Buying a Professional Practice Business

Tips for Buying a Professional Practice Business

Every month receive a few requests from Financial Planners, Money Managers, CPAs a few Insurance companies interested in buying a Professional Practice Business
… otherwise known as a “Book of Business.”

Unfortunately it’s a very difficult task because there are a lot more people interested in buying a professional practice business than there are sellers. Furthermore, just an off-the-record mention of a person thinking of selling their book of business  brings buyers out of the woodwork.

Long story short, they’re hard to come by.biz-practice

So what’s the point in writing this article?

The point is, there is MILLIONS to be made by people who build up a practice business, sell the book and do it again.

As the GURU’s say in the House Flipping business – “Rinse and Repeat”

That being said, if you have the opportunity to buy one, here are 5 things you need to watch out for so the purchase happens in a positive way instead of a nightmare:

1. Make sure there is a retention clause in the agreement.
A retention clause in a purchase agreement allows the buyer to withhold a portion of the purchase price until it is determined that the project, goods, or contracts meet the specifications of what is being sold.
In another words, the seller can’t collect all the money and leave on the next plane out of the country and vanish.    >> Dictionary Explanation of Retention Clause <<<

2. Transition of the practice to the new owner, (you) is critical and must be done in a way that the clients don’t disappear into the night. The best way to accomplish this is to make the sale look like a merger. Again, if the seller is going to jump on a plane the day after closing and fly off someplace, i’d be suer cautious and make sure there is a LARGE holdback of funds retained for release sometime on the future.

3. Thorough review of all paperwork is essential!   You must have absolute clarity on what you’re buying! Leave no stone unturned, and let no question go unanswered!

4. Complete a background check on the seller.
Google the owner and the business name and see what pops up. Check to make sure any business license or credentials are in good standing and no ethic violations have occurred against the owner or any partners. With the internet now-a-days, there are no secrets. If you don’t want to do the background check, hire someone to do it for you.

DON’T skip this step – regardless how well you know the person, or what you’ve heard about them. Their social profile will tell you a lot about their character. Do Your Homework on the Seller.

My Grandfather used to say , “You can whitewash the stripes of a Zebra, put a saddle on it’s back and call it a horse, but all you really have is a zebra with a saddle on its back and the stripes will come back after a good rain.”

5. Make sure all employees are under a non-compete and non-disclosure. The last thing you want to have happen is you invest a bunch of money into a company only to have the top employees  walk out behind the seller, taking their clients with them and going into business of themselves.

There you have it …. 5 Tips for Buying a “Practice Business.”

I wrote a book on the 5 Fundamental Elements of Every Successful and Sellable Business.
It is loaded with very good information, and if you build your business around the 5 Fundamental Elements, you can easily scale your business up quickly.
To get you copy, go to Amazon.com and type in my name Paul Forsberg.
Get the book – you’ll be glad you did.

The 5 Fundamental Elements of Every Successful and Sellable Business

Business Exit Timing

It Doesn’t Matter How Big or Small The Business. It Doesn’t Matter What Product or Service You Deliver.
Every Successful Business In The World Has All 5 Fundamental Elements Working Together, and Every Failed Business in History Does Not!

A message from the author-

The business failure rate in this world is staggering, and the sad truth about the businesses that do make it, only a few can be sold for Top Dollar!
“Entrepreneurs work hard – sacrificing their time, family, friends, and lord knows what else. I mean, we really work our tails off and the last thing any of us want to do after all of our hard work and sacrifice is end up being forced to close the doors in a liquidation sale, or when the time comes, end up selling the business for pennies on the dollar. None of us can afford the pain and anguish of being forced to clip coupons to get by in retirement because we failed to plan ahead of time.

You owe it to yourself to get the best help and advise you possibly can so you’re not taken advantage of and embarrassed – READ THIS BOOK – and Discover What You Need To Do Starting Tomorrow So You Can Sell Your Business In 2-5 Years And Walk Away Wealthy.”

