Mastering the Clinic Sale: Our Journey and Lessons Learned

Since starting up KCD Pros, we have received numerous requests for information regarding how we went about selling our clinic. I have written this post to let visitors know what we did and didn’t do in selling our company.

Understanding the Sale Process

First and foremost, seeking a buyer was not on our list of considerations. Therefore, we cannot help guide visitors on how to find buyers. Our therapy clinic was approached by a few different companies expressing interest in buying it for at least two or three years leading up to the sale.

I know there are brokers out there who can help you find buyers, but my understanding is that they charge a fairly substantial percentage of the final sale price. Be aware of the fees associated with using them.

As far as the sale process goes, it was very lengthy and tedious. From the initial contact to closing, it took about 6 months. We were able to very quickly respond to all of their requests for data and information.

They wanted to see and analyze pretty much every aspect of the company, including:

• Graphs upon graphs of growth and profitability
• Tables of the number of clients per insurance
• Copies of all our contracts with insurance companies
• Years’ worth of bank statements
• Copies of our QuickBooks entries
• Copies of all the BAAs we had with vendors who were potentially handling PHI, etc.

It’s a HUGE risk because if they don’t like the look of something and end up buying another competitor, they know EVERYTHING about your clinic and can use it to fight for growth and new clients in the area.

The Importance of KPIs in the Sale

My wife and I firmly believe that our strong understanding of our KPIs and our ability to very quickly hand that data over to the potential buyer helped add enormous value to the sale price.

If she had been on her own to answer many of their questions, she would likely have been unable to do so in a comprehensive and speedy manner.

This may have resulted in the buyer pulling out of the deal or at least lowering their offer substantially.

The buyer almost seemed disappointed many times when we submitted a new table or graph showing our growth and stability as well as our understanding of the importance of these metrics. They could see their costs increasing with every answer we submitted.

Determining the Sale Price: EBITDA and Multipliers

For the sale price, they calculated the price based on our EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization – basically your net earnings before taxes).

They allowed us to add extraneous costs back in to count toward the EBITDA. For instance, they approached us while we were in the middle of building out a new facility.

That build-out cost several hundred thousand dollars. They let us count that money as part of our earnings, and not take it out of our net since it was not a typical operational cost.

The negotiation part of the EBITDA process is the multiplier. There is a multiplier that takes your net earnings and multiplies it by a factor to determine the sale price.

Based on our research online and our understanding of the strength and market position of our clinic, we were able to increase their original offer on the multiplier.

Know Your KPIs

The bottom line is: whether you are seeking out a buyer yourself or you are approached by a prospective buyer, you MUST know and understand your KPIs to get top dollar for your company.

If you don’t know what your growth has been for the past five years to the tenth of a percent, why would a buyer take a chance on spending top dollar on your clinic?

Growth is just one of many KPIs buyers analyze very closely, so expect to go well beyond that if you truly expect to build value and attract attention to your clinic.

At KCD Pros, we’ve experienced firsthand how critical this knowledge is and are committed to helping other clinic owners navigate this challenging process with confidence and success. Feel free to contact us if you need help.