How to Sell Your Practice with Daniel King | POP 1404

client retention, practice profitability, practice revenue, practice sale, private practice buyer, selling a private practice, therapy practice buyer

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How can private practice sellers find the right buyers? What’s the equivalent of a kitchen upgrade before a sale for private practices? Which numbers do you need to determine how attractive your practice is to potential investors?

In this podcast episode, Joe Sanok discusses selling a practice with Daniel King.

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Meet Dan King

A photo of Dan King is captured. Dan is co-founder of Fireside Strategic, a private equity firm focused on growing outpatient mental health practices. Dan is featured on the Practice of the Practice, a therapist podcast.

Dan King is co-founder of Fireside Strategic, a private equity firm focused on growing outpatient mental health practices. With a background in law, mergers & acquisitions, and organizational psychology, he combines business expertise with a people-first approach to help practices scale sustainably. Dan has built and sold companies in the coaching industry and brings hands-on experience in supporting clinicians and teams.

Outside of work, he is an avid traveler and has taken part in extreme auto races across Europe and Asia.

Visit Fireside Strategic and connect on LinkedIn.

In This Podcast

The importance of empathy as an approach
Good listings for selling a practice
What to do 3 to 5 years before selling for a great sale
A basic outline of finding a practice’s value
Daniel’s advice to private practitioners

The importance of empathy as an approach

In terms of thinking differently, it’s given me empathy. I like to think I had some as a buyer, but now I have more, because now, putting myself in the shoes of a seller, I feel the emotion of this process. (Daniel King)

Selling a private practice is an emotional event, as well as a financial one. Your practice is likely the culmination of your years of experience and work as a therapist, and perhaps even a practice manager and boss.

There are years of sweat and tears (hopefully no blood!) put into the business that you have now decided to part with. So while people mostly sell in good spirits, it can still be an emotional transition.

For Daniel, who helps people sell their practices, he’s become adept at leaning on his empathy to help them with the process.

I feel the intensity of my clients’ emotional experience around selling their business and creating partnerships where, not only are you selling part of your baby, you’re trusting someone else to come in and parent or co-parent with you; it’s not an easy thing to do. (Daniel King)

Empathy and sensitivity are key ingredients to being a successful seller.

Good listings for selling a practice

For businesses across industries that want to sell, Daniel recommends BizBuySell, although not specifically for private practices.

Concerning therapy practices, Daniel often uses DealStream as a platform.

At the time of this recording, DealStream is free to use, but this should be confirmed if you decide you want to use it.

What to do 3 to 5 years before selling for a great sale

1 – An investor cares about whether there’s diversification in your revenue. If most of your income comes from a particular insurance provider, that may cause an investor to hesitate.

If your market is super reliant on BlueCross or Aetna, as an investor, that’s a huge risk. I’m concerned that Aetna could change its mind tomorrow about your 90837, you know? All of a sudden, if that’s 70% ot 80% of your business, my investment has deteriorated in value very quickly. (Daniel King)

Therefore, consider diminishing your peer concentration. You don’t need to reduce the number of cases you receive from insurance providers, but you could consider diversifying where you get clients from and whether they are cash-pay or insurance.

Explore B2B possibilities, explore EAPs, coaching, intensives … There are a whole bunch of internship programs. There are a whole bunch of ways that a typical therapy practice, if they get creative, can create alternative revenue streams in ways that most competitors aren’t going to. (Daniel King)

2 – Prove client and clinician retention. How can you show interested investors that your therapists and clients want to be involved with your practice, and continue to either come back or stay long-term?

3 – Diminish the practice’s reliance on you as the founder. In the three to five years before selling your practice, begin separating yourself from the practice’s processes so that they don’t need you to run them.

A basic outline of finding a practice’s value

With your practice’s topline revenue, to calculate your profit, you subtract two things:

1 – The cost of goods sold (every expense associated with the goods sold)

2 – Operating expenses (your overhead expenses, such as rent, etc.)

The number you get from this, which we’ll call SDE, the seller’s discretionary earnings. This is one measure of profitability.

Once you subtract your own annual market salary amount from the SDE, you get earnings before interest, taxes, depreciation, and amortization, also known as EBITDA.

Most investors are going to value your practice as a multiple of that EBITDA. Many investors won’t be willing to invest in a practice with “potential”; they want to see what it can do and what it successfully has been doing.

Daniel’s advice to private practitioners

You don’t have to do this on your own! The world will present you with partnership opportunities if you are looking for them. You can work with people that are better at certain aspects than you are, so let them help you.

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Resources mentioned in this episode:

Visit Fireside Strategic and connect on LinkedIn.

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Meet Joe Sanok

A photo of Joe Sanok is displayed. Joe, private practice consultant, offers helpful advice for group practice owners to grow their private practice. His therapist podcast, Practice of the Practice, offers this advice.

Joe Sanok helps counselors to create thriving practices that are the envy of other counselors. He has helped counselors to grow their businesses by 50-500% and is proud of all the private practice owners who are growing their income, influence, and impact on the world. Click here to explore consulting with Joe.

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