Business Exit Timing

Are You Thinking of Selling Your Business?

Business Exit Timing is of Paramount Importance if You’re Thinking of Selling Your Business at Anytime Within the Next 3-5 Years.

…. And Here’s Why ….

The odds are very difficult and they are stacked against you!

If you take any 100 businesses and put them up for sale, you will find only 20% of them will ever sell, and the remaining 80 will end up closing their doors in liquidation sale.
Leaving a trail of broken promises, shattered dreams, and jobs lost.

Get The Business Exit Timing Right.

The biggest mistake most business sellers make is that they don’t have an exit strategy.

Unfortunately most business owners wait until a random catastrophic event occurs, and unfortunately, Murphy’s Law shows up, and it happens at the worst time. It happens when there is a downward trend in business for one reason or another and the business isn’t making as much money as it should be.

So what do you do to correct this? “Business Exit Timing” is Critical and that requires you to have a Business Exit Plan.  

Here’ How To Get Started: 

Get The Books in Order.

You need to have your books in order – STOP living out of the business!

Most business owners live out of their business so they can decrease their tax

liability. They run auto expenses, travel and entertainment, cell phone bills, and other expenses through the business.

This strategy is legal, ethical, encouraged by the IRS, and of course, edified by the CPA’s.

The problem with doing this is, these expenses need to be added back to the business bottom line profits, and the more you add back, the more doubt comes into the picture from the buyer.

A much better way of doing this is, pay the expenses out of your personal account and take an owner draw from the business. This keeps the books clean and concise. Yes, you might have to pay a little more tax, but the payoff will dwarf the amount of tax you pay when you sell.

It’s CRITICAL to know the numbers and have your books in order.

B.S. Books will only get you B.S. offers when you sell – period.

Build Your Brand

About 95 percent of business owners have no idea what their brand is or what it means. While branding isn’t everything, it certainly has a lot to do with business value when it comes to “Good-Will.”

Here are 5 Brand Fundamentals:

  1. Brand Absence: customers aren’t familiar with your company, or only use it because it’s convenient to their location.
  2. Brand Awareness: customers know who you are and are familiar with you and your company.
  3. Brand Preference: customer prefer your company’s products and services over the competitors.
  4. Brand Insistence: customers are loyal to your brand and they refuse to use competing products and services.
  5. Brand Advocacy: customers become raving fans and recommend your products and services to others.

Each and every one of these are major contributors to the value of “Good-Will” and when you get to the level to where people are referring your business and service to others instead of you selling to them, the money begins to come in droves.

Know What Makes Your Business Valuable.

In order for your company to look attractive to a buyer, you need multiple

sources of income, a healthy customer base, and a solid management team in

place.

5 Fundamental Elements of Every Successful and Sellable Business

I wrote a book titled “The 5 Fundamental Elements of Every Successful and Sellable Business.” It is available on Amazon in print and Kindle version.
(I’m humbled and super proud to say it made the Amazon Best Seller List the day it was released!)

Buyers are buying the future income stream of the business, so they look for a large customer base, brand awareness, systems in place and upside potential.

Buyers will readily buy a business that has management and employees in place because they don’t want to buy a job.

Keep It Quiet.

Selling a business is somewhat of a “Clandestine” operation and the fastest way to ruin a business is to let the world know the business is up for sale! 

Employees will go elsewhere, vendors will become concerned about getting paid and about the new owner, and customers will miraculously vanish. 

The only people who are happy to hear that you’re selling the business is the competition and you can bet your bottom dollar they will be shouting it from the rooftops for everyone to hear.

Selling businesses is very different than selling houses.

Many people think it’s similar, but they are two completely different animals.

The real estate model is the more people you tell, the more houses you sell. In the business brokerage industry, the more people you tell, the more businesses you kill.

Hire a Professional Business Broker.

As I mentioned earlier in this article – Selling a Business is somewhat of a “Clandestine” operation, and this is where a Professional Business Broker comes in.

