Your Exit, Your Way: Part Two. A Full Sale or Partial Sale of Your Aged Care or Healthcare Business What is The Right Option?

Running an aged care or healthcare company is no walk in the park. You’ve spent years building your business, caring for patients, and navigating the complexities of the healthcare landscape.?

Now, you’re NOT probably thinking of selling today, but you know there are only two certain realities that are true in the volatile aged care sector and healthcare industry:

1. Selling an aged care facility or healthcare related?business is not a liquid marketplace. Buyers are a scarcity and the cost to find one is expensive before legal and accounting advice.
2. Should you be lucky enough a buyer comes along and offers to buy the whole kit and caboodle or just a part of it, be open to the opportunity to learn how this can benefit you in the long run. There is no initial cost to a friendly meet, a handshake and a conversation.

The choice between a full sale or a partial sale isn’t as clear-cut as it might seem. Let’s dive into the nitty-gritty and explore the best exit option for you.

A Full Sale vs. Partial Sale: What's the Big Difference?

When you’re pondering over the future of your aged care or healthcare business, the options can seem overwhelming. Essentially, you’re choosing between handing over the keys entirely or staying involved to some degree. Each path has its own perks and pitfalls.

Full Sale: A Clean Break

A full sale means selling 100% of your company. You walk away with a lump sum of money and, hopefully, peace of mind. But what are the real benefits and drawbacks?

Upsides of a Full Sale

• Financial Windfall: A full sale usually means a significant immediate payout. This can be especially attractive if you’re ready to retire or invest in a new venture.
• Complete Exit: You won’t have to worry about the day-to-day operations or future performance of the company. This can be a huge relief if you’re experiencing burnout.
• Risk Elimination: Selling your entire stake means you’re no longer exposed to the risks associated with the industry. This is particularly appealing in a field as volatile as healthcare.

Downsides of a Full Sale

• Niche Marketplace: Despite what every broker will tell you, sorry guys, selling a commercial business as a going concern is not like selling a house where you will have more than just one buyer and in most cases, back-up offers. Selling an aged care facility and or healthcare practice or polyclinic, you might get lucky enough to attract ONE buyer and possibly make an offer.?
• Financial Institutions Requires Full Access: In order for a full sale to occur requires the buyer to acquire funding from a financial institution of their choice. This means that the institution will show up numerous times to assess the validity of your business comb through every inch and to find any risk and reason to not provide the buyer with the funding needed to pay you out.
• Tax Implications: The tax hit from a full sale will be substantial and may not be enough to sustain you and your families future for a further 10, 15 or even another 20 years! It’s absolutely crucial to consult with an accountant / tax advisor to understand the full impact.
• Loss of Control: Once the sale is complete, you’ll have no say in how the business is run. This can be tough if you have a strong emotional attachment to the company, the legacy you worked so hard to build remains intact, staff retention and the suppliers relationships.
• Legacy, Staff & Suppliers are lost: When the staff and supply chain realise you’re in the process of selling, doubt will begin to set in, staff morale will drop, suppliers get nervous and the community gets wind of a sale, curiosity and rumors of who is coming in, the likely impact to their livelihoods and the future residents in the current pipeline.
• Potential Regret: Selling outright can lead to second-guessing, especially when you watch the business thrive and flourish over the next 3-5 years under new ownership.

Partial Sale: Staying in the Game

A partial sale involves selling a portion of your company, retaining some ownership and possibly an active role in the business. This option is often appealing to those who aren’t quite ready to let go.

Upsides of a Partial Sale

• K.I.S.S: Keep transition and transaction of a partial sale process stupid simple. When you do this, you limit your upfront costs during a 3, 6 or 12 month exclusivity period. This gives you time to understand, find common ground and intent with your buyer that you both are serious to make this work. Ensure the buyer has the same values, principals and intentions in the long run, typically 10 years or more, that benefit you, your staff and protect the legacy you’ve built.
• Retained Involvement: You can still have a piece of the cake and eat it too. Remain a stakeholder and have a say in the company’s direction and operations. This can be satisfying especially if you’re ready to coach, guide and support the operations to the point when you fully take a step back and watch the legacy continue in the community.
• Financial Flexibility: Selling a part of your business can provide certainty with discretion, confidence and cashflow over the forthcoming years that still allows you to benefit from any future growth. Essentially, you can become and act like a bank and receive all future payments as opposed to allowing a financial institution complete control. It will mitigate and significantly reduce the risk and the fear of your staff leaving and suppliers won’t get cold feet either.?
• Control & Reduced Risk: By selling a portion of the company, you can reduce your personal risk without giving up all control. This normally means you get your piece of the pie and eat it too. As the transition moves into its first 12, 24 and 36 month period, you can sit back and enjoy the fruits of their labour whilst getting monthly recurring payments upon the mutually agreed terms.

Downside of a Partial Sale?

