Exiting a small practice

Small practice owners face unique challenges when it comes time to exit their firms. Read more to learn how you can avoid common pitfalls and get far more for your business when you sell it!

Setting Prices Too Low

Unless you’re a negotiation consultant, you’re probably not well versed in the art of negotiating prices. Most small practices work on time & materials, and must subject themselves to vendor management (who get annual recurrent training on how to squeeze rates from small vendors).

If you don’t know how to work with vendor management, or worse yet if vendor management has no problem with your prices, you’re leaving a lot of money on the table. Seek out negotiation training; the amount it costs will pay for itself in a week or two at most, and your stress level will drop considerably as you learn to recognize the standard VM playbook.?

Increased prices mean increased EBITDA, which is the first thing a buyer looks at when valuing your firm for purchase.?

Remaining the superstar

Many SME owners are passionate about what they deliver, and they remain the best delivery person in their firm. This creates several problems:

1. Anyone who wants to be better skilled than the owner will have to leave the firm to do so;
2. Alternative ways of working that may work better in certain scenarios are never explored; and
3. The owner is trapped in a never-ending cycle of reviewing and “fixing" the work their people produce

Owners need to develop a?CEO Mindsetand let go of their delivery focus in order to succeed. While this is draining at first, allowing others in your organization to shine is key to their growth, and thus the company’s growth as well. When it comes time to exit, the replaceability of the owner is critical to increasing the firm’s value.?

Not developing a successor

This often coincides with remaining the superstar; when you’re the best at what you do, you often fail to develop a successor who can run the business in your place. Either they leave, frustrated with the lack of growth opportunity, or if they stay they’re often happy with the status quo (where the owner makes all the decisions) and are not interested in taking on additional responsibilities.?

Without a successor to take over leadership of the business, it’s difficult to get much value for the business. Without the (present) owner, it’s just a bunch of order-takers, and the present owner is looking to leave. A business that can stand on its own is far more valuable than one that cannot.?

Solutions

Many owners are well aware of these challenges, yet struggle with actually implementing them. Raising prices can be nerve-wracking, and doing the vendor management dance is time-consuming. Combine that with the very real challenges of pivoting away from a delivery focus (which is why many owners started their businesses in the first place) toward being a CEO focused on improving the business itself, and it’s no surprise that many owners never grow and settle for a fraction of their business’ potential value.??

In conclusion, small practice owners face unique challenges when it comes to exiting their firms. By avoiding common pitfalls such as setting prices too low, remaining the superstar, and not developing a successor, they can significantly increase the value of their businesses.

It may be daunting to implement these changes, but with the right guidance and support, business owners can create a thriving and valuable asset that doesn't demand all their time and attention. If you're ready to take your business to the next level and maximize its potential value, schedule an appointment with me. Together, we can explore strategies to increase your business's worth and reduce your workload, ensuring a prosperous future for you and your family.