If you’re a professional such as a doctor or accountant looking to sell your practice, the best way to locate prospective buyers and make a transition often depends on your time horizon and location. Many people, in anticipation of selling, eventually hire their eventual successor as an associate for a few years to smooth the transition for the doctors and clients. Some sellers also stay on as employees for at least a few months after a sale. Or maybe you want to sell all or part of your client list to someone in the same business to raise some cash or to take your work in a new direction.
Before you go looking for buyers, get all your records neatly organized, and prepare a clear breakdown of the financials and client data so prospective buyers can get a handle on the offer. Ideally, your practice should be thriving when you sell it.
All too often, professional-practice providers scale back their businesses in anticipation of retirement. But that can greatly ding the sales price. Buyers want potential, but they pay for history. A business that has been declining in client numbers won’t fetch top dollar or necessarily appeal to buyers.
Getting the practice accurately appraised also is key. Many sellers engage a professional appraiser who understands valuations in their industry. It’s a good idea to review the background and expertise of business appraisers before hiring them. Most professional practices sell for a multiple of annual earnings or income, but that multiple depends on factors such as the industry, location and other conditions.
Another possible benchmark is comparable sales — or recent sales of other similar practices. Such data for private businesses aren’t always easy to come by, but some sites, such as BVMarketData.com, offer subscriptions to databases with business-sales data.
How you go about advertising this opportunity to other professionals depends on your industry and how locked in your business is to a particular geographic area. The most likely buyers are often others working locally in your industry. For example, most dentists or accountants need to sell to other professionals in their immediate area, since most clients won’t travel too far from home for those services.
These professionals often do best by directly approaching nearby competitors whom they know to be actively seeking new clients. Try approaching a large practice group that might be open to rapidly expanding its client base or extending its business into a neighboring town or new specialty. To find these people, check local advertisements, Yellow Pages or online directories.
Old-fashioned networking through professional business groups can generate leads. You obviously don’t want to sound desperate to sell, but it can make sense have a candid conversation with other professionals in your industry.
If geography is less important, consider advertising with national or regional trade groups or through societies and clubs specializing in your industry. Most have online classifieds and newsletters where members can advertise. Another option: Web sites that offer paid classifieds for small-business owners and people looking to buy businesses, such as BizBuySell.com.
If you’re having trouble finding a buyer — or simply don’t want to devote the time and energy to search — consider hiring a broker that specializes in your industry. Business brokers might know potential buyers and can advise you on how to value and market your business. But their services aren’t free. Most brokers charge a commission on the sales price that generally ranges from 8% to 12% of the sale price.
Once you’ve found prospective buyer, you can improve your chances of closing the deal by promising to help with the transition. After all, there’s nothing to sell if all your clients flee and find new service providers. Some sellers offer to send clients a letter with a glowing recommendation of the buyer’s practice or give face-to-face introductions. You might even consider working within the buyer’s practice for a brief period to transition your clients to the new location and staff.
Posted in: Buying & Selling A Business