In this episode, Barbara and Jessica discuss:
-What factors to keep in check when buying a business
-Getting the Most For Selling Your Business—a book written by Jessica Fialkovich
-How to determine your business’ worth
” Every Practice Has A Value!” – Jessica Fialkovich.
Connect with Jessica Fialkovich:
Connect with Barbara Hales:
Content Copy Made Easy
14 Tactics to Triple Sales
Power to the Patient: The Medical Strategist
Dr. Barbara Hales: Welcome to another episode of Marketing Tips for Doctors.
I’m your host, Dr. Barbara Hales. And today, we have with us Jessica Fialkovich. She is the founder of one of the top experts in the business brokerage industry, Exit Factor. This offers a proven method that helps small to mid-sized business owners and medical practices the opportunity to maximize their company’s value.
Through one-on-one consulting services and online programs, the trusted advisors at Exit Factor teach entrepreneurs how to successfully navigate and fully leverage strategies when buying, building, and selling their businesses. This is a service I’m sure we all could use. Exit Factor is part of the consulting division within the United Franchise Group Family of brands.
This is related to the United Franchise Group, which is home to an affiliated family of brands and consultants, including Accurate Franchising Inc., Exit Factor, Franchise Mart, Fully Promoted, and several more worldwide. It’s in more than 60 countries. This is extremely interesting and valuable, so you may want to take notes today.
Welcome to the show, Jessica.
Jessica Fialkovich: Oh, thank you so much for having me, Barbara.
Dr. Barbara Hales: When people decide to buy into a business instead of going into a conglomeration or working as an employee at the hospital, how do they decide on buying a business? What goals should they have, or what guide should they?
Jessica Fialkovich: When you’re deciding whether to buy a business or not, I think the biggest decision you need to make in deciding factor is whether you want that ownership seat or not. And I think many employees and workers feel like they want ownership. But always the upside of ownership.
“I wanna make money when the hospital group makes money, and I wanna make money when the business makes money.” But there is an element of risk and accountability as an owner that’s not appropriate or desirable for everyone. I find that’s the biggest deciding factor for people when they’re deciding, they’re trying to vet whether they want to be a business owner or not.
Because that’s what it comes down to is, yes, there’s upside in ownership, but there’s also risk and liability.
Dr. Barbara Hales: How do we increase the value and profitability of practice once we start running?
Jessica Fialkovich: So there’s one really, and I’ll talk about this, like a tactical thing that I love to recommend to increase a practice’s profitability.
There’s something I call expense creep. This happens in our personal lives too. We’ll sign up for different services and compile expenses over time. And then I find that it happens in practices too.
So once a quarter, I recommend it to all our clients; I even do this in my own business.
It’s just sitting down and going through all the expenses we have in our business and asking ourselves, is this still working and necessary? And if the answer is no to either of those questions, eliminate the expense. So that’s one of the first tactical ways I start, by increasing the profitability of practice and businesses.
The first year we did that in my business, we increased our profit by 40%.
Dr. Barbara Hales: That’s pretty impressive.
Yeah, and it’s just simple. But it’s all about having the discipline to do it once a quarter and be ruthless if something’s necessary in the business or not.
Dr. Barbara Hales: That sounds like excellent advice. When you decide that you’ve had enough and only you can, what are some mistakes to avoid when you decide to sell your practice?
Jessica Fialkovich: Yeah, it’s a great question, and I see a couple of major mistakes. The first mistake is not realizing that, eventually, you’re going to have to exit your practice.
All things in life, our time on Earth, everything comes to an end, including our businesses, right? that time in our practice will come to an end. So I think the biggest mistake is that practice owners wait too long to realize that inevitability and wait until something happens that forces them into retirement.
If they’re burned out, they’ve just hit the end of the road and haven’t planned it. And because they haven’t planned it, usually they’re looking at a lower valuation, sometimes, smaller buyer pools than they would’ve if they had planned just a few years.
So that’s the first major mistake I see. The second major mistake is having the practice be about you as the founder, owner, and primary practitioner. It can’t just be about you. You have to have other people around you supporting you, whether that’s other doctors or physician’s assistants, and then also on the support side.
And having support team members, receptionists, administrators, and things like that and diversifying who’s doing the work in the business. And the last was to round out the top three: focus on profitability, running clean books and records, really clean financials on the business, and maximizing that profit margin.
Dr. Barbara Hales: Determine how much our business is worth.
Jessica Fialkovich: Yeah, that’s a very common question I get, and I say business valuation is part art and part science. So the science part is that all practices are worth multiple earnings. So we’ll look at typically the business’s earnings, which are defined by something called EBITDA, earnings before interest, taxes, depreciation, and amortization.
And that number’s easy to calculate off your PNLs; your accountants can help you find that. The harder part is the art. So the valuation is a multiple of that EBITDA number. So if we’re making a hundred thousand dollars in our business, there are multiple earnings. That determines that value and that number; that multiple could be two or four.
So what makes a business worth two times versus four times comes down to what industry you’re in, and what niche your practice is in. It also comes to the qualitative factors of the business. How is the business run? As we talked about, how dependent on the owner is it? How long have you been in business?
All those qualitative differentiators are the difference between a two-times and a four-times multiple on a business.
Dr. Barbara Hales: What strategies do you recommend to increase the likelihood that your business or practice will sell?
