By John Borrowman, CPC
Borrowman Baker, LLC, BV Staffing + Consulting
You know the time is coming when you’ll want to turn out the lights and lock the door for the last time. Not soon, maybe. But, it’s coming.
Because you’re in the consulting services business, you know that if you haven’t put the money in the bank when that time comes, chances are you won’t have another opportunity.
For starters, what would a business broker say about your practice? (Take an honest look.)
You have a service business that is an illiquid asset
The value of your practice is primarily in goodwill and, by definition, intangible
Selling your practice is going to require creative financial terms
Before you reach for the anti-depressants, however, take a look at what you do have going for you:
You have a real passion about what you do
You have integrity in serving your clients
You have creativity and flexibility, hallmarks of a successful entrepreneur
You have time – if you start early enough
Most practitioners’ first thought is that their practice might, somehow, be sold to another practice. If you’re located in a market of some size, where there are other practices, this could be an option. One of the first questions the buyer will be asking, though, is “Who will I get to run this after so-and-so is gone?” And, if your practice can’t be easily folded into the buyer’s (geographically speaking) this may not be an option.
Even if there are other practices near you, you may have your own reasons for preferring not to sell to them.
So, let’s take what may appear to be a way too elementary look at your situation. Begin by considering that the only way to get more money out at the end is to have more value at the end. Traditionally, you can add that value by increasing revenue or sending more to the bottom-line.
You could bill more hours, but that’s the antithesis of where you’re headed. You want to put in less time, not more. You could reduce costs. But, as a single-shingle shop, you’ve probably long ago reduced your costs about as far as you can go.
Consider the option of adding a second practitioner who would contribute to increased value with the expectation of buying you out and continuing to operate the practice. There are pitfalls to this approach, no doubt.
One is that with the increased revenue come increased expenses. You’ll need to be prepared to take the long view and to choose any such individual wisely. Another is that you will likely have an employee, something you have may have gone out of your way to avoid in the past. Yet another is the risk of personal and/or cultural incompatibility. But, that doesn’t mean you shouldn’t undertake this option. Only that you do it thoughtfully.
Finding and hiring your successor is the tricky part. You’re looking for someone who is not only going to be an employee, but also your successor. What you have to offer, therefore, is something other employers may not be able to match – the opportunity to step in as owner of a successful and profitable practice.
Depending on your geographical location, you might be surprised at the interest you’d find among younger practitioners who might consider it a terrific place to live and raise a family.
Getting to the end of this road won’t be easy. You’ll have to find and hire someone with a precision much greater than you ordinarily would. You’ll have to craft a mutually acceptable buyout arrangement. Your advantage, of course, is that you can be as creative as you want in devising it. Consult your own personal financial advisor(s) for ideas on how you might structure this arrangement.
Contact us for a confidential discussion of your situation and the potential for using this option for exiting your practice with greater value.