Not all Business Brokers are Created Equal – because, as in all professions, there is competence and professionalism, and there is incompetence and unprofessionalism.

therefore, as you would do in any situation that you need to hire a professional, you need to do you homework, and you need to ask questions and qualify them.

In my business, I have a database of over 2,000 qualified business buyers and am associated with another 1,400 Professional Business Brokers who have their own list of buyers.

In every instance, buyers must sign a “Non-Disclosure” agreement before any information about the business is released.

A non-disclosure agreement (NDA), also known as a confidentiality agreement (CA), confidential disclosure agreement (CDA), proprietary information agreement (PIA), or secrecy agreement (SA), is a legal contract between at least two parties that outlines confidential material, knowledge, or information that the parties will not share or distribute and information shared.

CAREFUL! Not All Business Brokers Are Created Equal:

Many business brokers have about the same rate of success as business owners do in selling their own companies. The key, to your success is finding a business broker with a proven track record.

Here are 9 questions you need to ask BEFORE you hire a Business Broker:

  1. Do you own the firm?
  2. What is your closing ratio?
  3. How many listings do you have now?
  4. What businesses have you sold and in what industries?
  5. Do you have a database of buyers and how many are on it?
  6. Who decides how much money is spent on marketing my business for sale?
  7. On average how much more can you sell my business for?
  8. Do you have any testimonials you can give? (“If they can’t give you any testimonials …. run”)
  9. What are your list of buyers looking for?

Ask yourself the following questions to determine if you should sell your

business and when should you sell:

  • Do you still love what you do?
  • How long have you been in business?
  • Do you truly feel like you have a business?
  • Are you still passionate about your business?
  • Do you still have a burning desire to succeed and lead?
  • Are you still creative and able to continue to grow your business to the next level?
  • Do you still work IN the business or can you work ON your business?
  • Are you growing market share?
  • Is your business trending up?
  • Are you making a profit?

If you answered “yes” to most of these questions, then your business is still in the positive phase and it is a GOOD time to sell, or at the very least, come up with an exit strategy.

You might be asking yourself, “What do you mean?
If I still love my business and it is doing well, then why in the world would I want to sell it now?

The answer is because this is the best time to do so.

Business buyers want to buy a business that is thriving not dying and the biggest The mistake sellers make is they wait too long before selling their business.

Here are some additional questions you should consider in order to determine if

your business is in a positive phase or a negative phase:

  • Do you dread going to work?
  • Are you working in your business?
  • Do you feel like you don’t own a business, but the business owns you?
  • Do you lack the passion for your business that you once had?
  • Are you burned out?
  • Do you feel your customers and employee are becoming a hinderance to you
  • Do you find yourself snapping and arguing with your employees, or customers?
  • Are you having a difficult time making decisions?
  • Is your business trending down or has it become stagnant?
  • Are you losing money or just breaking even?
  • Is the business or are you personally in debt?
  • Are you worrying about your business 24/7?

If you said “yes” to more than just a few of these questions, your business is in the negative phase and it’s time for you to get out before it’s too late.

Business Exit Timing is important for you to sell your business for Top Dollar.

Do you have a “Business Exit Timing” Strategy of Business Exit Strategy in place?
Please share

Why Most Businesses Cannot Be Sold

and What You Can Do About It

Why Most Businesses Cannot Be Sold and What You Can Do About It ….

Most businesses cannot be sold because they never get out of the Storming stage.
There are 4 distinct phases in business, and the Storming stage is phase 2.
There was a well known professor named Bruce Tuckman, who identified four distinct phases of team development: forming, storming, norming, and performing. … Tuckman proposed that all are inevitable and even necessary parts of a successful team’s evolution. 
These phases also exist in business, and unfortunately, most businesses cannot be sold because they never get out of the Storming stage.
 I explain it in the video and tie it in with The 5 Fundamental Elements of Every Successful and Sellable Business.

