BLOGS
Exit planning: What factors determine the value of my practice?
It’s vitally important when preparing to sell your practice to understand the factors that determine its value.
Have you thought about it from the prospective buyer’s point of view?
In our guide ‘how to get the best price for your practice’ we give you a full and comprehensive list of these factors.
But to get you started on the right track, we break down a few of the bigger ones below.
Financial performance
We must talk about this to start off. After all, it’s arguably the most important point. Practices with a high gross and net profit margin will be the most attractive on the market. However, buyers will ask a whole host of questions around your financial results, including:
- What’s your latest income and profit?
- Do these match the minimum expectations?
- What analysis have you done of the successes and areas that need improvement?
The answers to these and a host of other questions will keenly influence the ultimate value buyers are willing to agree to.
Clear financial records
Tied into the financial performance, it is really important that you ensure all of your records are clean, tidy and up to date and you can, therefore, present them in good order. Crucially, this will give the buyer confidence that the business has been well run.
Client Base
Buyers will want to closely scrutinise your client base and drill down into the details. They will examine not only how big your list is, but who your clients are, the demographics, their industries and professions.
Competition
How well are you competing? Buyers will be looking to discover specifics about your closest competitors, and the extent of the rivalry between them, as it plays out in the marketplace. This involves identifying relative strengths and weaknesses against the competition.
Technology
The technology your firm uses is becoming a significant factor in valuation. Buyers will be looking for forward thinking, modern firms that have adopted cloud solutions, automated their key processes, streamlined their workload and cut down on unnecessary manual work which costs time and money.
We give you the full list of factors you need to consider in our guide HERE.
Once you’ve considered all of the factors that are going to determine how much a buyer is prepared to pay, you can look at improving your practice in all of these areas. Which are the weaker points in your business that need to be addressed first and foremost?
The good news is there are many ways you can make your practice more attractive. We can explain more in the next blog in our series. Look out for it next week.
In the meantime, if you’d like a conversation with any of our exit planning specialists to understand more about what you’ve read so far, please call 0344 844 9644 or email practicesales@iris.co.uk.