Question
I am thinking about retirement in the next few years and preparing to sell my practice. I have a selling price in mind, but how do I determine if it's realistic, fair to me or attractive to potential buyers?
Answer
Thanks for your question. You do not indicate what factors you considered to determine the price you have in mind. Perhaps you had a professional valuation conducted, or maybe you just spoke with colleagues and think you have a handle on what buyers pay. Regardless, most audiology practice owners are biased in their own favor when it comes to selling price.
One trap that owners fall into is pricing their practice based on their hopes and dreams rather than on reality. Not only can unrealistic pricing expectations derail a deal, they can also turn away potential buyers before the negotiations even begin. Imagine the process of buying a house. Typically, buyers look online or speak with their real estate agents, and one of the main criteria they use to determine which houses to visit and which to avoid is price. Many practice buyers take the same approach. Analyzing an acquisition opportunity is a lot of work and many buyers would rather not expend the time and energy if they interpret the list price as inflated, unrealistic or beyond their means.
Now consider you are a home buyer and have found the perfect house. You fall in love. Not only does it have everything you want today, but you also have the opportunity to put on an addition, giving you an extra bedroom and more living space. In turn, this will increase the home's value. Would you base your offer for the house today on what it will be worth after you put on the addition? Probably not. Selling a practice is no different. While the potential may appear obvious to both parties, it is the buyer who must invest in order to achieve growth, and who must take the risk in the process. At the very least, if you choose to base your price on aggressive growth forecasts, be prepared for an earn-out in which you share the risk.
Consider seeking a qualified, independent Merger & Acquisition firm to help you determine a proper selling price. Most business owners only sell a company once, and selling their company represents the largest financial transaction of their lives. A good adviser can mitigate risk and improve your potential for a successful sale. Select an independent adviser, who can put your best interests first, and one that has experience with the unique considerations of audiology and hearing care practices.
