By John R. Scibal, OD, AIBA 
The market in practice sales is coming back–but a successful sale must work for both parties. Buying well means getting an informed appraisal from an objective source and making the numbers work. Selling well means planning in advance–and the bigger the practice the longer a sale takes. The steps you take to prepare for that sale are critical.
Did the strike of midnight on New Year’s eve this year turn your thoughts to buying or selling a practice? The economy is not fully out of its slump, but there is evidence that the market for buying and selling practices is slowing reviving. Here are four ways to tap into what may be a renewed market for practice sales.
Buyer: Look for a Certified Appraiser
for an Objective Practice Valuation
As the seller, potential buyers are going to be skeptical of your own valuation of your practice. That skepticism will make them less likely to buy your practice.
The solution? Enlisting the services of a certified appraiser. Be sure the appraiser you choose is accredited (e.g., “AIBA”) through a credible business appraisal agency. These include the American Society of Appraisers (ASA), Institute of Business Appraisers (IBA), National Association of Certified Valuation Analysts (NACVA), and the American Institute of Certified Public Accountants (AICPA)
The web site of the Institute of Business Appraisers offers guidelines to help you choose the right appraiser for your practice.
Price Realistically, Highlight Benefits
There is a good market out there to tap into. Unfortunately, a lot of sellers wait too long and are unrealistic in their asking price for their practice. They come up with a figure without any real basis or meaning. As a result, the practice sits on the market and doesn’t sell.
The business savvy understand that the deal has to be fair to both buyer and seller for it to work. The most important factor in valuing a practice is the practice’s profitability. The purchase price of a practice should reflect how much cash flow is available for the new owner. In order for the deal to work, after all expenses have been paid, there must be sufficient cash flow for the new owner to pay himself or herself a fair level of compensation as well as pay the practice bills and meet the financial obligations of the loan.
Give your potential buyer the numbers to prove that he or she stands an excellent chance of earning a good living by purchasing your practice. You can do that by opening your books enough to show either proven strong annual revenues or evidence that your annual revenues are trending upward. It also helps to enlist the services of a certified appraiser who can provide an objective assessment that backs up your selling points (see blue box above).
Plan Out Sale in Years
How far out you need to plan the sale of your practice depends on the size of the practice. If your practice brings in under $1 million annually, plan a year and a half to two years out. Less time is needed for the sale of a practice of this size because it supports only one OD. When it sells, you’re out the door with no further planning ahead necessary.
Bigger practices of $1 million or more, with two or more practicing ODs, need to start the sales process five to 10 years in advance. Look for a partner or associate for a few years, and then let them buy part of the practice over time.
Make Capital Investments to Increase Value
Make the capital investments that make your practice a good deal for buyers. That means buying the latest instrumentation, such as digital retinal imagery and and an OCT. You also need to keep your office in top shape if the doctor purchasing your practice will move into your current location as part of the deal. Keep the carpeting up-to-date and be sure your optical still looks enticing for patients to shop. The last thing a buyer wants is to inherit fixer-upper office space.
Own the Real Estate
Owning the building where you practice offers additional options: It can either be included in the sale or you can maintain ownership. I bought the building my current practice operates out of in 2000 on a 15-year bank note. I sold my practice in 2009 but still own the building. The new owner is now my tenant, and his rent provides an excellent income stream.
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John R. Scibal, OD, AIBA, of Blackwell and Scibal Consulting in Morehead City, NC, provides practice management consulting and conducts practice appraisals. To contact him: john@blackwellandscibal.com.
