When finalizing the sale, get it in writing.
Contracts are put in writing to record what was agreed upon. Oral agreements result in flawed memories and disagreements. The Statue of Frauds is a doctrine in contract law requiring a writing to make certain contracts binding.The writing is not the contract but instead is evidence of the contract. Under the Statue of Frauds, the writing is also necessary to make the contract enforceable.
Have good financial documentation at least 3-4 years before selling.
A good paper trail is a plus when selling your practice. The value and selling price is a fraction of the income and expense history. The buyer, lenders, and brokers are all going to want documentation (P&L and tax returns) to justify the sale price. Poor or shady financial records result in a lower selling price.
To know the value of your practice get a 3rd party appraisal.
An unbiased professional appraisal allows you to know where you are financially in time. Remember, cash flow dictates what is available to pay debt and practice expenses; however, it is only one factor that is used in appraising a practice to determine market values. Ultimately, the market determines selling price, but an unbiased professional appraisal will come closer to the selling price than many owners’ subjective inflated value based on their retirement plans.
Take time to go over your practice and make some curb appeal or gingerbread accommodations.
When the buyer views the practice, they want to envision a nice place they want to spend the next 10-20 years practicing in, not in a run down facility. The building needs to be in good repairs, clean, and in good working order. One does not need state of the art equipment or facilities. Most buyers want a place they can begin practicing veterinary medicine, not working remodeling or fixing up a worn out facility. They are buying a practice to practice in, not one to spend valuable time remodeling and fixing up.
Don’t let your accountant or lawyer squelch the deal.
Every seller and buyer should be represented by counsel and an accountant. The problem rises when one relies on counsel from a less than qualified and experienced business attorney. Using one’s brother-in-law or other relative or lawyer not experienced or knowledgeable in business matters only gums-up the works. Use an attorney that is knowledgeable in business closings, warranties, and deals. Reopening negotiations over dead-end issues only aggravates all parties and can literally kill some deals. Pressuring opposing parties just to get every aspect of the deal to go their client’s way can negatively impact the closing. Advisors should try to make sure their client’s interests are protected but not to the point of negating a fair deal. All parties should want a win-win situation resulting in growth and success for both buyer and seller.
When planning on selling, get your practice revenue stream on fast track.
The last 3-4 years is the most critical time in your practice career because the last 3-4 years of your practice revenue is what the buyer and lender will most closely scrutinize.
Making sure you charge for all procedures and charging a fair fee will enhance your Average Client Transaction (ACT). Veterinary economics dictate that this figure should approach $100.00 or higher. Remember that each dollar falling to the excess earnings column results in 4-5 times in practice value when marketing your practice.
Giving services away or not charging a fair fee may result in happy clients that figure they got a freebie, but will ultimately come out of your retirement when you sell your practice.