Improving Practice Value and Profitability in Response to COVID-19

By J. Robert Brooks, CEPA, CBI, Practice Endeavors, LLC, www.practicendeavors.com

1. Get an assessment/evaluation of your practice. A professional analysis of practice and financial information can be very helpful in improving practice value and profitability.

2. Approve a Letter of Instruction. A Letter of Instruction informs family members and your professional advisors what to do in the event that something unforeseen happens to you.  This is for both operations and/or transfer to new ownership. It benefits your family, staff and patients.

3. Ramp up for office re-opening.  Come out of the starting gate fast to generate cash flow and maximize patient retention. Be well prepared to communicate your office re-opening with patients. Having a resilient practice with patients quickly returning to fill your schedule is a great way to demonstrate practice value to future buyers.   

4. Practice sellers, recognize the times that we are in. In the last 75 years, we have been in recession only 15% of the time and in growth periods 85% of the time. It obviously makes more sense for a practice seller to invest sale proceeds when the stock market is lower rather than at market highs. Don’t fret about where the market is today. The first year or two of retirement during market recovery will likely be only a small portion of a seller’s retirement years. 

5. Practice buyers and sellers should be flexible on closing dates. Buyers are understandably concerned about how the CV-19 pandemic will affect practices that they are in the process of purchasing.  Sellers should not push buyers to close until the smoke clears. For the most part, lenders are willing to use pre-CV-19 profit and loss data upon which to base their loan approvals.  Contrary to what many may think, according to industry experts, multiples on practices (multiplier of seller’s discretionary earnings or EBITDA used to determine practice values) are expected to change little if any.  Significant discounts on practice sale prices are not likely to occur although seller holdback on a portion of sale prices may become more common.