Tag: ROI corporation

Eyes Wide Open

Buying-Selling A Practice, Practice, Resources

|

0
(0)

Two pressing issues have surfaced in recent discussions with clients—and they’re both very important and closely related. It’s like the two sides of a coin. Heads deals with impossible promises while the flip side, tails, involves managing expectations.

IMPOSSIBLE PROMISES

A client I’ve known for years called to say that he had been approached by a corporate entity to buy his practice. Later, he called me again for a second opinion to make sure he was doing the right thing. The investor buyer had promised to pay the highest price for the practice compared to any other private-sale offers or open-market sales brokered by any firm.

So, is this a legitimate and fully defensible claim? The first and key thing to remember is that if a practice does not go to open market, the price paid by the buyer will be the highest offer that the seller receives, simply because the seller is not accepting other offers. In that respect, this purchaser made a correct claim.

On the other hand, the buyer also suggested that his/her offer would be the highest of any offer—but if a practice does not go to open market, then this is an absurd claim because it cannot be validated. Why? The reason is also simple: if no other buyers are given the opportunity to make an offer, how can anyone prove that the first offer was the best? Impossible promise!

This type of behaviour is prevalent because there is a limited supply of good practices for sale. Corporate investors are very flexible and have a dedicated senior management team soliciting and focusing on practice acquisition. On the other hand, in the traditional health care practice marketplace, the buyers are mostly professionals who are raising families and practicing in various locations. Typically they do not have the time or resources to invest when searching for a practice to buy. These buyers rely upon brokers to introduce them to practice sales opportunities.

MANAGING EXPECTATIONS

On the flip side of today’s eye care practice sales market, it’s about juggling sellers’ expectations. In the normal course of appraising and selling a practice, many parties are consulted. Early on in the process, the seller should seek legal and accounting advice on sale structure and allocation of sale price as shares or assets. In today’s multilayered corporate structuring, we are still finding old management companies, technical service corporations and multiple health care professional corporations, as well as sole proprietorships. Each of these scenarios has different and unique tax implications and, in some cases, complex legal implications.

Vendors often tell us that they’ve consulted with their advisors, so we proceed to the market (and we often consult with advisors at this early stage). However, as we near the completion of an offer to purchase or closing date of a practice sale, sometimes advisors will realize that there may be some last-minute opportunities to affect tax savings for the benefit of the vendor. In many instances, there is no harm to the buyer and, in some cases, there’s actually a significant benefit to the buyer. But the serious dilemma with bringing these matters to light in the final days and hours, is that advisors on both sides start seeking to re-negotiate a contract or even re-enter a conditional period—perhaps when all other conditions have already been removed—and this puts a transaction in serious jeopardy.

Our advice to both buyers and sellers of any type of health care practice is to begin consultations and preparations of tax and legal matters a year in advance of a possible sale and, at the very least, prior to the preparation of the appraisal of the practice. Any delay in making this investigation or process happen with your tax and legal advisors will likely cause significant delays, high fees and could jeopardize the sale of your practice. In short, poorly managed expectations.

IT TAKES TWO SIDES

It is important to not be misguided by an impossible claim to sell a practice at the highest possible price. Be levelheaded. Adopt a well-conceived, balanced and careful plan when you’re in the process of buying or selling a practice. And save that coin for your pocket.

TIMOTHY BROWN

is Chief Executive Office of ROI Corporation Canada’s national professional practice and brokerage firm.

Jackie Joachim, COO ROI Corp

JACKIE JOACHIM

Jackie has 30 years of experience in the industry as a former banker and now the Chief Operating Officer of ROI Corporation. Please contact her at Jackie.joachim@roicorp.com or 1-844-764-2020.

Share:
Rate:

0 / 5. 0

A Unique Perspective on Practice Appraisal

Buying-Selling A Practice, Finance|Wealth, Practice, Resources

|

0
(0)

I was reminded of an article I wrote a few years ago about a unique situation. Our company was engaged to appraise the practice of an optometrist who was preparing for her retirement. While I was meeting with her, I mentioned that I needed a new pair eyeglasses and I also wanted to purchase a pair of prescription sunglasses.

I performed the appraisal when the practice was closed—which is the usual and customary process for all business appraisers—and while meeting with the owner I asked for her permission to book an appointment to attend her practice as a new patient for an examination and new glasses. She agreed.

Needless to say, when I arrived for my appointment during normal business hours the staff did not know who I was and that we had performed an appraisal for this practitioner. I had a wonderful experience as both a new patient and a purchaser of two pairs of glasses.

Then as now, it occurred to me that as a professional practice appraiser and broker— seldom do I meet the staff—nor do I attend the practice during regular operating hours for obvious, confidential reasons. I realized how much I had learned about the wonderful office environment that this owner had built and the incredible staff that she employed. I wish, as a broker, that my team could have this experience with every practice they visit.

