Just recently we sold a health care practice for 12.5% above the asking price. As we’re often asked what factors are involved in achieving a top price, and in this case, a sale price well above the asking price – we thought we would give some details as to what determines the price that the business will sell at.
Before going any further we should mention that we had five buyers wanting this particular practice, so as specialist business brokers we were in a good position to achieve an excellent outcome for the seller. But what motivates a multitude of buyers to become desperate to purchase a particular practice? And what determines a strong asking price?
Obviously profitability is the key factor but that alone is not what gives buyers the confidence to pay top dollar.
Buyer confidence
Undoubtedly the systems and processes that have been put in place give a great degree of buyer confidence. Systems and processes may sometimes be beyond the full understanding of the
purchaser but they’re a certainty to impress the purchaser’s accountant. This applies not just to good book-keeping, but processes that keep the practice in touch with past patients and anything
else that will help in keeping the business turnover growing.
Being a health fund preferred provider undoubtedly adds greatly to buyer confidence as also does the retention of key personnel.
A prominent location of the practice is important, and so is having a good website that gives a strong on-line presence.
Last but not least – we have to say this because it is true – your business broker.
List of buyers
It really is essential that the person selling your practice knows the industry thoroughly. That’s not just the activity of business brokerage – but has a good understanding of your industry because years of being in the business enables the broker to be familiar with what comparable practices have sold for:
- what is a reasonable offer
- what is unacceptable
- The broker will have a list of prospective buyers who can often be matched up with the practice being offered.
Preparation
These are all crucial factors – but there is one more that warrants emphasis – it’s preparation for a sale.
If you’re thinking of selling your practice within the near future (a few years) it is vital to set the business up for a sale now. That’s why we strongly advise practitioners to make contact with us long before you’re ready to sell. We look at practices in the way that a purchaser does which means we can put you on the right track to optimise the final price that can be achieved.