HOW TO FIND THE RIGHT PRACTICE TO BUY
Finding the right practice to buy has a lot of advantages (please read our advantages of buying a practice) as long as the practice reasonably meets the buyer’s requirement. Acquiring an established practice can reduce the struggle to become a successful practitioner considerably. It can expedite the process considerably because it immediately gives you a reliable revenue and constant cash flow.
BELOW ARE 7 KEY AREAS TO FOCUS ON WHEN INITIALLY EVALUATING AN PRACTICE TO BUY:
FOCUS ON CLIENTS:
Who is your ideal client? Are you likely to be able to connect with these clients? Let’s assume for a moment that you have the technical and professional competence to create value for these clients. Can you relate to them? Would they be enjoyable to work with? Look at their income, industries and ages. A good cultural fit with the seller of practice may be a positive sign.
FOCUS ON TRUST:
Do you trust the seller? This is really simple. No trust, no business. Take some time to develop connection with the seller and take note of your first impressions of the seller.
BACKGROUND OF SELLER:
What is the professional background of the seller? Big firm, small firm, corporate? This will help you understand his/her skillset better. This background of the clients will show up in various ways throughout the practice. For example, a practice with a corporate heavy background may do more strategic consulting with clients while a practice with a big firm background may have very structured/organized files.
How many staff does the firm have? Have you managed people before? How does the seller manage his/her people? Would their managerial style be described as structured or flexible? All owners manage people differently and perhaps buyer’s management style would be better, but it’s important to understand the relationships the seller has with staff. This can help buyer spot several things such as: competitive threats, hiring and firing needs, as well as strengths to build upon.
Know the key revenue streams of the practice. If there are smaller areas where you do not have expertise to handle the file it may not be a problem, but if the practice focuses on areas that you do not have exposure with, then the practice may not be right for you.
Know the key areas where risk exists when buying a practice. The most common risks we see are:
- Practice with very large clients - if large clients represent a large percentage of firm revenues, then this can pose a risk that you will want to mitigate with the purchase structure.
- Competitive threats from outside and inside - With the seller and potentially with staff.
- Transition - poorly executed transitions are probably the biggest threat. Early communications with staff and clients are crucial. A proactive, confident approach fuels success.
Many buyers focus only on the risks the come with the purchase of practice that they forget to consider and plan for the opportunities. Most of the potential to grow the practice comes from your own abilities and talents. The one thing which buyer of practice has which the seller of practice doesn’t have is ENERGY. The best things you can do as a buyer is know your own strengths and weaknesses and put your energy in the right places. You need to find a practice that can capitalize on your own strengths. Significant growth of the existing practice can often be accomplished simply by creating more value for existing clients. Along with good services, improvements in pricing strategies and efficiency, and the practice’s cash flow can be significantly and rapidlyoved.