From this visit, I had obtained two points of view—one as an appraiser/broker—the other as a patient. This was and still is an extremely rare circumstance. In completing the appraisal, it was now impossible for me to ignore the excellent service I had received as a patient. In addition, the staff provided me with the following:

• An email containing a simple, online patient survey within 24 hours of my appointment, which I completed,
• A second email thanking me for completing the survey—it arrived within minutes of the survey completion process,
• A third email asking whether I would like to be contacted in the future by email, telephone or by text message for upcoming appointments—I found this very useful as I prefer text messaging.

What incredible patient communications! All of this had transpired within 24 hours of my new patient examination. Needless to say, this remains one of the best patient experiences I have ever had in a professional health care practice.

My dilemma at the time was how do I ignore my experience as a patient when I finalized the appraisal as a professional? Frankly, I could not and did not. This practice was exceptional. I was thoroughly impressed—if all appraisers and brokers could have the new patient experience in their client’s practices they would know much more about how a practice operates and what the patient experience is like.

Essentially, I was an ‘undercover patient’ (much like retailers employ undercover/false shoppers to gauge customer service) and as such learned a great deal more than the traditional, after hours appraisal process.

My company to this day is still trying to decide how or even if it is practical to use ‘undercover patients’ to learn more about our clients’ practices in order to prepare a more empirical practice appraisal. Obviously, we cannot simply act as an undercover patient each and every time we appraise a practice. But I still think about it—maybe as a practice owner you should as well.

Jackie Joachim, COO ROI Corp

JACKIE JOACHIM

Jackie has 30 years of experience in the industry as a former banker and now the Chief Operating Officer of ROI Corporation. Please contact her at Jackie.joachim@roicorp.com or 1-844-764-2020.

Share:
Rate:

0 / 5. 0

Empathetic Goodwill

Buying-Selling A Practice, Finance|Wealth, Practice, Real Estate, Resources

|

0
(0)

In the usual course of our business we are asked to assist when a sudden disability or death of a health care practitioner/owner has occurred.

The initial reaction and concern from the disabled practitioner, staff, family or advisors is that the practice is going to suffer without the presence of the principal owner and that patients will seek other providers. Most conclude that a business disaster is imminent. Much to their surprise, history proves them all to be incorrect.

Our first advice is to install a professional locum practitioner to attend to the patient needs. This is critical and not to be ignored. As difficult as it may be to accept this advice, it has to be business as usual for the preservation of the practice to assure the staff that their jobs are secure and that all practice financial obligations can be met. A short, temporary closure of 3 to 5 days is understandable and expected but after that the practice must be open for regular business hours at all costs!

And then a very unusual phenomenon begins to reveal itself.

Empathetic goodwill is our descriptor to explain why people go out of their way to show support for the business and the business owner.

Once the initial shock of the tragedy or the situation is absorbed, we often find that the staff begins to show incredible support for the business and they actually go above and beyond the call of duty. This is a natural empathetic response that happens after people adjust to the new norm. A norm where you, the principal, are no longer present.

We also learn that patients may show extra enthusiasm for helping your practice through the tribulations and they respond by honoring appointments.

Once some time has passed, usually about a month, we see that the practice with the support of the staff, the loyalty of the patients, and the aid of a professional locum, is actually doing as well and on some occasions even better than it did under the guidance of the previous owner. Yes, better than when you, the principal, were present!

This phenomenon can be further explained by the fact that people genuinely care and want to help those in need.

The summation of this discussion and this article is to suggest that if something terrible should happen to a business owner, you will be shocked, amazed, and surprised at how their staff’s loyalty and their patients’ support impacts the business in an incredible way. Your practice remains vibrant, productive, and is able to meet its debt and overhead obligations. The long-term result of taking the actions outlined here is that when it becomes necessary to sell the practice, it will have held its true monetary value.

TIMOTHY BROWN

is Chief Executive Office of ROI Corporation Canada’s national professional practice and brokerage firm.

Jackie Joachim, COO ROI Corp

JACKIE JOACHIM

Jackie has 30 years of experience in the industry as a former banker and now the Chief Operating Officer of ROI Corporation. Please contact her at Jackie.joachim@roicorp.com or 1-844-764-2020.

Share:
Rate:

0 / 5. 0

Choose One – Thou Shalt Not Serve Two Masters

Buying-Selling A Practice, Practice

|

0
(0)

A client called me the other day to say that he was approached by one of my competitors professing to have a very serious buyer for his practice. The broker went on to suggest that the practice did not have to be advertised on the open market nor should it go through the usual procedure of multiple buyers competing for ownership of the practice. The client was at first enticed by this proposition and realized that he may be able to negotiate a lower commission with the broker if they had a willing buyer waiting in the wings.

