There are many moving parts that you’ll need to manage when selling your practice. While it’s essential that you focus on everything that needs to be done correctly to complete this transaction, there are also some things you shouldn’t do when selling your practice. A single mistake can cost you thousands of dollars in the final sale or, worse, foil the sale altogether. Here are some of the most common mistakes to avoid.
Setting an Unreasonable Price
One of the easiest mistakes to make is setting your price far higher than what the market will bear. Even if you think it’s worth the higher price, it’s important to consider the market and the buyers’ perspective. Remember, you’re probably biased, after all, you’ve poured a lot of your time into building your practice. That’s why it’s essential to get an accurate valuation before you price your practice for sale. A good quality valuation from a certified professional is well worth the money. The price has to be both fair and financeable. If payments at “your price” exceed the practice’s ability to pay a loan on that amount, then the price is incorrect and a sale will never go through.
High interest rates have dampened buyer interest throughout many markets, which is why your listing price should align with what your broker thinks is your practice’s market value. This will be based on your recent valuation and information from a current market analysis looking at recently sold practices in your area that are similar in size and features. There is often a little bit of art and science to properly pricing a practice for sale based on current market conditions.
An overpriced practice can linger on the market, deter prospective buyers, and may necessitate further price reductions and concessions far below what a reasonable listing price would have generated. Setting the right price from the start puts you in a stronger selling position and avoids prolonging your practice sale.
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Trust an experienced practice broker to advise you and properly appraise your practice to ensure your practice sale goes as smoothly as possible.
Ignoring Important Repairs and Equipment Upgrades
You might feel inclined to sell your practice without going through the hassle of making the necessary replacements or repairs to equipment and your facility. However, having a lengthy list of maintenance problems will likely push buyers away and significantly lower your practice’s price. You don’t have to fix everything, but it is important to address the most significant maintenance issues that affect your practice’s functionality, safety, cosmetics, and structure. Upgrading equipment, if needed, should be done in advance of the sale, preferably a couple of years or more in advance. This allows you time to recoup the investment and budget for the acquisition cost.
After your practice has been placed on the market, your goal should be to have as many buyers tour your practice as possible. If your broker has a buyer who wants a private showing of your practice, you should do whatever you can to accommodate the showing. This won’t always be convenient for your schedule, and you may need to accommodate a visit on short notice, but remaining flexible will pay off in the long run. Nothing drives buyers away like having to wait for a long period of time to see a practice. You want to take advantage of the buyer’s interest when their emotional drive to consider buying your practice is at its peak.
Immediately Accepting an Offer or Waiting Too Long
As a seller, you likely want an offer that matches or exceeds your asking price, but that is not always possible. However, the highest offer may not always be the best offer. Make sure that you check to see what, if any, contingencies have been placed in the offer. Do they want you to finance part of the purchase, or stay and work for an extend period post-sale, or provide some form of future performance guarantee? Contingencies are conditions you’ll need to satisfy before the sale can close and if they are unreasonable, you may need to move on to offer #2.
Interestingly some of the earliest buyers you encounter are often the best ones. Something has attracted them to your practice, and many know what they are looking for and are ready to purchase now. Holding out for too long allows those initial buyers to become distracted and pursue other opportunities. Be careful not to casually dismiss an early offer; it very well could be the best offer/best buyer combination for your practice.
Resistance to Buyer Contingencies
The most common contingencies are related to financing and due diligence. Although you may restrict access to some information early in the transaction, once the contract is signed your practice should be an open book for the buyer. To you it may seem silly that they are pouring over every business or medical record, wanting to get a building or equipment inspection, checking on zoning, licensing and appropriate permits or a multitude of other things but that’s called doing a good investigation into what someone is buying. Although you know your practice well and may have confidence that everything is in order, the buyer usually does not. So, try to be generous in offering the buyer access to information. A well informed buyer is a good buyer, but one that feels like they may have missed something important is at risk of flight and not finishing the purchase. While you should accommodate any financing contingency, be cautious about agreeing to an overly long escrow period and delayed closing date. Significant delays in the closing timeline between contract signing and sale date are rarely beneficial to the seller.
Turning All Decisions Over to Others
You’ll likely surround yourself with a team of advisors. A business appraiser, practice broker, attorney,
CPA, financial planner, and more. What you don’t want to do is simply nod yes and accept any and all
suggestions any of them try to offer. They should be advisors not decision makers. Decisions are your job. Listen, but then stay actively involved in making any decision. A run-away attorney who wants to
renegotiate the deal at the last minute when reviewing the contract may not recognize that it took months of negotiations to get the transaction to where it is today. Taxation advice that tries to stack all the best tax allocations solely to the benefit of the seller will certainly disrupt the sale. Being pressured by your broker to complete a quick sale that just doesn’t sit right with you is also a disaster. At the end of the day, there should only be two well-advised decision makers: the seller and the buyer. Stay in control of your transaction if you want it to actually go through. Sometimes you have to ask yourself “what’s more important, this specific issue everyone else is arguing about or getting the sale completed?”
If you’d like the process of selling your practice to be as stress-free as possible, avoid making the mistakes mentioned above. Trusting an experienced practice broker to advise you and properly market your practice is another way to ensure your practice sale goes as smoothly as possible.