Hoping to sell your practice? Set yourself up for success by avoiding these mistakes many sellers make.
Posted in Planning on Friday, June 17, 2022
Every doctor selling a practice enters the market hoping for a quick, smooth sale. Many are already burned out from increasingly burdensome practice management requirements and the physical toll from years of patient care. Most expect that a new buyer will be eager to jump in and continue the legacy.
Unfortunately, too many doctors never get the chance to sell their practice. Forbes magazine did a study that showed that 70-80% of listed businesses never sell at all, and those that do may spend years on the market.
I’ve helped hundreds of doctors sell their practices for maximum value, and I’ve become familiar with the obstacles sellers face along the way. If you can avoid these mistakes, you’re well on the way to success!
Lack of Preparation
Many of the most common seller mistakes can be addressed before the clinic even reaches the market.
Research the Sales Process
Without a strong grasp of the steps and phases involved in a chiropractic sale, sellers are likely to create snags and delays. Every delay is another opportunity for buyers to walk away.
Get Your Financials in Order
Buyers rely on financial statements to assess the value of a clinic and the trustworthiness of the seller. These are the gold standard. Things like clinic visits, new patients and PVA have very limited value if the financials are not accurate, up to date, and easy to explain. Inconsistencies, omissions, or mistakes will send buyers running for the hills. But most doctors have focused on patient care, not squeaky-clean financial statements. So, there is work that needs to be done before beginning the sale so that all the clinic information presents as a complete, easy to understand presentation of the practice, including:
- Operational details
Furthermore, it is important to recognize that past performance from years to decades ago really has no impact on the present value of the practice. Buyers and their lenders will be focused on how the clinic is performing both now and over the previous 3 years (as a general rule).
Understand the Sales Timeline
Sellers also need to be prepared for the length of the sales timeline. Business sales are far more complex than real-estate sales, and the average clinic takes 12-18 months to sell. A broker with a strong marketing strategy can shorten the timeline, but every sale takes sustained effort. This is generally more like running a marathon and not a sprint to the end. Sellers who aren’t ready to keep the numbers up through the sale and put in the time to complete necessary sale steps will struggle to sell their clinic.
Seek Professional Support
Finally, many owners try to push a sale through with limited professional support. While they may save on commissions, the savings are usually counteracted by value lost, and a poorly managed sale often leads to lost opportunities and longer time spent on the market — if the clinic sells at all. The “for sale by owner” approach can be successful, but it requires a dedicated seller with access to great market exposure, a strong knowledge of how to sell a business, a structured sale strategy, and access to resources to help the buyer with sale education and financing.
Lack of Follow-Through
There are a lot of opportunities for mistakes to happen during the sales process.
Some sellers are unable to maintain their clinic’s profit and revenue numbers during the sale. Many are burnt out (physically or emotionally) before they even put the practice on the market. This is a recipe for disaster — if numbers fall - even as little as 10% - the clinic’s value will be reassessed and may be lowered, and some buyers may walk away all together due to a heightened perception of risk around buying a clinic in decline.
Selling a clinic is a major transition for both parties, and emotions run understandably high. If tempers flare or personalities clash, trust in the transaction erodes. This can have a profound impact on the “goodwill” of the practice sale- the most valuable asset you may have in selling your practice. Maintaining a working professional relationship is essential for a successful sale. The best way to ensure that this relationship is preserved is to have a third-party act as the go-between or intermediary.
Sales often fall apart when either party feels their expectations aren’t being met or they don’t understand what is happening. This is especially common in associate buyouts, which have a lower success rate due to the long-term nature of the transaction. There’s a lot of time in a 1–5-year transaction for unspoken expectations to form below the surface, and the other party has little chance of meeting these. Without formalized sale terms, timelines, and management- it is very difficult to keep all parties engaged and on track for a successful sale.
Becoming the Competition
After the sale, some sellers may plan to continue practicing in the area. Even if the seller considers the patient care to be non-competitive to the buyer, this is a major red flag to most buyers and will often result in loan denial from the lender. In some cases, the clinic staff may also leave after the sale, leaving a buyer without a knowledgeable support team to help maintain the practice. This is especially challenging in today’s labor market. If a clinic faces stiff local competition or requires major hires, the buyer shoulders additional risk in taking ownership.
How to Avoid the Pitfalls
Understanding the challenges you face is half the battle, because it allows you to plan to avoid them.
- Come to your sale prepared.
- Be ready to put in the work and take care of the details.
- Be fair, respectful, and professional when dealing with your buyer; in other words, treat buyers the way you’d like to be treated when buying a business.
- For the best outcome, work with a professional broker who has specialized experience in selling chiropractic practices. Whether you use their full-representation services or utilize more limited advisory services, an expert in this process will provide you with invaluable guidance and proven sales methodologies that will dramatically improve your sale odds and give you the best chance of successfully meeting your sales goals and ensuring the practice legacy.
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About Crystal Misenheimer
Crystal Misenheimer received her BBA from Baylor University in International Management Information Systems. She worked in database management in the non-profit sector prior to taking over the management and marketing aspects of three of Kevin's chiropractic clinics. As the Lead Broker for Progressive Practice Sales, Crystal has helped hundreds of chiropractors to successfully transition into the next stage of their careers. With an in-depth understanding of the intricacies of practice valuations, the constantly changing challenges of the current marketplace and the many complexities of practice sales, Crystal is the leading expert in the chiropractic practice sales space. You can find her regularly featured in industry podcasts, blogs and periodicals. She lives in Chattanooga, TN, and enjoys spending her free time hiking, practicing yoga, and spending time with her husband Kevin and their four children.