Selling an audiology practice is one of the most significant events in a business owners’ professional life. Yet far too often, insufficient planning results in a poor outcome for what often amounts to a life’s work. A classic example of a trap owners fall into is illustrated by a practice I reviewed recently. If the owner had sold three years ago they would have received a significant price for their practice but instead they reduced their clinical time and scaled the business back. The income they received for the three extra year’s work plus the price the practice achieved on completion of the sale was less than they would have received in 2014. In effect they worked for 3 years for nothing and ended up with a poorer outcome.
The starting point when planning retirement is to understand your numbers. What will your practice realistically achieve when sold? Based on this can you afford to sell? If so, when? There are so many myths and misconceptions about practice values that give owners a false sense of security. The reality is that there is no single simple individual measure that dictates value. Practices do not sell for some specific percentage of turnover and they do not simply sell for a standard multiple of profit. Some practices change hands for as little as £1. Others achieve a sale price which is greater than the turnover. There can also be a steep differential between the perceived ‘technical’ value and the true realisable value. Practice sales work like any other transaction: they are market driven. Two practices with identical operational aspects and mirrored profit levels may achieve very different prices on disposal due to their location. Ultimately, it is all about supply and demand. There are many hot spots where practices are snapped up within days of going on the market. Sadly there are also areas where it is difficult to find a buyer at all – irrespective of the business appeal and performance. For example, an audiology practice in a coastal or island location is likely to take significantly longer to sell than one in a large city such as Birmingham or London. This means that practice owners need to start the sale process sooner rather than later.
A frequently overlooked consideration is the different strategies that may be applied to the sale of multi-branch operations. Sold separately the value of individual branches may be worth more than the sum of the whole business. Many owners find that a phased sale over a period of time can work very well depending upon their reason for sale.
When planning your exit, you should identify areas of opportunity to improve the value of the practice when it eventually is placed on the market. There are a vast range of measures that can be introduced any may be applicable in your practice these may include:
- Improving the customer/patient Journey
- Increasing staff training
- Ensuring that your services and hearing aids sell for the right price
- A practice make over to make it visually more attractive
- More delegation to assure the buyer that goodwill will transfer
- Improved use of practice management system to boost productivity
Which of these initiatives are appropriate to a particular practice will depend upon the timescale available and the culture and positioning of the practice. For example I would not recommend paying for an expensive shop fit immediately prior to a sale. Too many owners seem to be following advice from television shows! Selling a practice is very different from selling a house. You only get a return on a shop fit when the business improvement translates through to the balance sheet. Likewise, it may be better to leave the practice decoration as it is, demonstrating that it will successfully generate the profits shown in the accounts. Purchasers can see the true picture and are likely to see an area for further improved business performance.
The focal point is ensuring everything possible is in good order. If your property is rented then you need a clear strategy on the timing of your lease relative to the sale. A buyer will need sufficient security of tenure but the seller does not want to be lumbered with significant post-sale liabilities. Ensure that accounts are transparent going forward to provide prospective future buyers with trust and confidence to proceed. Make sure that your practice policies and documents are current to avoid issues with the regulatory authorities such as the CCG or the local fire and rescue authority. Staff should also be issued with up to date contracts of employment to avoid delays in a business transfer further down the line.
The world is moving faster than ever and the value of both your practice and your pension can change very quickly. It therefore pays to stay fully informed. Your health, or the health of a loved one, can also change towards the autumn of a practice owner’s tenure and time can quickly become more important than having a maximized pension. The Ideal time to take stock and get your plan in place is two to five years before you sell.
For a free and confidential discussion about selling your practice call us now via 0161 929 8389