When a buyer offers a price for your healthcare business, they aren’t pulling this number out of nowhere. They use a pretty specific process for calculating the value of your business. If you know this information ahead of time, you can find ways to add value before you sell. Here’s how.
Start preparing early to add value
It’s not really possible to add value to your business when you only have a couple months before the sale. There just isn’t enough time. For the best results, you should start preparing a good 12-18 months before you want to sell. This way you can put together a strategic review of your entire business, come up with a plan to add value, and then put that plan into action.
Reduce reliance on the owner
As the owner, you are the most important person for your healthcare business. Its success is due to your hard work, management, and vision. The problem is you won’t be there after you sell, at least not in the same key role. You need to prepare the business so that buyers can take over and manage even if you aren’t there.
Take a look at what you do every day and start moving those jobs over to other employees in the organization, who will still be there after you sell. Buyers will be most concerned about whether they can maintain the same revenues even after you leave. If you have any relationships with patients, start introducing them to other key employees. This will improve retention because then patients won’t leave once you leave.
Figure out answers to your industry challenges
Every part of the healthcare industry has its own challenges. Buyers will want to know how your business can handle these challenges and might not know the answers themselves, especially if they are financial buyers who aren’t from healthcare. If you come up with some clear solutions for how your business would manage future challenges, it will look a lot more attractive to buyers.
For example, if your sector will be dealing with reimbursement cuts in the near future, you can explain how you will make up these losses through greater operating efficiencies. The more specific your solutions, the better because then buyers will feel confident in your plan.
Focus on more than cash flow
In the months leading up to your sale, it can seem like a good idea to crank up your revenues and cash flow. However, higher cash flow on its own rarely adds value to a business. Instead, buyers are focused on the efficiencies of your business and your margins after expenses. If you want to increase cash flow, make sure to protect your margins at the same time. This combination adds value.
Highlight strengths, improve weaknesses
When you meet with candidates at the beginning, your first goal should be to promote the strengths of your business. Explain why it’s valuable and how it would be a great investment. This will keep quality candidates interested so they will want to move along in the process.
However, at some point they will go through due diligence to learn everything about your business. If there are weaknesses, buyers will discover them then. You can’t hide problems with your business, but you can improve them before you go to the market. Take the time before you sell to identity and improve any weaknesses that you can think of. You may want to have an investment banker/business broker go over your business to see if there are any problems you overlooked.
You only have a few more months before you sell so make them count. By following these strategies, you can add some extra value and a few more points to your price when you eventually sell.