Exit Options: A Different Perspective
How to exit without walking away entirely.
By Matt Slimming, PT, DPT*
There is an old adage in stock market investing: “When it’s already on a magazine cover, you are too late.”
One example was buying cannabis stock a few years ago. By the time most of us had thought about buying into this trend, it was already too late. There wasn’t much money to be made, and there was plenty to be lost. There may be a similar truth when it comes to selling a physical therapy practice. It may seem that every other week someone is interested in buying your practice. Maybe this is a great time to sell. Then again, perhaps this is the time to invest in your own practice. After all, there must be a reason all these very smart investors feel that your company is an attractive purchase opportunity.
The reality is that we will all exit our company at some point. Selling can be a great option for many of us. It does make sense that we control that transition rather than someone else. So, it is important to plan for how we want that to transpire.
What is the Right Exit Strategy for You?
Two important questions to ask when making this decision are:
- What is your dream?
- What is your calling?
It seems exciting to be able to sell a large portion of your company for seven figures, but does that really fit in with your dream and your calling? Many aggressive entrepreneurs start out their career with the goal of retiring early. But then what?
I attended a great lecture on exit strategies about 10 years ago. The presenter gave some great information about the types of deals that can be made and some wonderful success stories. But I wanted to know more and waited my turn in line to ask one question:
“What were the sellers of these practices doing five years later?”
The presenter smiled and said, “Well it’s fun going fishing every day … for a while. After about six months it gets old. They all got back in the physical therapy game.”
That was all I needed to hear. If I was probably going to get right back in the game, why would I go through all the stress of then having to start another company? Better to just enjoy the one I had and live my dream within it.
I understand that for some older owners, the math makes sense — they’ll get a big lump sum now and enjoy the security that brings. However, maybe there is another way to achieve that and lose some of your current headaches without adding the inevitable headaches that go along with preparing and executing a sale.
What is your dream and what is your calling?
Ask yourself that question repeatedly over the next few months. Ask it on your good days when you are loving your patients and staff. Ask it on your bad days when you feel you are only one step away from everything crashing down around you. Ask it on weekends. Most important, ask it on longer vacations when you are removed from work and have perspective.
If you are thinking, “I don’t know when I can even take a vacation,” then you already know what your dream is: you just want a break! But you can’t really answer the question well until you are able to take a week or two vacation pretty consistently. If you can’t do that just yet, then you’ve got some work to do before you exit your practice successfully. Don’t worry, it IS achievable.
Once you have an idea of your dream and your calling, it should make your path clearer. You may just need some help in working out how to get there.
Types of Exit Strategies
There are three commonly known exit strategies:
- Sell to an outside entity
- Sell to employees
- Sell/give to family
However, there’s one additional strategy that may be worth considering:
Engage a management company to take on some of your business management responsibilities.
This approach may provide more day-to-day flexibility and freedom in the timing and manner in which you exit. It can also take on tasks you don’t enjoy or aren’t good at ranging from billing and collections to insurance authorizations, marketing, and even managing compliance issues.
When You’re Not Really Ready to Exit
People sometimes want to sell their business just to change their lifestyle. That’s like selling a house you love, pocketing the cash, and moving into an apartment because you don’t like mowing the lawn. It would probably make more sense to just hire someone to mow the lawn. A professional might do a better job, too. Does that ring true for you at a slightly deeper level? If yes, you might not be ready to exit your business, and an alternative might be more appropriate for you.
The Right Time to Exit
In most cases, as long as you are growing, the longer you wait to sell, the more you will earn from your company throughout your ownership period and at the time of sale. This strategy can be particularly lucrative when selling to an outside buyer. In contrast, if you plan to sell to employees or family, your sale price may be lower and it will be necessary to have the appropriate supports in place to help with operations, marketing, or insurance issues can help keep the business going and continue your legacy. Plan ahead for these supports and consider all options for this exit strategy. While not as common as sale, if you have poured your heart into building your company and preparing your employees, this can be the most personally rewarding way to hand over the reins.
Many owners may delay the exit process because they’re not truly ready to fully step away, while others might rush it only to discover they miss participating in their calling. Examine what your personal goals and dreams are, and whether stepping away from your business is the right move. The range of exit options available to owners allows you to choose the best path forward for you, on your own timeline, while preserving your legacy.
Matt Slimming, PT, DPT, is owner of STAR Physical Therapy, STAR Fitness and STAR Management Company, which serves physical therapy practice owners. Matt can be reached at firstname.lastname@example.org.
*The author has a professional affiliation with this subject.