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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.