Secure your practice’s value
It’s never too early – securing the value of your practice for future sale
By Paul Freeman, Medfin CEO
As the looming cost of health care sits front and centre in the mind of government, and the needs of our ageing population continue to dominate headlines, better managing productivity and costs are high on the agenda of medical practitioners.
Practitioners are increasingly looking to how productive and efficient they can be in their own right, and best managing the day to day variables within their own control – running their business smoothly and surrounding themselves with a strong team of staff, bankers, advisers and wealth managers. However ensuring your business is strong and match fit doesn’t just matter for today – it is vital for securing the value of your practice for eventual succession and exit options sale down the track.
Paul Freeman, Chief Executive Officer of Medfin Finance, knows that regardless of when you plan on selling, if you have put years of effort into building a dental practice you want the sale price to reflect that hard work in building up your business. But unless you can prove that your business is a sound investment, you could be disappointed. Here, Paul suggests four steps that can help you to maximise the value of your practice and ensure a future ownership transition – whenever it may occur – goes smoothly.
1. Get your books in order
Most buyers will pay a premium for certainty and are looking for evidence of consistent revenue, expenses and financial performance over a number of years, through both good and challenging times. They want to see well-kept, solid accounts that they can test and validate and you must be able to answer questions about patient numbers, the strengths and weaknesses of the business, throughput, competition and anything that differentiates your practice. They may also be interested in opportunities for growth.
Over the last few years there has been a marked increase in the number of corporate-style purchasers. From their point of view, they are buying an income stream that happens to be a medical or dental practice, so they are absolutely focused on the numbers and the way the business is managed. The process may be less rigorous if you’re selling to someone already working in the business, but they’ll still want to see detailed figures.
2. Have an exit strategy
Think about when, why and how you’re going to leave your practice. Do you want to make a clean break or are you prepared to continue as an employee, either full time or part time, for an agreed period after the sale?
Staying on to shepherd through the transition of ownership can add to the value of the business and help you to attract a higher price. Many corporate purchasers insist on it, and they may want to start with a down payment and then make one or more milestone payments when the business achieves the projected returns.
3. Prioritise solid and trustworthy financial advice
It’s important to talk to your banker and other professional advisers from the outset so they have plenty of time to make any necessary adjustments. For example, as you’re selling an asset, you need to be very clear about your tax position. There may be a case for restructuring the business before you initiate the sale process. Don’t be afraid to seek a second opinion.
4. Preparation is key
Disciplined, sound financial management will make your business more attractive to a buyer and will also help you to run your practice in the most efficient and profitable way.
Life is unpredictable – you could find yourself with no choice but to sell in a hurry. If your business is well run, it will always be ready for sale.
With more than 20 years of industry experience, Medfin is an Australian leader in finance for healthcare professionals. Our dental specialists are available to discuss your practice set up needs at a time and place that fits within your busy schedule. Before making any financial decisions you should make sure you receive appropriate financial, legal and tax advice.