to chew on, as well as some strategies to consider.
If You Don’t Know Where You are Going, You Will Never Get There
Put the following in writing: What are your exit goals?Ideally when would you like to sell your clinic? What adventures would you like the next stage in life to hold for you?Do you see yourself walking away after selling the entire practice, retaining partial ownership, or even staying on and practicing as a part-time employee? What are your income needs when you are no longer practicing full time?
Now that you know where you are going, let’s talk about four key steps to get there that you should put on your calendar right now (even if it is a calendar item for 2040!)
Clear Out the Skeletons
When we value a practice we use financial data (primarily tax returns and profit and loss statements) for the three previous years. For doctors who decide to sell at the last minute this can be really bad news. Maybe they have been passing through personal expenses or even under-reporting income.Maybe they haven’t been running a very tight ship, keeping family members unnecessarily on the payroll or accumulating a lot of discretionary equipment and monthly expenses. Or maybe they just haven’t felt like working so hard the last few years and have let their numbers drop.
Let me be perfectly clear about something very obvious: The profitability of your clinic is the most important factor of your ultimate appraised value. So for the three years prior to a sale, STOP doing all of the things listed above and make sure your tax returns and financial statements clearly demonstrate the maximum profitability. Any additional taxes will likely be more than offset by a higher sales price.
Easy to Run = Easy to Sell
Are all of your office procedures in your head- or even worse, in an employee’s head? This is not an ideal situation for a buyer- and you want all aspects of your clinic to be as close to ideal as possible. So take the time to get it all on paper. While you are at it cross-train your staff members and train them on everything you do to run the business. Check out this post for more on this strategy to increase your practice's attractiveness and value to potential buyers.
Get Your Lease in Order
You want to know when you are going to sell because you want your lease to be as friendly to a new buyer as possible. The time to put that into place is when you sign your last lease prior to the sale. Get a clause where you can assign the lease, or negotiate the landlord to lock in the same rate for your buyer as you are getting. Ask for new paint, flooring, building repairs, new landscaping. Landlords see an opportunity to make some extra money when a new buyer is taking over a space, but when that is just an idea on the horizon they have much more incentive to keep you, the long-term tenant, in place when it is time to sign a lease renewal.
Clean House!
When you are thinking of selling a business, you probably are thinking it is the time to stop spending money on it. But this is absolutely the wrong way to approach this situation; The chiropractic clinic marketplace is a crowded one, and well-spent investments help your practice to stand out .Additionally, spending money strategically on your practice can actually increase its ultimate sales price, and shorten it’s time on the market.
So I would highly encourage you to put some money into how your practice looks. Get it professionally cleaned if it’s been a while.Remove any dated decorative objects, and spend a few hundred dollars on current wall art for your entire practice (try HomeGoods or World Market). Consider fresh paint and get the carpets cleaned. Evaluate your curb appeal and consider adding landscaping or at least some large potted plants to frame the doorway.
The Ultimate Exit Strategy
This is the big one and every single doctor can implement this TODAY (whether you are hoping to sell tomorrow or 50 years from now.) Ironically, the ultimate way to sell your practice is to consciously create a business that you would want to run for the rest of your life. Because if this is the mindset you have, you will build a business that other buyers will want, too. Use this mindset to make decisions in every aspect of your clinic, from buying new equipment or changing the décor to decisions regarding profitability and building a competitive edge in the marketplace, down to the culture and the vibe you create among your staff and your patients.
If you are interested in creating a strategic plan for selling in the future we’d love to talk with you about it. We also have an a pre-sale assessment that is an affordable way to see what your clinic is currently worth and what you can do to dramatically boost your clinic's value so you are ready to get top dollar when it's time to sell!
Here’s to the next stage- whenever that may be for each of you!
Cheers,
Crystal