PRACTICE SELLING TIPS

TRIED TO SELL AND CAN’T?

Here’s a checklist of what you need to consider, and ways a business broker can help

BY BILL NOLAN

Whether you are a single ownership practice or part of a multiple-doctor partnership, at some point optometrists will have to give consideration to selling their ownership interest in their business. If the doctor is lucky, he or she may have the buyer currently working in house as an associate, or a potential buyer may surface because of the geographic location of the practice.

KEY CONSIDERATIONS

LOCATION. In today’s marketplace the number one criterion a young doctor uses for determining whether he or she will buy a particular practice is its geographic location. Whenever I lecture at optometry schools, the overwhelming majority of students tell me that when they create their short list of practice opportunities, they do so by geographic location. Unfortunately for the seller, that is the one thing about your practice that is nearly impossible to change. So, knowing how to overcome objections is important.

REGION. Issues like demographics and the economic vitality of a community are critical considerations for potential buyers and should be considered by every seller when transitioning a practice.

OPTOMETRIC PRESENCE. A factor often overlooked when selling is whether optometry has a strong presence and is supported by the state’s legislative practice act. There is no doubt that in certain regions of our country the profession has thrived and been a key player in the healthcare delivery system. As a result, potential buyers look for practices to purchase in these areas.

MARKET LIMITATIONS

SMALL POOL. There is, however, a small market for both potential buyers as well as sellers wishing to transfer ownership of a practice. The preponderance of the buyers and sellers today are other optometrists which, by definition, limits the liquidity the marketplace. Occasionally some other entity such as a medical group or hospital group may buy a practice, but those purchases are few and far between.

TRANSITION LIFE CYCLE. Most doctors will attempt to sell their practice on their own without using any professional help or counsel on how to do it. In your personal life, it is not uncommon for a family to have three or more home sales during their life, beginning with a starter home and ending by downsizing into a townhouse for the retirement years.

PERSONAL VS. PROFESSIONAL. In their personal lives, most people will use a professional real estate company to help determine the price, market the property, negotiate terms, and get the deal done! Practice transition follows the same transaction life cycle, so why not use the services of a professional optometric brokerage firm?

TIPS FOR SELLING SMARTER

DON’T UNDERESTIMATE BUYERS. Determining a fair and reasonable purchase price is very important. Nothing will eliminate buyers and cause a delay in getting a contract like over pricing a practice. Today’s young buyers have a very good idea of the range of value for an optometric practice because information is so widely available on the Internet. All the major banks distribute information to the schools about value and price so the buyer pool is well informed.

GETTING THE RIGHT MESSAGE. Marketing is the most valuable resource available to a seller when using a broker. It is difficult for an individual doctor to reach all the target markets or perhaps to create the right marketing message to generate enough interest or overcome objections.

BROKERING THE DEAL. Buyers and sellers arrive at the purchase price quickly. It is often the terms and conditions which cause problems. How to structure financing, what is included in a letter of intent, and owner financing, are some of the terms and conditions which most sellers are unfamiliar with and don’t know how to structure. Help with these issues is important and necessary, and your broker can help you with all that.

MAKING IMPROVEMENTS. Your broker will be able to aid you in determining if there are areas for improvement within the walls of your practice—from upgrading fixtures, paint, and some cosmetic issues to the overall appearance of your practice.

SHOW IT. It’s important to make key improvements and then to take and send images of the location.

MANAGING EMOTIONS. Perhaps the most important element of professional help is keeping the emotions of both buyer and seller in check. For most doctors, the practice is their life’s work, and transitioning out, even if the time is right, can create and engender several competing emotions. When emotions run high, people tend to make a quick decision. That’s a big reason why having a neutral third party is helpful.

UNDERSTANDING FINANCING. When banks look to finance the sale of your office for a new buyer, the primary concern and metric is the free cash flow available for the young doctor to pay himself or herself and service the debt incurred by the sale. Professional help in understanding the available free cash flow—and guiding a seller through good growth strategies to improve cash flow—will all help with the long-term strategy of transitioning a practice.

Bill Nolan is an executive vice president at Williams Group, based in Lincoln, NE. He has been in practice management consulting since 1989.