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THINKING BUSINESS
a blog by Chris Barrow

Then again, you could decide to never sell your business




Moving on from yesterday's post on the 8-year exit...........


If you could create:


  • a management team who ran the business efficiently;

  • a clinical team who hit their production targets;

  • a marketing team who generate plenty of new leads through internal and inbound marketing;

  • a financial support team who monitor the KPIs and keep you on track;

  • an external team of the very best professional advisors.


Why would you sell a business that was generating a steady 15% per annum EBITDA for just 4.9 years earnings up front?


(Why 4.9? Take the current goodwill valuation at 7 x but then factor in 70% cash up front for your earn out - which is 7x70% = 4.9x.


You are paying for the earn out yourself as the caretaker manager I mentioned yesterday).


Why then do people sell their practices for so little return?


Because most sales are distress sales.


Types of Distress:


Pre-Covid:


  • Financial – Divorce/Tax/Debt/Cash flow

  • Compliance – Litigation and the GDC

  • HR – Employment legislation and dealing with self-employed clinicians

  • Illness – Own or family


Post-Covid


  • All of the above plus

  • Recruitment, Retention, Remuneration

  • Production, Prices, Profit

  • Burn out


If you have a sick goose (or you are a sick goose), then a distress sale may well be your only option.


4.9x and the chance of a bit more may well fit the bill.


If you are not in distress, why sell yourself short?


The Long-Term Planned Retention


Build a self-managing business and keep your 15% per annum EBITDA for as many years as you like - then either give it to your kids, sell it to your team/clinicians - or ring that agent way down the line. When it suits you - no distress, no urgency.


If your goose is laying golden eggs - keep the goose. Nurture the goose.


You'll be needing a business coach for that as well. A client recently asked me to to create a one-day "How to not have to ever sell your business" Masterclass. It's on the task list.






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