Housekeeping This presentation is being recorded CE credit is - PDF document

4/22/2015 Welcome to How to Have It All: Exit Strategies and Succession Planning Presenter: Clifford Carey Communications Director EarQ www.myearq.com IHS Moderators: Ted Annis Suzanne Hill Sr. Marketing Specialist Professional Development Project Supervisor Housekeeping • This presentation is being recorded • CE credit is available! Visit ihsinfo.org for details • Note taking handouts are available at ihsinfo.org on the webinar page. Feel free to download now! 1

4/22/2015 Note: This presentation highlights recognized principles commonly found in the financial arena, but in no way suggests nor should be considered as financial advice. It is recommended you consult a financial professional for specific advice regarding financial matters that may be pertinent to you or your practice. No relationship exists that represents a potential conflict of interest or special business relationship between the International Hearing Society and Cliff Carey or EarQ nor any of its principals or employees. Agenda • Goals and Expectations • Timing Your Exit • Review the Market for Your Practice • Succession Planning • Q&A (enter your questions in the Question Box any time) 2

4/22/2015 Selling your practice can be one of the toughest challenges for the small business owner. Common Questions • Is it the right time? • Who will buy? • Are there recommended strategies? • What is my practice worth? • What are the first steps? 3

4/22/2015 Goals What if you could… • Earn the best sale price while limiting your tax exposure? • Determine a reasonable timeline with agreeable responsibilities after the sale? • Identify an appropriate buyer type and leave a legacy? Your Investment The fundamental valuation of your practice vs. your ability to realize it when you sell. Practices with similar earnings can differ in value. 4

4/22/2015 Seek Professional Advice A good advisor should: A good advisor must: • Manage parts or entirety of • Be independent sale process • Be experienced in hearing • Mitigate surprises/obstacles healthcare valuations during discovery • Determine a proper • Vet the buyer asking price • Help prepare financials • Protect your confidentiality • Allow you to continue running your business Merger and Acquisition Firms • Assist exit strategies, transition management services • Main goal: successful sale and highest valuation • May charge a retainer and/or a success fee ‐ Michael Gravel, iMerge Advisors M&A Advisor Fees 5

4/22/2015 Timeline Are you even ready to sell? Timeline There are three major considerations: • Your timing • The company • The market 6

4/22/2015 Your Timing Preparation • 5 ‐ 10 years is ideal • 3 ‐ 5 years is workable • Less than 3 years = limited options • Fire sale! Company Timing Ideal Conditions: • Your business is growing • You employ established, competent staff • You have built a stable and diverse patient base 7

4/22/2015 Market Timing Buyers • Status: important • Many owners at retirement age • Significant M&A activity has already taken place Market Timing Tax Implications • Status: worth consideration • Work with your CPA to assess impact on your income tax and capital gains tax 8

4/22/2015 Market Timing Interest Rates • Status: favorable • Inexpensive to borrow money • Buyers can pay higher premium Market Timing Financing • Status: favorable • Non ‐ traditional lenders aggressively pursuing acquisition, lending at high levels • Cash required at an all ‐ time low 9

4/22/2015 Today’s Market Who will you sell to? The Market 10

4/22/2015 The Market Manufacturer and Retail Option • Well ‐ capitalized; may pay a premium • Strategic acquisitions with specific benefits – Secure channels of distribution and POS – Talent; may not have requisite staffing • Possible employment agreement ‐ Jon Anderson, Principal, J Analytic Baby Boomers, Bottlenecks, and Boosting Growth Medical Medical Option • Hospitals • ENTs • Desire expertise and added revenue 11

4/22/2015 Competitive Professional Established: • Reduce expenses through economies of scale • Allow the owner to phase out quickly • Many are Baby Boomers; may also be considering selling First ‐ Time Buyer: • Shortage of professionals seeking practice ownership • May not be able to pay a premium; buying first practice • Requires long ‐ term vision and planning Barriers to Exit Obstacles that may impede your desire to leave your practice 12

4/22/2015 Barriers to Exit • Closure and/or penalty costs – Contract contingencies with suppliers or buyers; lease agreements • High investment in non ‐ transferable fixed assets – Real estate or capital equipment that is specific to one task • High redundancy costs – A large number of employees, or high salaries • Potential market changes Owner Contributions • Commonly the most valuable intangible asset • Major revenue contributors to the practice • Majority of goodwill justifications (valuation) result directly from owner’s presence • Departure can result in loss of patients and profits 13

4/22/2015 Tips: Owner Contributions • Reduce the practice’s reliance on the owner – Limit contribution to less than 1/3 of total revenue – Virtually impossible for the sole practitioner • Hire and retain key employees who make significant contribution to revenue Succession Planning How to Have It All 14

4/22/2015 Succession Plan • Finding a successor is a tough challenge for most small business owners. • Exercise the same diligence as you did to get to this point. Succession Plan No successor on staff? Hire one. 15

4/22/2015 Tips: Succession Plan • Hire smart people who can take direction; encourage entrepreneurial spirit • Give your employees freedom, but with strings attached • Encourage participation in decision making, ideas, and action plans • Reward them; consider profit sharing Conclusion Jump the Barriers! 16

4/22/2015 Selling Your Practice • Can be an unnerving experience • Seek the proper guidance • Align your expectations with reality • Prepare based on your company and the market, not your desires • Be patient and maximize your return Suggested Reading • The Exit Strategy Handbook: The BEST Guide for Selling Your Business by Jerry L. Mills • Exit Strategy: Maximizing the Value of Your Business by Thomas W. Lyons • The E ‐ Myth by Michael E. Gerber 17

4/22/2015 Questions Enter your question in the Question Box on your webinar dashboard 18

4/22/2015 Contact Clifford Carey: ccarey@earq.com Visit www.myearq.com For more info on obtaining a CE credit for this webinar, visit www.ihsinfo.org THANK YOU FOR ATTENDING! 19