For many healthcare practice owners, the thought of selling their business can be both exciting and daunting.
The excitement of reaping the rewards of their hard work can be tempered by the fear of navigating the market and getting fair market value (or in an ideal world, the best possible price via the power of the leverage of competitive bids).
Often, accountants are brought in to determine the business’ value, relying heavily on financial statements.
While financials are a crucial piece of the puzzle, a true valuation of your practice goes deeper, encompassing intangible factors that can significantly impact the asking price.
Why accountants can’t tell the whole story
Accountants typically use one-size-fits-all methods like multiplying your practice’s adjusted profit (earnings before interest, tax, depreciation, and amortisation – EBITDA) by an arbitrary multiple. This provides a starting point, but it fails to consider key factors specific to healthcare businesses that significantly influence the appropriate multiple of adjusted profits to be used:
- NHS contract vs private patient mix – an NHS contract can still be a valuable thing, but more clinicians are finding the constraints untenable and turning to specialisation to build a loyal private patient base. In the right location, a strong reputation for personalised service and clinical expertise can translate into increased revenue and a higher valuation.
- Location and demographics – A practice situated in an affluent area with a growing population trading profitably against a backdrop of solid existing competition will typically command a premium compared to an unopposed practice in a more impoverished area. The supply of clinical healthcare resources within a commutable radius also has a major impact on the number of potential buyers and the realisable sale price.
- Inventory and equipment – Modern, well-maintained equipment and an attractive practice will help your business now and will appeal to potential buyers in the future.
- Staff expertise and culture – A skilled, experienced team fosters a positive patient experience and reduces training costs for the new owner.
Exit planning: More than just a price tag
The good news is that understanding the factors impacting value doesn’t and shouldn’t require waiting for a sale. Enter exit planning, a proactive approach analysing the same factors that specialists use to evaluate a sale value, to gain valuable insights to improve your practice’s overall health and profitability – setting yourself up for a successful exit on your terms, whenever you choose.
Here’s how exit planning empowers you as a healthcare business owner:
- Strategic Growth – Identifying your practice’s strengths and weaknesses allows you to develop targeted strategies to enhance value. This could involve expanding your patient base through marketing initiatives, focusing on high-margin products and more specialised examinations, or investing in staff training to enhance patient care.
- Succession Planning – Thinking about exit options early on opens doors. Perhaps you envision passing the practice on to a trusted employee or family member? Knowing your business’ value now helps structure a smooth ownership transition and efficient tax planning which can make a significant difference to the amount of money you walk away with.
- Negotiation Leverage – When the time comes to sell, a comprehensive understanding of the value drivers beyond financials empowers you to negotiate effectively with potential buyers. You can demonstrate the true earning potential of your practice and secure a more attractive price.
By focusing on these areas, you’re not just making your practice more profitable in the short term, but also laying the groundwork for a successful exit in the future.
Conclusion
Selling your healthcare business is a significant life event. While financial statements are important, a true valuation delves deeper to consider the intangibles that make your practice unique. Implementing exit planning strategies now not only empowers you with valuable business insights but also paves the way for maximising your practice’s worth whenever you choose to step away. Remember, a thriving, well-rounded practice with a loyal following and a strong team is a highly sought-after commodity. By focusing on these aspects, you can ensure that your exit is not just financially rewarding but also a testament to the success you’ve built.
Navigating the intricacies of valuing your healthcare practice is a complex task. As a specialist consultancy, Myers La Roche can provide invaluable guidance. We can help you not only understand the true value of your practice but also develop a strategic roadmap to maximise it.
Our expertise is founded on thirty years of valuing, supporting and selling Opticians, Audiologists and Podiatrists through our family of companies, and our friendly team are the experts in the field.
Myers La Roche was established in 1985 and soon developed a reputation as a trusted partner to the independent optical sector. As the market evolved to see more hearcare delivered alongside eyecare, Audiology Business Central was born. With clear synergies between these niche sectors and their patient bases, Podiatry Business Central followed soon after to support the growing independent podiatry sector.
We can’t do your tax return, but we can help you can ensure a smooth transition and a successful exit whenever you choose, allowing you to step away with the peace of mind and financial security you deserve.
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