• Upfront Costs: There will be upfront costs, post acceptance of an offer, valuations (not always needed), brokers advertising, documentation, legal and or accounting costs, which is a normal part of the sales process. In some agreements and post acceptance, there can sometimes be a seller's remorse clause where you might have to pay if you change your mind during the buyer's due diligence period.
• Complex Negotiations: Partial sales can be complicated, requiring detailed agreements on how the business will be run and how profits will be shared. This is a normal part of the process where your legal team can advise.
• Ongoing Responsibility: You’ll still have some responsibility for the company’s performance,, which can be stressful if things don’t go as planned.
• Potential Conflicts: Sharing ownership may possibly lead to conflicts, especially if there are differences in vision or management style with the new stakeholders.

Factors to Consider When Choosing Your Exit Option

Making the right decision involves weighing several key factors. Here’s what you need to keep in mind:

Your Financial Goals

• Immediate Needs: Do you need a large sum of money right now, or can you afford to wait for a potential bigger payout down the road?
• Future Earnings: Are you more interested in a one-time windfall, or would you prefer to continue earning from the business as a stakeholder?

Your Personal Goals

• Retirement Plans: Are you ready to retire, or do you still want to be involved in the business as an advisor?
• Other Interests: Do you have other ventures or hobbies you want to pursue that might require your time and attention?

Market Conditions

• Industry Trends: Is the healthcare sector experiencing growth or facing challenges? How might this impact the sale value of your company?
• Economic Climate: What’s the current state of the economy? Buyers are never plentiful in selling a business in any climate. Normally there will only ever be one.

Tax Implications

• Tax Rates: Understanding the tax implications of a full vs. partial sale is critical. Different sale structures can have vastly different tax outcomes.
• Tax Planning: Consult with a tax professional to explore ways to minimise your tax burden, regardless of which sale option you choose.

Emotional Attachment

• Legacy Concerns: How important is it to you that the company continues in line with your vision and values?
• Stress Levels: Consider the emotional impact of both options. Which scenario gives you the most peace of mind?

Steps to Take Before Making Your Decision

Before you make your final decision, there are several important steps to take:

1. Evaluate Potential Buyers & Sign an NDA

Not all buyers are created equal. Listen to your intuition, consider what’s important to you, whether it’s their ability to maintain your company’s legacy, keep the staff on, what's their vision for the future and are they good people to do business with.

2. Plan for the Transition

Whether you’re selling fully or partially, a smooth transition is key. I am biased to partial sales because we can develop a detailed transition plan together that benefits all parties and ensure continuity for your staff, residents and suppliers.

5. Prepare for Due Diligence

Buyers will conduct thorough due diligence before finalising a purchase. Be prepared to provide comprehensive information about your company’s financials, operations, and compliance with industry regulations over the last 3 years and sometimes they can ask for information pre-covid as a comparison.

FAQs

Q1: What’s the difference between a full sale and a partial sale of my aged care or healthcare company?

A full sale involves selling 100% of your company, resulting in a complete exit from the business.?

A partial sale means selling a portion of your company, allowing you to get a monthly income for a long period of time, retain some ownership,? and potentially remain involved in its operations.

Q2: What are the financial benefits of a full sale?

A full sale typically provides a significant immediate payout, eliminating your exposure to future business risks and freeing you from ongoing responsibilities.

Q3: How can a partial sale benefit me?

A partial sale allows you to remain involved in the business, benefit from future growth, and reduce personal financial risk without giving up complete control.

Q4: What should I consider when choosing between a full and partial sale?

Consider your financial and personal goals, market conditions, tax implications, and emotional attachment to the business. Consulting with financial, tax, and legal advisors can provide valuable insights.

Q5: What steps should I take before deciding on an exit option?

Ask the buyer why and learn what their intentions are over for the future over the next 3, 5 or 10 years from now. Understand that the price of the offer makes sense and benefits you and your families futures first!

Accept their offer, seek professional advice and prepare for due diligence. Collaboration is key.

Conclusion

Choosing the right exit option for your aged care or healthcare company is a significant decision that requires careful consideration of various factors. Whether you opt for a full sale or a partial sale, it’s crucial to understand the implications of each choice and how it aligns with your personal and financial goals.

By evaluating the potential buyer, seeking professional advice, and planning for a smooth transition, you can make an informed decision that meets your needs.?

Remember, there’s no one-size-fits-all answer. What’s most important is choosing the path that gives you peace of mind and sets you up for success in your next chapter.

So, whether you’re ready to hand over the reins entirely or prefer to stay connected to your company’s future, take the time to weigh your options carefully.?

Your future self will thank you.?

Disclaimer - The information contained herein should not be construed as legal, financial or investment advice. Information contained in this article should not be construed as a recommendation to sell or buy any security and makes no representation related to expected investment returns. Always seek professional advice.