“Entrepreneurs work hard – sacrificing their time, family, friends, and lord knows what else.
I mean, we really work our tails off and the last thing any of us want to do after all of our hard work and sacrifice is end up being forced to close the doors in a liquidation sale. Or worse,  when the time comes, end up selling the business for pennies on the dollar.

This video reveals why most businesses cannot be sold and what you can do about it.

I hope you enjoy it – if you have questions, you can Contact Me By Clicking This Link.

 

How To Sell Your Business

Walk Away Wealthy

How To Sell Your Business & Walk Away Wealthy

So many people think selling a business is like selling a house and they have it completely wrong! A house sells itself. All real estate agent has to do is listen to a prospective buyer and show them what they are looking for. Realtors don’t sell houses -they show them. The house sells itself. How To Sell Your Business

The video you are about to watch shows you the exact process you need to know if you want to know how to sell your business.

Once you understand the process, you’ll know exactly how to sell your business and you will then be able to plan ahead so when you do sell, you might just walk away wealthy.

 

 I hope this video helps you understand the business sale process a little better than before you watched it.

You worked hard for a long time in your business – sacrificing your time, your family, your friends, and Lord knows what else – The LAST thing you want to do after all those years of sacrifice is to sell your business for less than it’s worth.

You simply can’t afford the pain and embarrassment that would go along with being forced to pinch pennies and clip coupons for the rest of your days after working so hard for so long.

A little business exit planning goes a long – long way.

I’m putting together a weekend workshop for business owners wanting to learn how to sell their business themselves for top dollar.

Please feel free to contact me if you’d like to learn more about the workshop.

Business Staging Is The New Way To Effectively Sell A Business For Top Dollar

For Business Owners Looking To Cash Out For Top Dollar, Business Staging Is Now Neccesary

business staging

With Tsunami of Baby Boomer Business Owners Looking To Sell and Retire, Business Staging Will Become a Necessity.

The Massive Wave of Baby Boomer Business Owners Retiring And Placing Their Businesses Up For Sale.  Competition For Buyers Is Fierce. The Landscape For Selling a Business Is Shifting Like No Other Time In History.

Are You Ready For It?

Research indicates that more than $10 trillion Dollars in Baby Boomer Owned Businesses will be passed down or sold by 2025.

According to BizBuySell.com, the nation’s largest online business sales database,  a startling 50,000 Baby Boomer Owned Businesses will be coming on the market over the next 8 years creating a buyers market unlike anything we have ever seen in history.

This is Unfortunate Because Trillions of Dollars in Value Will be Lost, and Business Staging Will Be The Best Way To Mitigate Risk and Increase Your Chances of Selling a Business for Top Dollar.
(more…)

The Quick and Easy Way To Value a Small Business

There is a lot of bologna, spin, gimmicks and fast talking out there when it comes to valuing a small business.

The Quick and Easy Way To Value a Small Business

There is a lot of bologna, spin, gimmicks and fast talking out there when it comes to valuing a small business.

In the next couple paragraphs, I’m going throw it all under the bus and share with you the Quick and Easy Way To Value A Small Business in a straight-forward and professional manner.

Easy Way To Value a Small Business

Let me be clear – You need to keep in mind one simple fact: a business is only worth what someone else is willing to pay for it. Not a penny more and not a penny less.

That being said, there is no science to placing a value on a business.

First of all, the “Asking Price” for a business is usually too high.

Second of all, a buyer almost always thinks the asking price too high as well.

The key to establishing some sort of realistic asking price, the first thing that needs to be done is get the numbers together.

This formula applies a factor to the previous year(s) Owner Benefit figure to arrive at a purchase price. The Owner Benefit figure is a combination of several factors:

Pre Tax Profit + Owner’s Salary + Additional Owner Perks + Interest + Depreciation = total Owner Benefit.

After you have the final number, all you need to do is go on www.BizBuySell.com and run comparable sales data. They make it so simple a 3rd grader can do it in about 10 minutes.

