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Welcome toHow to Have It All:
Exit Strategies and Succession Planning
Presenter:
Clifford Carey Communications DirectorEarQwww.myearq.com
Ted AnnisSr. Marketing Specialist
Suzanne HillProfessional Development Project Supervisor
IHS Moderators:
Housekeeping
• This presentation is being recorded
• CE credit is available! Visit ihsinfo.org for details
• Note taking handouts are available at ihsinfo.orgon the webinar page. Feel free to download now!
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Note:
This presentation highlights recognized principles commonly found
in the financial arena, but in no way suggests nor should be considered as financial advice. It is recommended you consult a
financial professional for specific advice regarding financial matters that may be pertinent to you or your practice.
No relationship exists that represents a potential conflict of interest or special business relationship between the International Hearing
Society and Cliff Carey or EarQ nor any of its principals or employees.
Agenda
• Goals and Expectations
• Timing Your Exit
• Review the Market for Your Practice
• Succession Planning
• Q&A (enter your questions in the Question Box any time)
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Selling your practice can be one of the toughest challenges for the
small business owner.
Common Questions
• Is it the right time?
• Who will buy?
• Are there recommended strategies?
• What is my practice worth?
• What are the first steps?
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Goals
What if you could…
• Earn the best sale price while limiting your tax exposure?
• Determine a reasonable timeline with agreeable responsibilities after the sale?
• Identify an appropriate buyer type and leave a legacy?
Your Investment
The fundamental valuation of your practice vs. your ability to realize it when you sell.
Practices with similar earnings can differ in value.
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Seek Professional Advice
A good advisor should:
• Manage parts or entirety of sale process
• Mitigate surprises/obstacles during discovery
• Vet the buyer
• Help prepare financials
A good advisor must:
• Be independent
• Be experienced in hearing healthcare valuations
• Determine a proper asking price
• Protect your confidentiality
• Allow you to continue running your business
Merger and Acquisition Firms
• Assist exit strategies, transition management services
• Main goal: successful sale and highest valuation
• May charge a retainer and/or a success fee
‐Michael Gravel, iMerge Advisors
M&A Advisor Fees
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Timeline
Are you even ready to sell?
Timeline
There are three major considerations:
• Your timing
• The company
• The market
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Your Timing
Preparation
• 5‐10 years is ideal
• 3‐5 years is workable
• Less than 3 years = limited options
• Fire sale!
Company Timing
Ideal Conditions:
• Your business is growing
• You employ established, competent staff
• You have built a stable and diverse patient base
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Market Timing
Buyers
• Status: important
• Many owners at retirement age
• Significant M&A activity has already taken place
Market Timing
Tax Implications
• Status: worth consideration
• Work with your CPA to assess impact on your income tax and capital gains tax
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Market Timing
Interest Rates
• Status: favorable
• Inexpensive to borrow money
• Buyers can pay higher premium
Market Timing
Financing
• Status: favorable
• Non‐traditional lenders aggressively pursuing acquisition, lending at high levels
• Cash required at an all‐time low
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Today’s Market
Who will you sell to?
The Market
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The Market
Manufacturer and Retail Option
• Well‐capitalized; may pay a premium
• Strategic acquisitions with specific benefits
– Secure channels of distribution and POS
– Talent; may not have requisite staffing
• Possible employment agreement
‐Jon Anderson, Principal, J Analytic
Baby Boomers, Bottlenecks, and Boosting Growth
Medical
Medical Option
• Hospitals
• ENTs
• Desire expertise and added revenue
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Competitive Professional
Established:
• Reduce expenses through economies of scale
• Allow the owner to phase out quickly
• Many are Baby Boomers; may also be considering selling
First‐Time Buyer:
• Shortage of professionals seeking practice ownership
• May not be able to pay a premium; buying first practice
• Requires long‐term vision and planning
Barriers to Exit
Obstacles that may impede your desire to leave your practice
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Barriers to Exit
• Closure and/or penalty costs
– Contract contingencies with suppliers or buyers; lease agreements
• High investment in non‐transferable fixed assets
– Real estate or capital equipment that is specific to one task
• High redundancy costs
– A large number of employees, or high salaries
• Potential market changes
Owner Contributions
• Commonly the most valuable intangible asset
• Major revenue contributors to the practice
• Majority of goodwill justifications (valuation) result directly from owner’s presence
• Departure can result in loss of patients and profits
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Tips: Owner Contributions
• Reduce the practice’s reliance on the owner
– Limit contribution to less than 1/3 of total revenue
– Virtually impossible for the sole practitioner
• Hire and retain key employees who make significant contribution to revenue
Succession Planning
How to Have It All
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Succession Plan
• Finding a successor is a tough challenge for most small business owners.
• Exercise the same diligence as you did to get to this point.
Succession Plan
No successor on staff?
Hire one.
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Tips: Succession Plan
• Hire smart people who can take direction; encourage entrepreneurial spirit
• Give your employees freedom, but with strings attached
• Encourage participation in decision making, ideas, and action plans
• Reward them; consider profit sharing
Conclusion
Jump the Barriers!
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Selling Your Practice
• Can be an unnerving experience
• Seek the proper guidance
• Align your expectations with reality
• Prepare based on your company and the market, not your desires
• Be patient and maximizeyour return
Suggested Reading
• The Exit Strategy Handbook: The BEST Guide for Selling Your Business by Jerry L. Mills
• Exit Strategy: Maximizing the Value of Your Business by Thomas W. Lyons
• The E‐Myth by Michael E. Gerber
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Questions
Enter your question in the Question Box on your webinar dashboard
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THANK YOU FOR ATTENDING!
Contact Clifford Carey:
Visit www.myearq.com
For more info on obtaining a CE credit for this webinar, visit www.ihsinfo.org
