You’re nearing retirement and looking ahead to a slower season of life with fewer demands. Maybe you’re looking for a professional change in the latter part of your career. Whatever the case, your medical practice is the biggest obstacle standing in your way, and it’s time to sell.
Many physicians or practice administrators in this position are tempted to try to sell their practice on their own and are hesitant to hire a business broker to facilitate the sale. They’re thinking, “Wouldn’t it be nice to save 10% on the brokerage fee?”
The truth is that you are an expert at running your business – but that doesn’t mean you’ll be an expert at selling it. The complex business sale process is lined with potential pitfalls that could have long-term, negative repercussions if they’re not handled well. A good broker can help you avoid these mistakes, and in most cases, they will be able to add at least 10-12% to the sales price, if not more!
Here is a more in-depth look at some potential pitfalls you’ll encounter when trying to sell a practice on your own.
Price is the single most important factor in determining how long a business stays on the market. Inexperienced sellers have a tendency to set a price before they’ve determined the value, and that price is usually on the high side. Sellers who take the time to conduct a thoughtful valuation process before assigning an asking price will be able to best defend that price and reap the benefit of a faster, smoother sale. In the reverse scenario, some sellers do undervalue their business, which leaves money on the table that you could be taking into your next season of life. An experienced broker, like Strategic Medical Brokers, uses an in-depth valuation method that is guaranteed to position your practice well within the marketplace.
Not Attracting Serious Buyers
Pre-qualifying prospective buyers is essential for a successful business sale. However, we’ve found that many sellers avoid qualifying prospects too soon, because they fear it will scare the prospect away. In reality, only 4-5% of buyers who contact you will actually be able to buy your business, making early pre-qualification essential to a seamless and timely sale. But most sellers don’t know how to properly screen buyers or feel like they don’t have the time, even though doing so will save you valuable time in the long run.
Not Protecting Confidentiality & Not Protecting Yourself
You’re likely concerned with confidentiality during the selling process, and for good reason. If it becomes public knowledge that your business is on the market, it could adversely affect revenues and your relationship with your staff. However, you still need to get the word out and market your practice. But getting the word out that the business is for sale without letting anybody know that it’s your actual business for sale is, of course, a very tricky proposition. How do you reveal enough in your ads without revealing too much? How do you protect confidentiality when talking to potential buyers?
In our years of experience, we’ve seen many business buyers do their best to circumvent barriers that have been put in place to protect you as a seller. They try even when you are working with a broker! They may attempt to get around confidentiality agreements or force your hand in sharing proprietary information like trade secrets or patient demographics. A good broker helps you maintain confidentiality and protect you and your business throughout the entire sale process.
A broker will also help you represent your business in the best light and guard you against potentially misrepresenting it to prospective buyers. At some point during the process, you may be tempted to exaggerate numbers, distort projections or even cover up problems. Those types of misrepresentations send up red flags when prospective buyers review the actual financials and can even become the basis for legal action after the sale.
The Transaction & Closing
All-cash sales are unrealistic in today’s marketplace. Cash sales can also be detrimental to you as a seller from a tax perspective. Instead of handing over a big chunk of cash at closing, today’s buyers are more likely to need concessions in the form of seller financing, deferred payments, or assistance in obtaining third-party financing. Even if you didn’t need a broker to help you market your business and vet potential buyers (perhaps you already negotiated a price with a buyer, are selling to a family member or employee, or are an entrepreneur who has sold multiple business), it may still be beneficial to hire a broker to assist with closing. A broker is going to help you navigate the complex closing process and reduce any uncertainty and stress.
Documents, Contingencies, Transitions, Continuity of Business….and More
There are countless other steps throughout the selling process where you can easily make missteps and waste valuable time, energy, and financial resources. Do you know how to negotiate and draft a letter of intent? Or how to assemble due diligence documents or obtain a lease assignment. A serious buyer will likely want to meet with some of your key employees. Do you know how and when to accomplish that buyer contingency? Do you know how to negotiate your transition out of the practice in a manner that benefits you, and not only the seller? And if you are managing this entire process yourself, have you thought about how to maintain continuity of business during the sale?
There are so many details to a business sale, and each complex piece is an opportunity to make a major misstep that could have serious, long-term repercussions.
Maybe It’s Time to Call a Broker
Abraham Lincoln famously said, “A man who represents himself has a fool for a client.” While representing yourself in the sale of your practice may mean you pay less in professional fees, it doesn’t necessarily mean you will maximize your net proceeds and secure the best overall outcomes. A broker’s expertise will help you maximize your purchase price, sell quickly and efficiently, protect you, let you focus on running your business during the sales process, and give you peace of mind that every detail is handled.
Strategic Medical Brokers exists because we saw a need in the healthcare community for a brokerage firm that truly understands sellers’ needs and goals. Our brokers have firsthand experience owning and working in medical practices, and our in-depth understanding of the industry helps you get the most out of your business sale. At the same time, we’re focused on protecting you and your patients, staff, and legacy.
We know selling your medical practice is a bittersweet time, and we also know it can be a stressful and conflict-ridden process. We promise that you’ll feel relieved and grateful to have us on your team as you’re selling your business. We bring safety, privacy, and loyalty to the table, and help launch you along the path toward a new season you can be excited about! And at the same time, you can trust the path we help create for your practice that leaves your life’s work in good hands.