There is no real “Rule-of-Thumb” for a multiple of earnings because some will sell for 1-time owner benefit, while others will sell at 6 and 7 times. (more…)

The Coming Tsunami of Baby Boomer Business Owners Retiring

Is Creating A Cataclysmic Shift on How Businesses Are Sold.

The Coming Tsunami of Baby Boomer Business Owners Retiring Is Creating A Cataclysmic Shift on How Businesses Are Sold.

The Massive Wave of Baby Boomer Business Owners Retiring And Placing Their Businesses Up For Sale Is Already Clogging Databases.

Competition For Buyers Is Fierce and The Landscape For Selling a Business Is Shifting Like No Other Time In History …

 

Are You Ready For It?

Research indicates that more than $10 trillion Dollars in Baby Boomer Owned Businesses will be passed down or sold by 2025.

According to BizBuySell.com, the nation’s largest online business sales database, the median sales price of a business is $200,000. By using simple math, it breaks down to a startling 50,000 Baby Boomer Owned Businesses will be coming on the market over the next 8 years.

Talk about a Coming Tsunami! (more…)

Business Exit Timing – Get Out Before It’s Too Late!

Business Exit Timing

Kenny Rogers’s hit song “Youve got to know when to holdemKnow when to foldemKnow when to walk awayAnd know when to run.

While he wrote the song about gambling, the words hold true in business as well.

Business Exit Timing Is of Paramount Importance!

The difference is the stakes are much higher in business.

All businesses have a life-cycle, and the exact length of that life-cycle is determined by the person in charge – YOU
To learn about a typical business life-cycle, click this link:
http://pbforsberg.com/category/business-lifecycle/

In virtually all privately held businesses, the owner is the boss, and after a while, the boss gets burned out. It happens to everyone – no-one is exempt from this simple fact, and is probably the number one reason why so many businesses suddenly vanish.

If you’re a business owner reading this, you probably got into business because you thought it would give you the freedom to do what you want, the ability to work on your own schedule, make the kind of money you deserve, and eventually be able to retire on the fruits of your labor.

If you’re anything like about 99.9% of all the other business owners out there, you’re the first one in the door in the morning and the last to leave in the evening.

You do it all, and eventually, you’re going to get worn-out and you lose your motivation. The excitement will wane, the motivation will go out the window, and your drive will begin to fade.

business exit timingGetting up in the morning and going to work will become a burden, employees will begin to bother you, customers will begin to get under your skin, and all the fun you once had will be a distant memory.

It doesn’t happen overnight, but it happens to practically everyone.
It usually takes a few years before you realize it because you’re working your butt off and can’t or won’t take the time to step back and take a 30,000ft view of operations. (more…)

Multi-Generational Family Business Conundrums

Why Most of Them Fail and What You Can Do About It

Multi-Generational Family Business Conundrums –
Why Most Multi-Generational Family Businesses Fail And What You Can Do About It.

Multi-Generational Family Business Conundrums

Multi-Generational Family Businesses have a terrible chance of survival!

In this post, I’m going to run through a typical multi-generational family business and touch on what happens to it and why. I’ve seen this exact scenario in more than a couple family businesses.

The originator starts a business, has a family, and as the kids grow up, they work in the family business. The kids basically grow up believing that they will be working ‘with” dad or mom, and got through their formative years helping out in small ways and then after high school or college, they work full time in the business being led to believe that one day, “this will all be yours someday.”

Then, since they/you are so busy working IN the family business, they/you become too busy to realize that the kids will also have children one day and their children might very well follow in what is not a family tradition and the belief is the same – “This will all be yours someday.”
And the next generation, in turn, has the same proudly earned tradition that continues – but faulty at its’ foundation.

Now, we have 3 plus generations working in the business.
Sounds great, wonderful and romantic, but in real life, it’s a catastrophe in the making – with few exceptions.

Here’s Why:
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