Disastrous News!
It seems about a third of medical business owners are planning to exit their business by selling up. That in itself is not a bad thing. But selling up without having an exit strategy in place?
Yeah….. that’s not a wise thing to do.
Why? Well, because experience says that if you do, you will get anywhere from 25% to 50% less than if you had a plan. That’s a lot. And when you consider the hours you put in, the last thing you want is to lose money on any sale.
But to be honest, most medical businesses are sold without a plan. Vendors do not realise the amount of money left at the table.
There’s more. Baby boomers and early Generation X medical professionals were retiring and were high-risk takers. That means many of them went into business and will be looking to sell, with most leaving their businesses within the next ten years. It is estimated that only 20% of baby boomers and Gen X with businesses will still be in business in 10 years’ time, and I think that is overstated. Most will get out earlier.
And only a few have a plan.
For some, the plan will be to pass on the baton to the next family generation if they can. Some will sell to someone employed in the business, but most will sell outright.
Here’s the problem. Many who think they will pass the baton to the next generation within the family have not asked the question, ‘Does the next generation of my family actually want to take over the medical practice?’ Many think they do, but the reality is Millennials and Gen Z are not that interested.
Why? Well, they have seen their medical practice owners put in consistently 60-hour weeks, and they do not want to do that.
It does not end there. Even if you do have a family member willing to take on the mantle, there are plans, timelines and expectations to put in place. The last thing you want is to have a plan to leave it to the next generation but not agree on a process, and it all falls apart.
What about selling the business to another medical professional working on the business? Again, this is possible, but the question remains. Do they want to?
And also, at what price and when? Promising one of your doctors vaguely about something in 10 years’ time is unlikely to get their juices flowing, and there are too many variables that can mess it up. They may feel that the value of the business went up because of the time and effort they put in. If you then ask them to pay for that, how will that go down?
So, you need to have the discussion, timelines and a process.
Selling to family and those within a practice is less risky for them. They know the practice. But selling to a stranger who knows nothing about you?
In their minds, that is a lot of risk, and if the risks outweigh the price you are asking, then generally, they will walk away. Any medical businesses trying to sell to a Stanger needs to minimise risk as much as they can. And that usually means showing that your medical business is operating as a business.
And always remember you will value your medical practice much more than anyone else will value your practice. That is because you know your practice well. But a stranger does not know your business, so he does not value the business as much as you do.
And sometimes, practice owners are so preoccupied with the value of the practice they tend to ignore taxes. If structured incorrectly, there could be a chance that more taxes are payable when you sell. And again, the level of taxes you pay will be determined by how much time you have to prepare and plan for a sale.
Exiting your medical business is Step 9 of our 9 steps to working less, earning more and creating more wealth. If you would like to know………