Jessica Fialkovich: Yeah, so the first strategy is just starting early. We recommend just at least understanding the value of your business and the potential pitfalls or hurdles you have to come in a sale process at least two or three years in advance of a sale if you have that time.
And I think that’s the biggest pitfall again: people wait too long, then they’re listing it for sale on the market, and we’re seeing the red flag issues as they come. From a buyer’s perspective, it gives us very little or no time to fix those issues from a sale perspective.
So that’s one of the biggest ones. The other one is that this happens in the medical practice world, quite often than in other industries, is that sometimes, owners undervalue the practices they’ve built. So I’ll talk to many owners, and they’ll say, “Hey, I don’t think anyone will buy my business.”
Jessica Fialkovich: I don’t think my business is worth anything. I don’t think my practice is worth anything. And the truth is that every practice has value. We have to manage our expectations of what that value is.
Dr. Barbara Hales: Typically, do people come into biomedical practice just by the patients, or do they buy the location and all of the equipment as well?
Jessica Fialkovich: Yeah, they will typically buy the full location. It depends on what the buyer is that’s coming in. If you have what’s called a strategic buyer, that’s a competitor; it might be a larger hospital group or larger medical group than your current practice. They’re mainly interested in the client base, but they also are interested in your location.
So opening up a satellite location or a second office. So typically, you’ll see them buy everything. Client, patient list, location equipment, they want the team, everything. If you’re in a situation where they’re just buying the patient list, you’re probably more in that situation where you haven’t done some preparation work in advance.
Maybe the practice isn’t as desirable to some of those larger buyers as another practice, and they’ll pay you a smaller value. But just for the client, for the patient list.
Dr. Barbara Hales: I see. So what one or two tips can you give our listeners today to sell their practice so that they get the maximum amount, feel comfortable, and have fewer regrets?
Jessica Fialkovich: I think the first is the mindset shift in the medical world. My mom’s in medicine, and I love this about practitioners, is that everyone’s very service-oriented, right? They want to do the best for their patients. They want to do the best thing for their medical community.
And they don’t think of their practice as a business, as a financial asset that should produce a return on investment. That’s the mindset shift when moving to sales or even running a better practice. Start thinking about the practice as a financial asset that should produce a return on investment for you as an owner.
And if you think of it like that and run it like that, it’ll be highly desirable to another owner and buyer in the future. So that’s the first tip. The second tip is that understand where you are. I always say to people, understand your baseline and foundation. Go out and get an opinion of the value of your practice and see where you’re at today. What’s the practice worth? What are those red flags? What are the holes or gaps that you need to solve? And you can do that by working with, a professional investment banker, business broker, or an exit strategy just like myself.
But that gives you an understanding of whether you are five years away from the sale or five quarters away from the sale. It just gives you an understanding of the baseline of where you’re at today and the expectations buyers will have of your practice when you exit.
Dr. Barbara Hales: Jessica, you have found a really interesting and worthy niche for yourself, and I don’t think there are too many other people competing with you. How did you get into that?
Jessica Fialkovich: I started because I was also a business owner. I’m still a business owner. But I started in the wine and spirits industry when I was 24. And I founded a couple of companies, and I sold them. And what ended up happening is that through that process, I realized very few advisors would help business owners prepare for and sell their businesses, specifically small to mid-size companies.
So I’ve been in that arena of mergers and acquisitions for small to mid-size companies for over a decade. And then one of the industry niches my husband and I started working in is medical practices. We’ve helped many clients in that arena, and I still find much passion in not just working in the medical world but working for small practice owners and mid-size practice owners. That’s the niche I grew up in, small business.
I founded my small businesses, and that’s where I’m passionate and wanna give back.
Dr. Barbara Hales: How do you promote yourself so that doctors looking for your services know where and who you are?
Jessica Fialkovich: Yes. So we have a network of professional advisors that refer business to us across The US. We’re partnered with about 150 business brokers, investment bankers and CPAs throughout the country.
But if anyone listening to the podcast wants to learn more about us, they can go to exit factor.com/podcast. We’ve got a few free downloadables and resources to help start the process
Dr. Barbara Hales: Great. I have also heard that you recently launched a new book called Getting the Most for Selling Your Business, which turned into a number-one Amazon bestseller.
Jessica Fialkovich: Yes. Yes, we did.
Dr. Barbara Hales: Could you tell us about that?
Jessica Fialkovich: Yeah, that book is; I joke to everyone who used to ask me, “Hey, can I take you for coffee? And can you tell me about how I can position my business for practice to get the most out of it and get the highest sale price?” And that book is basically what I would tell you over coffee.
If we were sitting down face to face and you asked me that question, that’s my complete dissertation of the answer. So it’s all about how businesses are bought and sold in the US and how you can best position yours to be the most attractive. So you get the most and most money at the closing table, giving you the most freedom after the transaction.
I’ve tried to keep it short and sweet too. It’s only about 150 pages because I know doctors and business owners are very busy, and they don’t have time to sit down and read a three or 400-page book.
Dr. Barbara Hales: We’ll be putting a link to your book in our show notes. And it was a pleasure having you here today. Jessica, thank you for coming.
Jessica Fialkovich: Thank you so much, Barbara.
Dr. Barbara Hales: This has been another episode of Marketing Tips for Doctors with your host, Dr. Barbara Hales. Till next time.