What You Should Know If You Are Considering Selling Your Practice
Bettie Borton, who is a former president of the American Academy of Audiology and is the current director of University and Student Outreach at Audigy, sat down with me to talk about her experience selling her practice, including some of the lessons that she learned along the way and advice she has for any practice owner considering selling their business. You can listen to the podcast or read the transcript below.
Q: When did you decide to sell your practice, and what made you decide to sell?
Bettie Borton: I sold my business several years ago. I believe it was in 2012, and in 2013 the negotiations and payout took place. The reason that I decided to explore selling my business was because I was solicited by a manufacturer. My practice locations happened to be strategically located for them in central Alabama, and they own some practices on either side of my offices and really wanted that territory.
In some ways, it was not my idea to sell my practice, but the opportunity presented itself. It was timely for both myself and my husband. My husband is 11 years my senior, he was already retired, and we were looking at a larger retirement scenario. This played into it very nicely.
Q: What were some of the concerns that you had about the offer? More specifically, what were your nonnegotiables?
Bettie Borton: Since I was not actively trying to sell my practices at the time, the price was nonnegotiable. I had a bottom-line figure in mind, and I can tell you it was an overvaluation of the practice. That is what made this offer something that both Audigy and myself agreed was significantly positive to the point where it was necessary for me to seriously consider selling the offices.
Q: That must have been quite a surprise get an offer out of the blue. Especially since you weren’t really looking to sell the business.
Bettie Borton: It caught me off guard when they came to me originally. They made an initial offer to me, and I turned them down. Then they came back and offered more money and an acceptable closure date, and so we decided to move forward. Another thing that was nonnegotiable for me was having assurance that my staff would be allowed to remain if they chose to do so.
Additionally, I wanted a very finite workout period. In other words, for most practice purchases, at least for manufacturers, there is an initial payment to the owner and then some sort of goal or incentive is structured for the remaining payout. And I wanted that workout period to be relatively short, and I did get that negotiated.
Q: How long did the workout period end up lasting?
Bettie Borton: My workout period was one year, which, in the total scheme of things, is relatively short. I’ve talked to many practice owners who had to deal with a three- to five-year workout period, and that can be uncomfortable if you don’t like the management team that you have to work with.
Q: Were there any specific KPIs or milestones that you had to hit before the sale could be completed?
Bettie Borton: The only functional metric that was inherent to the sale of my practice was a goal for gross revenue, and that goal was achieved. The metric that was used was a certain dollar amount that had to be generated within that one-year period to get the remaining percentage of payout.
Q: Did you have an opportunity to negotiate on some of the revenue goals?
Bettie Borton: We did not engage in a lot of negotiation about the dollar figure for the goal or the target because I felt like it was very doable. It was not much more than what I had done in the previous year, so I felt like that I could handle it easily.
Q: What type of support did you receive from Audigy when it was time to sell?
Bettie Borton: Audigy offered me a lot of help regarding the sale of the practice, but once it was sold, they were not in a position to help me achieve the goal for the workout.
I think, most importantly, the fair perspective that they brought to the negotiations, the emotional support they provided for selling the practices, and that they wanted the contract to be as favorable to me as I possibly could get it. While I did engage my own legal staff to help me, Audigy provided a tremendous amount of resource and support. I was extremely appreciative of that.
Q: Can you talk about the sales process itself? Did you feel like it was a smooth process?
Bettie Borton: The sale process itself was fairly smooth, but it involved the production of a lot of data and records. And that was taxing. It was cumbersome. It was laborious.
Audigy played a tremendously positive role in helping me showcase what I had built to the manufacturers to ensure that I got the very best amount of compensation for the practices possible.”
Q: Who specifically was involved on the Audigy side that supported you?
Bettie Borton: Certainly, Mason Walker and Brandon Dawson were very hands-on. Connon Samuel was very involved in the development of the plan for purchase. And my SBU was very helpful in making sure that I had all the facts and figures that I needed to showcase my practices.
Q: Now that you could look back on it and it’s been a couple years, are you happy with how the sale turned out?
Bettie Borton: In general, I am very satisfied with the sale of the practice because it was right for me at the time, and it was right for my husband at the time. And, so, in general I’m pleased with the sale of the business. It opened a whole new world of opportunities for me.
When you sell your practice to a manufacturing entity, I think it’s emotionally very difficult. The systems and procedures that Audigy employs are very patient-centered. They are designed to provide remarkable patient care. I think most Audigy practice owners have a very special relationship with their patients, and it’s hard to see somebody else step into that role.”
Q: Do you have any advice for our listeners who may be owners considering selling their practice?
- I would advise anybody who is approached by a manufacturer to be thoughtful, and careful, and engage good legal counsel to help you with this transaction.
- It’s important to be specific about little things. For example, I did not specify that I would like to have my professional dues covered. That was something that I did within the context of my business without even thinking about it as a business expense. I sort of thought to myself, “Well, they’ll do that.” If it’s not in the contract, they’re likely not going to do it, so try to be very specific about all the things that you want to happen or to continue to happen after the sale of the practice if you’re going to work there.
- I would be very cautious about the tax ramifications. I’m not an accountant, but if your purchase can straddle two tax years, with some of the money coming in one year and some of the money coming in a subsequent year or years, you’re going to be a lot better off. Remember that that’s one of the downsides of getting sort of a lump sum payment for your practice rather than structuring an equity buy-in. You’re going to have to report all of that as income, and it’s going to put you in a different income bracket. It just has all kinds of negative tax ramifications. It’s really a lot more favorable to you taxwise if you can structure an equity buy-in with a private entity.
- I would also advise anyone who’s selling their practice to a manufacturer or some other large entity to structure a workout or a conclusion of all the moneys to be paid as rapidly as possible. If you can get it down to a year, that’s ideal. I think that’s rare, but that’s ideal. But know that by the end of a two-, three-, or five-year workout you’re likely to not be totally enamored with the change that is coming.
- Finally, I would say, if you sell your practice to a manufacturing entity, you need to brace yourself for change, because change will come. You will not be able to rely on the resources from your Audigy family. And it can be very tough emotionally. It can be tough to deal with that level of change for something that’s been very much under your own control for so many years.
Are you considering selling your practice? You need to understand your practice’s value
Smart business owners will tell you it’s never too early to plan for life after running a practice. They’re right, but did you know that proper planning involves a firm understanding of your practice’s value? Get tips on understanding your practice’s value and how it is measured.