Have you been getting offers from buyers for your private practice? What should you do now to make it easier to sell in the future, should you decide to? How can you make sure you get the most value out of your hard work over the years?
In this podcast episode, Joe Sanok speaks about how to properly value your private practice before you sell.
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In This Podcast
- Valuing your business
- The financial assessment
- The client base and operations
- Location and the facility
- Intangible value assessment
Valuing your business
- Look at three to five years of the net income outside of the owner who is leaving.
So, maybe your business made $100k and between paying the clinicians and other costs to run a business, you only went home with $20k. So, you take that $20k and multiply it by five years, which gives it a $100k value.
- Look at the assets, both tangible and intangible. What is the value of your SEO level, or your marketing network and online presence?
All that infrastructure, that general operation, the staff hiring, and the reputation of your practice are all included in the price valuing.
That’s the really quick and dirty version of figuring out how much your counseling private practice is worth. (Joe Sanok)
The financial assessment
Do some of your own research as well and speak to both your local accountant and attorney to make sure that you are on the right track both financially and legally. 1 – Gather financial statements: Collect profit and loss statements, balance sheets, and cash flow statements from the last three to five years.
[Do your financial assessment] to really have a good picture of what are those rhythms and the ups and downs so that the buyer has a really good idea [of what to expect]. (Joe Sanok)
The potential buyer can sign an NDA before they look at all of these statements and documents. 2 – Calculate the revenue to determine the average annual revenue generated by that practice over that specific period of time. 3 – Assess the expenses. Which expenses keep the overall cash flow low and could they be changed somehow to save money? Analyze the fixed and variable costs to see where your money is going and where it has to go. 4 – Look at the profit margin. Calculate the profit margin by dividing the net profit by the total revenue and express that as a percentage.
The client base and operations
You will have a client list which is the list of active clients, their demographics, retention rates, long-term contracts, and anything else along these lines. What is the value of these long-term contracts? Also, look at current, future, and historical bookings:
- How often do you receive referrals?
- How close are you to being fully booked?
- Do you have a waiting list?
- What is the lifetime value of your client base? How long do they generally have sessions within your practice?
Having those numbers in a good EHR like Therapy Notes or other EHRs will help you to pull some of that data together. (Joe Sanok) Additionally, you can evaluate your staff assessment. What are your therapists certified in? If you have W2 employees, this can raise the value of your practice significantly.
If you have a bunch of employees that you have contracts with that are highly qualified, in this competitive employment environment, that’s super valuable! (Joe Sanok)
Location and the facility
If you own the building where your practice is located, then it definitely boosts the overall value because it’s like an additional real estate sale. It is worth working with a real estate professional to decide if that’s something that should be included in the purchase of the practice or as a separate sale. Do a facility assessment. Look at the condition and the aesthetics of the office. Will the furniture be part of the sale? If so, keep these in mind too!
Sometimes it’s helpful to itemize how you got to your final number when you’re looking at the sale of it and what was all included in [it]. (Joe Sanok)
Intangible value assessment
Intangible things like your reputation and your brand will impact the value of your practice. Look at your connections, network, and referral systems. How many businesses are linked to you and share clients with you because of your high-value service and care? What’s your overall brand recognition? Have you done a good job becoming known in your community as one of the best counseling practices? Do you offer any specialized therapies in your practice that are uncommon and sought after in your areas? This will differentiate you from the rest and boost the value of your business. Some bonus points to look at:
- Legal and regulatory factors
- Licensing compliance
- Make sure everything is cleaned up and that there are no unfinished legal charges or issues
In general, I would say [to] give yourself at least 20% more than what you value it to give yourself a bit of wiggle room … to land where you hopefully really want to. (Joe Sanok)
Sponsors Mentioned in this episode:
- Register for Level Up Week now to attend one of more of these amazing free webinars and take the next step in your private practice journey.
Useful links mentioned in this episode:
Check out these additional resources:
- Apply to work with us — a decision-making matrix for your next steps
Meet Joe Sanok
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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