There is an old adage in stock market investing: “When it’s already on a magazine cover, you are too late.”
One example was buying cannabis stock a few years ago. By the time most of us had thought about buying into this trend, it was already too late. There wasn’t much money to be made – and there was plenty to be lost.
There may be a similar truth when it comes to selling a Physical Therapy practice. It may seem that every other week someone is interested in buying your practice. Maybe this is a great time to sell. Then again, perhaps this is the time to invest in your own practice. After all, there must be a reason all these very smart investors feel that your company is an attractive purchase opportunity.
The reality is that we will all exit our company at some point. Selling can be a great option for many of us. It does make sense that we control that transition rather than someone else. So it is important to make a plan for how we want that to transpire.
What is the right exit strategy for you?
I think the two most important questions to ask when making this decision are:
- What is your dream?
- What is your calling?
It seems exciting to be able to sell a large portion of your company for 7 figures. But does that really fit in with your dream and your calling?
Many aggressive entrepreneurs start out their career with the goal of retiring early. But then what?
I attended a great lecture on exit strategies about 10 years ago. The presenter gave some great information about the types of deals that can be made and some wonderful success stories. But I wanted to know more. So I waited my turn in line to ask one question:
“What were the sellers of these practices doing five years later?”
The presenter smiled and said, “Well it’s fun going fishing every day – for a while. But after about six months it gets old. They all got back in the Physical Therapy game.”
“….They all got back into the Physical Therapy game.”
That was all I needed to hear. If I was probably going to get right back in the game, why would I go through all the stress of then having to start up another company? Better to just enjoy the one I had and live my dream within it.
I understand that for some, older owners, the math makes sense. Get a big lump sum now and enjoy the security that brings. But perhaps there is another way to achieve that and lose some of your current headaches without adding the inevitable headaches that go along with preparing and executing a sale.
So what is your dream and what is your calling? One way to answer this is to ask yourself the question: How would you spend your time differently if you suddenly had an extra $4 million in your bank account? I’m not saying that’s how much you will get in a sale. Some would get more, some would get less. But the point is that most of us could live comfortably off the interest of $4 million.
Ask yourself that question repeatedly over the next few months. Ask it on your good days when you are loving your patients and staff. Ask it on your bad days when you feel you are only one step away from everything crashing down around you. Ask it on weekends. Most importantly ask it on longer vacations when you are removed from work and have perspective.
If you are thinking, “I don’t know when I can next have a vacation,” then you already know what your dream is: you just want a break! But you can’t really answer the question well until you are able to take a week or two vacation pretty consistently. If you can’t do that just yet, then you’ve got some work to do before you exit your practice successfully. Don’t worry, it IS achievable.
Once you have an idea of your dream and your calling, it should make your path clearer. You may just need some help in working out how to get there.
You have probably heard of most of the usual types of exit strategies. There are basically three that most of us hear about::
- Sell to an outside entity
- Sell to employees
- Sell / give to family
However, there is one type of strategy that you may not have heard about that may be worth considering: Engaging a management company that can take over some of the headaches for you. This approach can give you a lot more flexibility and enjoyment. It can also give you more freedom in the timing and the manner in which you exit.
What does a Management Company do and why should you consider this?
A Management Company essentially utilizes their expertise to do a really good job at the things you don’t enjoy or just aren’t good at.
Why could this be a good idea for you?
Because often people want to sell their business just to change their lifestyle. That’s like selling a house you love, pocketing the cash and moving into an apartment because you don’t like mowing the lawn.
It would probably make more sense to just hire a guy to mow the lawn. He’d do a better job too and your spouse would be happier. Does that ring true for you at a slightly deeper level?
What are the kinds of things that a Management Company can do for you? Often they provide a menu of services. You may be able to pick and choose what you want, when you want. Examples of these services are:
- Billing and Collections
- Insurance Authorization
- Outside Marketing
- Online Marketing
- Internal Marketing
- Human Resources and Payroll
- Staff Development
- Adding proven Physical Therapy programs
- Adding cash based services
If a Management Company does their job well, your goals could be to experience the following:
- Increased gross revenue
- Decreased stress
- Decreased time spent working
- Increased brand stability
- More consistent new patient volume
- More vocational fulfillment as you are spending your time working in your strengths, rather than putting out fires in your areas of weakness
How does that help with your exit plan?
By achieving these objectives, you will be more attractive to a buyer and you will be able to command a higher price at the sale. However you may find that you are enjoying your work more and realize that you don’t actually want to sell until a much later date.
In most cases, as long as you are growing, the longer you wait to sell, the more you will earn from your company throughout your ownership period and at the time of sale.
Another nice benefit of engaging a Management Company is that it allows you the benefits of a rarely used exit strategy: selling to employees.
For most practices, the employees probably don’t have all the skill sets, financial position and stability that would be required to purchase and keep growing your business after your exit. If they have a Management Company in place, then they don’t have to. They can keep doing what they love and keep building the legacy of the company that you started.
If you have poured your heart into building your company and your employees, this can be the most rewarding way to hand over the reigns.
What are 2 steps that you can take today?
- Get alone for 30 minutes and ask yourself the question: “What would I change in my life if I had an extra $4 million?” And don’t say, “Go fishing every day.” It would probably get old.
- If your answer includes continuing to serve your community in some way (even part time), then consider that maybe this isn’t the time to sell. Maybe this is the time to get some management support so that you can start working in your areas of strength and truly enjoy your work.