Then the client asked me, “Do you think this broker will get me the best price for my practice if they are only working with one buyer?” In my experience, the open market has always proven to yield more than one interested purchaser in most instances and generally speaking the open market silent sealed bid competition will always yield a higher price.

Of course, this is impossible to prove if multiple offers are not presented—how could any broker claim that a buyer is submitting the highest price, given that only one buyer is being negotiated with?

The client then further asked me, “Who do you think this broker is working for, Tim, when they are bringing me this one special buyer?” It brought to mind the antiquated concept of dual agency and multiple representations, whereby a broker works for both buyer and seller. In most provinces, this is still permitted, although I have always argued that it is an absurd concept because nobody can serve two masters.

I encouraged the client to contact the broker and ask him or her a straightforward question. Is he or she being paid a finder’s fee or commission by the purchaser in order to locate practices that the purchaser wants to buy? At the time of writing this article, neither the client nor I know the answer to this question.

In the past, purchasers have approached me and offered to pay me a direct commission above the sale price of the practice if I promised to bring forth highly desirable listings for their exclusive review before taking the practice to market. I have always refused. I do not, nor will not, serve two masters.

If I was selling my house and an agent approached me and said they have a special buyer and that the normal routine of placing a sign on the lawn and conducting an open house is not needed because this buyer is motivated, I would be suspicious that this realtor may be working with a preferred purchaser on a secret or undisclosed commission agreement. According to the real estate legislation that I am aware of—doing so is contrary to the Code of Ethics and if a broker or realtor is acting for a buyer and not telling the seller they are being paid by that buyer, they are breaching one of their fiduciary duties.

Serving two masters will place anyone in a very difficult and compromising situation. Who do you disclose all relevant facts to? If a buyer says he or she will pay more, do you have to tell the seller? If you are also working for the seller and he or she says they will accept less, do you have to tell the buyer?

I never put myself in that position, or any of the sales representatives of my company. And the province of British Columbia may agree with me; recently BC legislators proposed that the type of dual agency discussed here should be regulated. Regardless of any legislative outcome, I caution possible sellers, to be very wary of anyone who appears to be serving two masters. Instead, pick one or the other.

Jackie Joachim, COO ROI Corp

JACKIE JOACHIM

Jackie has 30 years of experience in the industry as a former banker and now the Chief Operating Officer of ROI Corporation. Please contact her at Jackie.joachim@roicorp.com or 1-844-764-2020.

TIMOTHY BROWN

is Chief Executive Office of ROI Corporation Canada’s national professional practice and brokerage firm.

Share:
Rate:

0 / 5. 0

When Will You Really Be Ready?

Buying-Selling A Practice, Finance|Wealth, Practice, Practice Metrics & Benchmarks, Resources

|

0
(0)

At some point, you will be selling your practice. It is a fact. But what will be the trigger? Will it simply be the right time, burnout, or illness? In my position at ROI Corporation, I have the privilege of speaking with owners across the country every day. Most often, the conversation is about when this key event should take place. People may have their offices in very different communities, face a variety of economic challenges and have diverse philosophies to practice. But one thing is certain. The following questions are the same regardless of your age, gender, or stage of career.

• Why do you really want to sell?

• Will you completely retire or would you like to stay working a day or two a week?

• What are your plans after you sell?

• Does ownership define who you are?

The last question is probably the most important. Regardless of the reason for selling, how you define yourself – your role, your life and your practice will determine how easy it is for you to proceed and go through the process of selling. Finding a buyer is easy. It is still a seller’s market. Key factors in the market have definitely changed which directly impact the final sale price such as “who is buying”? How much a buyer is willing to pay? And of course, the unknown factor – increase in interest rates.

One of the most challenging aspects about selling, in my opinion, can be the vendor. The happiest vendor is the one who calls us and says they are ready to list. This scenario can be misleading if the vendor hasn’t done all the hard work or gone through two or three years of decision making to reach this point. However, most vendors who call us are not at that point. Selling a practice that you may have owned for a number of years is a daunting thought. You are not just selling the bricks and mortar but also the long-time relationships with patients, staff and very importantly your routine.

Regardless of whether you are tired with the management of the office, politics of the profession or any other reasons, you still have a routine you follow without giving a second thought. We want to assure you that there is life after selling your practice. There are many new opportunities and adventures that life can offer you if you are willing to open yourself to see them. Every major event brings fear and trepidation but we want you to know that we will not only help you sell profitability but also with dignity. It never hurts to explore your options and we are always pleased to listen and provide our experience.

On a final note, a little bit of fear is okay. Remember how you felt walking into your first appointment?

Jackie Joachim, COO ROI Corp

JACKIE JOACHIM

Jackie has 30 years of experience in the industry as a former banker and now the Chief Operating Officer of ROI Corporation. Please contact her at Jackie.joachim@roicorp.com or 1-844-764-2020.

Share:
Rate:

0 / 5. 0