How do I know how much my practice is worth?
Just as your patients seek your help in diagnosis and treatment, so should you seek the help of a professional in establishing a reasonable offering price for your practice. No two practices are alike and consequently, rules of thumb are a poor indicator of practice value. An experienced practice broker has the knowledge and the skills to determine the market value of your practice based on your practice's unique characteristics. The Paragon Group has more than 20 years of experience in appraising and selling chiropractic practices nationwide. We will advise you on an appropriate offering price for your practice, which we will set forth in a comprehensive practice prospectus.
How long does it take to sell a practice?
The length of time that a practice is on the market is dependent on several variables, including the type, quality, and location of the practice. Financially strong practices in densely populated communities tend to sell more quickly than do practices with declining production and/or which are located in remote locations. The typical practice sale takes six months, but you should anticipate that the practice sale could take as few as three to as many as 12 months. The Paragon Group will make every effort to sell your practice as quickly as possible by giving it the maximum marketing exposure in the trade journals, on the Internet, and through a direct mail campaign to our Buyer's Registry.
Will I have to finance the sale?
You should not have to finance the sale if your practice is priced right and the buyer has the necessary criteria to qualify for a loan. A practice acquisition lender will require that the cash flow of the practice support the debt service associated with its acquisition. In other words, the buyer must be able to pay the operating expenses, draw a reasonable living wage, and pay back the loan required to purchase the practice. This is another reason why it is important to establish a reasonable offering price. Most buyers rely on third-party sources for financing; very few have financing at hand, and if the cash flow of the practice does not support the loan payments, a lender won't fund its acquisition. The Paragon Group works with multiple lenders to whom we can refer prospective buyers for financing.
What can I do to prepare my practice for sale?
You will want to maximize both the perceived and economic value of your practice. The perceived value results from the overall appearance and function of your practice, including the office space, equipment and furnishings, procedural operations, and support staff. Maintain your practice facility just as you would your home; keep it functionally and esthetically appealing to encourage patients to frequent your practice, which will increase revenues as well as cash flow. Cash flow produces the economic value. Maintain your production; don't slow down because you've decided to sell. Report all your revenues and don't overstate your expenses on your tax returns, which buyers and lenders rely on as evidence of your practice's financial performance. Collect your accounts receivable, bring your financial statements up to date, obtain proper title to the assets, and clean up unfinished business.
Whom should I hire to represent me and what are my costs?
A good practice broker can help you establish a reasonable offering price for your practice, help you to locate your buyer, and help you to negotiate the terms of sale. Your accountant can answer your tax questions, and an attorney will prepare the contract of sale. Fees will vary depending on where you are located and the level of service you need. Practice brokers typically charge a percentage of the sale; accountants and attorneys are often paid by the hour. The Paragon Group is a full-service practice broker and will assist you with the sale of your practice from start to finish.
How do I maintain confidentiality during the sale process?
You should be in control of when your patients and staff are made aware that you are selling your practice; you don't want patients and staff to become uneasy and their trust to become compromised if they find out from a third party. Prospective buyers should be required to sign a confidentiality agreement in which they promise not to disclose that your practice is for sale to anyone and wherein they promise not to disclose information about the practice. The Paragon Group requires that prospective buyers sign a confidentiality agreement before the identity and proprietary information about the practice is disclosed.
Should I include my accounts receivable?
Some practice buyers wish to purchase receivables, while others would prefer to borrow working capital from their lender. If you prefer to sell your receivables, it is important to realize that the value of accounts receivable is dependent on their anticipated collection rate and the length of time it will take to collect them. The older an account receivable, the less it is worth. If your receivables are clean, and the majority is aged less than 90 days, you may be able to sell them at a value comparable to what you would collect yourself. If on the other hand, your receivables include a lot of bad debt and/or are significantly aged, rather than discounting them to induce a buyer to purchase them, you may be better served retaining them and collecting them yourself, or you can ask the practice buyer to collect them on your behalf for a small fee. The Paragon Group can assist you to determine which option is right for you. If you decide to sell them, we will help you establish the market value; if you decide to retain them,
we will help you to work out the terms of collection.
How long will I have to stay on during the transition?
The typical transition period lasts 30 days. Some buyers will want more time, others may prefer less. A longer transition period may be warranted if the practice is very large in volume or if it is reliant on a number of referents, to whom you will need to introduce the buyer. Remember that the transition period is not a time that you continue to treat patients. Rather, your role is to introduce the practice buyer to patients and referral sources and teach him/her the procedural operations. The Paragon Group, having sold hundreds of practices since the company was founded well over a decade ago, has the experience to provide you and your buyer with guidance to ensure a successful transition period.
FREQUENTLY ASKED QUESTIONS
About The Paragon Group
The Paragon Group, Inc., are specialists in practice appraisal, brokerage, and valuation related consulting for office-based health care professionals. The company, which was founded in 1992, has appraised several hundred health care practices, including primary and specialty medical practices, chiropractic practices, general and specialty dental practices, and equine, small animal and mixed animal veterinary practices. Valuations are done for purposes of sale, litigation, partnership buy-outs and buy-ins and a host of other business and professional matters. In addition to valuation work, The Paragon Group has facilitated the sale of hundreds of chiropractic practices nationwide and consulted with buyers of chiropractic practice on valuation and financing matters.