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When Are You Ready to Sell?

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Explore what it takes to be prepared to sell.

By Tony Lynch* and Lisa Mackell, MPT

Do you receive multiple calls per month inquiring about the sale of your practice?

Are you feeling exhausted after COVID-19 and hoping someone calls you with interest to buy your business? Many practice owners simply don’t know if they should sell, when they are ready to sell, and what makes a practice/owner ready. We have unique experience in these conversations: Tony as a business broker and Lisa as a practice owner who sold her business.

There is a significant difference between being ready to sell and being prepared to sell. Mentally, you may feel ready to sell; however, are you and your business prepared to sell? There are many things about your business in which a potential buyer will be interested. It is never too early to start gathering information to prepare for a sale. A good first step is to put yourself in a buyer’s shoes and ask yourself some questions about your business.

This article explores the different perspectives of buyers and sellers when considering the main elements of a sale.

REVENUE

Tony

  • Can a buyer develop a high degree of confidence that they can replicate your revenue and your profit year after year?
  • The buyer’s primary objective will be to answer this fundamental question with a resounding “Yes” before they close your deal.

Lisa

  • Be prepared to explain ups and downs in your revenue and begin to gather data and documents showing revenue reports including total visits, monthly billed, and collected. If you have multiple offices, try to compile the data by office.

Trends

Tony

  • How would you describe recent trends, pre-COVID-19, in your business?
  • Was revenue up or down?
  • Was profit up or down?
  • What are the trends in your market? Consider how your market’s trends, including demographic, competition, large health care systems and payors, salaries and household income, employment rate, and more, impact you. For every obstacle, be prepared to offer a way around the obstacle. You want the buyer to recognize your business adapts and thrives because you adjust and re-strategize your plans regularly.

Lisa

  • This is where I believe your knowledge as the business owner is extremely valuable to the potential buyer.
  • What makes your practice different, beneficial, gold standard, to your community at large? This is not the time to be shy or reserved. Tell your story and brag a little.
  • What have you done differently in response to what your community needs?

Operating Agreements

Tony

  • Are your operating agreements buttoned up? For instance, do your office leases allow you to assign your tenant lease rights to the buyer so the buyer can continue to operate in your current facilities?
  • Will any of the lease terms or costs change for the buyer?
  • Review all other significant operating agreements, including billing vendor, payroll services, etc.
  • A buyer may have their own operating systems and may not want to assume any long-term obligations.
  • Do any of your agreements include financial penalties for early termination?
  • Generally, there are workarounds for the barriers you may encounter, but it’s beneficial to be aware of where they lie on the course.

Lisa

  • Begin to gather your contracts and assess what services may be absorbed by the buyer.
  • Consider which services could be assumed by the buyer, and the increased ease this will create for you as an owner.

Payor Agreements

Tony

  • Are your payor agreements industry standard?
  • Evaluate any agreements that may have unusual terms and conditions to determine whether the buyer can continue to use the agreements without unreasonable delays due to the sale of your practice.

Lisa

  • Determine which contracts you may have negotiated higher-than-standard pay rates – this can be valuable to the buyer.
  • Consider which payor contracts you do not currently have. After the sale, is there a potential increase in referrals and revenue with added contracts the buyer has?

Employee Retention

Tony

  • Will the buyer feel there is significant risk of losing any of your revenue-generating employees?
  • Do you have employment and non-competition agreements with your key employees? Consider the impact (if any) on your revenue if one of your key staff left. The buyer will certainly weigh this risk as well.

Lisa

  • Consider which of your employees will offer significant value to the potential buyer, and those that may have to be terminated based on what the new company has in place.

Buyer Comfort

Tony

  • Will a buyer feel comfortable that they’ll be able to transition your longstanding goodwill and revenue streams?
  • This question can cover almost every facet of a business.

Lisa

  • What is needed to ensure the buyer that they can replicate your revenue?
  • Do you plan on remaining on after the sale? Typically, a buyer is looking for stability in the business, a solid integration plan, and may pay more for a company when the owner plans to stay on for a few more years.

Getting Prepared

Tony

  • Do you need help getting prepared?
  • Make sure you communicate that confidentiality is paramount for anyone who is helping you prepare.

Lisa

  • Whether you are preparing to sell this year or in five years, it is never too early to start preparing.
  • You may need to enlist outside consultants or internal employees to help you gather the necessary documents and data that will be requested by the buyer.

It is critical for you to remember that you are a smart business owner. You have created a successful therapy practice. When you feel you’re ready to sell, consider contacting a business broker to discuss your practice, revenue, expenses, and other criteria that will be looked at by potential buyers. A good broker may also help you find ways to increase your revenue, decrease your expenses, or make other suggestions to increase your attractiveness to potential buyers. The process can be scary, emotional, and daunting, but for the prepared business owner, the process can go very smoothly. Good advice and representation, as well as preparedness, are key. 

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Heidi Rose Bender

Tony Lynch is a business broker with MT Consulting, and has worked with many physical therapy practices in their sale process.

Lisa Mackell, MPT, is the founder of Theraplay, Inc. and was a client of MT Consulting when Theraplay went through a deal process in 2015.

*The author has a professional affiliation with this subject.