There is a video that went viral over the internet a few years back and tends to pop back up around the holidays called the “Company is Coming!” The comedian made a parody of the stress people feel when cleaning their house and perfectly captures that ridiculous mania that we all feel when getting the house ready for company to come, especially when we wait until the last minute.
Well, this same feeling of panic applies to getting your practice ready to sell, if you’re not prepared. The number one stressor we see with our clients is in the preparation phase and gathering due diligence information.
Due diligence. Why is it so important? After all, how hard can it be? You’ve got copies of your tax returns, you’ve done small improvements to the facility so that it shows well, you’ve got a loyal staff and you’ve been able to earn a decent living for the last twenty-five years – now you just need to find a buyer. Sounds simple on the surface. What else is there to prepare for?
Due Diligence is the process the buyer uses to rationalize the value you’ve requested and to completely understand their risk. Similar to the deep cleaning we find ourselves doing before company comes over, where at each turn we find something else that needs to be done, the due diligence process goes much deeper and takes much longer than you would first envision; because, for the buyer, there’s a lot of risk (both perceived and real). As a seller, you will need to start preparing for the information that the buyer will really want to see and be prepared for the tough questions that the buyer is actually going to ask. Hard questions. Complex questions. Questions about your financials – details about certain expenses in your profit and loss statements. Questions about your staff – details on their roles in the practice and how they’re paid. Questions about your policies and procedures and how you operate your practice. A seller must understand that the due diligence process is about the buyer finding reasons not to proceed. The questions can seem daunting and sometimes feel personal, because your practice is, after all, your second home. The time spent to gather data and documents can seem endless. And yes, besides answers, buyers will want copies of everything because behind every buyer is their attorney, their accountant, and their advisors. Then, the stress levels start to rise when you realize you’re still gathering data when you thought you’d be signing an agreement.
So, while you’re excited about the prospect of selling your practice, the value for which you’ve worked hard for all these years and truly earned, the dream of retirement which you can almost feel … you first need to clean your house … because a buyer is coming!
Join us for the National Transitions Conference and learn how to maximize your potential value and properly prepare for your exit.
See you there!