Common Mistakes of Sellers when Selling a Practice

Mistake #1: They don’t plan ahead.  Some practice owners are so busy with the day-to-day demands that they neglect what is often the most important part of the sale process: pre-sale planning. In some cases, this oversight results in the practice being in an unfavorable form of business entity. In other cases, the owner misses the opportunity to maximize the practice’s performance during the all-important period preceding the sale. By focusing on these issues early Sellers can take a healthy first step toward enhancing practice value.

Mistake #2: They have unrealistic expectations.  Somewhere, someone once told a veterinarian that his practice was worth one times his gross revenues. And he told two friends, and they told two friends, and so on. But the reality is that the value of a business is based on the cash it generates after expenses, not its gross revenues. Sometimes a seller’s best prospects are turned away because the seller initially fails to recognize the true value of his or her practice. That is why obtaining an accurate idea of the value of a practice at the outset of the sale process is vital.

Mistake #3: They try to cut corners.  Some practice owners try to save money by marketing their own practices or by using a broker whose career is not focused on brokering veterinary practices. Others fail to seek the advice of accountants and attorneys who are experienced in these types of transactions and can help the prospective seller avoid serious legal and financial pitfalls. In many of these cases, the desire to avoid spending some money results in the loss of much greater sums, such as in lost sales opportunities, reduced sales prices or the payment of taxes that could have been properly avoided.

In addition, some practice owners fail to organize their affairs so that information can be easily provided to a prospective buyer. Sellers who make this mistake unintentionally send a critical message regarding the quality of their businesses practices. A prospective buyer will keep this factor in mind when deciding between different purchase opportunities or when determining what price to offer.

The good news is that all of these mistakes can be easily avoided, especially with a little advance planning. If you have invested years of your life in building a practice that you are proud of, then why not invest the appropriate time and effort into the process of selling that practice once the time comes.

Trey Cutler is a business attorney and the principal of The Cutler Law Firm with extensive experience in practice transactions. He can be reached at 800-308-2555 or treycutler@attbi.com.

Medical Practice Brokers, Inc., 15847 Woodmeadow Ct., Colorado Springs, CO 80921
Direct Line: (719) 487-9973    FAX: (719) 487-9974    Email: dave@practicebrokers.com