The EntreMD Podcast
Dr. Una is passionate about helping physicians embrace entrepreneurship so they can grow their wealth and win back the freedom to practice medicine on their own terms. Learn more at: https://entremd.com/. Dr. Una helps physicians build and grow their businesses to 7 figures and beyond. Each week, she will share key insights on how you can turn your medical experience into a profitable, passion-based business that gives you time, freedom, and a deep sense of purpose. Be sure to follow the podcast so you never miss a new episode!
The EntreMD Podcast
Prepare Your Private Practice for Exit with Emily Stubbs, Esq.
Use Left/Right to seek, Home/End to jump to start or end. Hold shift to jump forward or backward.
One day, you will exit your private practice.
You may sell it, pass it on, or simply decide you are ready for something different. The goal is not to rush that decision. The goal is to build a practice that gives you options.
In this episode of the EntreMD Podcast, Dr. Una sits down with Emily Stubbs, Esq., of Visibility CFO Deal Advisors to talk about how physicians can prepare their practices for an eventual exit on their own terms.
They discuss owner dependence, EBITDA, financials, legal risk, what buyers look for, and why preparing years in advance can make your practice stronger and more valuable.
Whether you plan to sell someday or simply want to build a business that can thrive without depending entirely on you, this conversation will help you think differently about what you are building.
Tune in!
Additional Resources:
- Learn more about my 12-month program.
- Interested in 1-on-1 coaching? Apply here.
- Grab a copy of the "The 7-Figure Physician CEO" book.
When you are ready to work with us, here are three ways:
- The Profitable Private Practice Movement - If you want to build a thriving private practice that serves a lot of patients, while creating time and financial freedom for you, come join us here.
- EntreMD Business School Grow - This is our year-long program with a track record of producing physician entrepreneurs who are building 6, 7 and 7+ figure businesses. They do this while building their dream lives!
- EntreMD Business School Scale - This is our high-level mastermind for physicians who have crossed the seven figure milestone and want to build their businesses to be well oiled machines that can run without them.
To get on a call with my team to determine your next best step, go here ...
The base is is that cash flow number that even a number? But then how that cash is coming in and how how you're managing it is that quality is gonna determine what range of quality.
SPEAKER_01Hi dogs, welcome to the OnCham B podcast, where it's all about helping amazing physicians just like you embrace entrepreneurship so you can have the freedom to live life and practice medicine on your turn. I'm your host, Dr. Innat. Well, hello, hello everyone. Welcome back. I am so pumped about this podcast interview. This has been many, many months in the making, but I have my good friend Emily Stubbs here, and we are going to talk about a topic that's near and dear to my heart, which is you know private practices, optimizing them, optimizing for exit, what to do to prepare, all of those things. This is her jam. Okay, so um I may have not I may not have told her this yet, but she's a physician ally because she does this, and we need all hands on deck um so that we can thrive in the times that we happen to find ourselves in. So, you know, this is one before before you even get ready to listen, I'm gonna tell you want to share this with every doctor you know, every private practice owner you know for sure, because this conversation is gonna be a game changer for so many people. So, Emily, welcome to the show.
SPEAKER_00Thanks. Thanks for having me.
SPEAKER_01I'm excited you're here. Okay, so I'm gonna give you a moment to introduce yourself. That way people get a feel for why I'm so excited that you're here. And then I have 2,000 gazillion million questions for you. But yeah, this will be good.
SPEAKER_00Perfect. Um, so Emily Stubbs with Visibility CFO Deal Advisors, and we help uh business owners, specifically um physician-led companies, practices to uh make their exit number real. Um, we have a team of CFOs, accountants, attorneys that are create that infrastructure, that that structure, the boring stuff that is so critical uh for growth and for exit that allows the the um practitioner, uh, the business owner to focus on their special ability, their um, you know, gift to the world, and to grow their their thriving practice uh without that red tape that so many people don't want to have to deal with.
SPEAKER_01So many of us don't want to deal with it. And I'm really grateful for what you do. And you can understand why, you know, when I met you, I was like, wait, what? I said we need to have this conversation on a podcast. But, you know, so tell me why physician-led businesses specifically, like what made you pick the niche that you now find yourself in?
SPEAKER_00Yeah, uh great question. So the the nature of the medical world is is so complicated, unfortunately. And the cash conversion cycle, and that's a big word, but when you do perform your services to when the money comes in because of insurance, because of you know, all of these different avenues that make it difficult. And you may bill at one rate, but the insurance company may come back at a different. So knowing whether you're even profitable is really difficult in the medical field. And so um, you know, we started off more generally, but found that we were most effective and could do the most good um for um private medical practices um because of, and again, the the when it's owned by a physician, you have a vision and you know what you want to build, but those pieces can make it difficult. Um, and while you're trained in many things, not in in these things. And so being able to pair that with um the good work that's being done uh is is how how we kind of really thrived and and got into it.
SPEAKER_01So yeah, and I will tell you, I think I speak on behalf of many, many physicians when I say thank you. Thank you. Thank you for doing all of that. Now, you talked about profitability and how it can be challenging and a cash conversion, the long cycles, and all of those things. Do you find that a lot of people who own practices actually don't have an idea of how their practices are doing financially?
SPEAKER_00Yeah. And and I mean, there's a high level, you know what's in your bank account. You you can know the bottom line, but if you're a dental practice or an internal medicine practice and you've got these different lines, you may not know which things are actually bringing in money and profitable and covering those that aren't. And so you may, you know, it's often the services that require more staff, more equipment, those things. If you don't know that it's profitable, you could be spinning your wheels and really kind of taking from one pocket into the other and and wasting precious energy. So yeah, I think it's really more common than you would think.
SPEAKER_01Very interesting. Okay, so now, and this is not this is not a question where I'm looking for a detailed answer, right? But when you come into a practice, right, what are some of the first, maybe first three or four things that you look at to say, oh, this is not profitable or this is profitable, like quick and dirty. You know what I mean? Like what are those things for you?
SPEAKER_00Yeah, so I wish it was as easy as just coming in and being able to identify it. Um, but really at the core of our system, um, we come in, we we we work with the existing financial team. We're not here to replace bookkeepers or all, you know, the accounting staff that you currently are using. We are a layer of um strategy. So we work with them, we train them. If you don't have the right people, we help you hire them. Um and then we create a consistent close. Because if you are consistently closing, because if you don't have accurate data, we can pull all the dashboards, you can have AI pull all the dashboards, but but you're not really gonna get actionable data. And so we make sure that that at the foundation, and we do three lenses where we're looking at your cash, which is super important, because if you can't make payroll, that's an issue, right? Um, accrual, which is where we line up where your services are to what when, you know, not when you get paid, but what you should have gotten paid at that time. And so that's where when we do that lens, that's when we know what's profitable or not. And then we do a tax lens because that once a year or you know, quarterly, if you're a business owner, those payments come up and they can sneak up and you're not thinking about them in your day-to-day operations. So our job is to try and help you minimize those and get that expense line item not as a stressful thing. And so when we're looking at those three things on a monthly basis meeting, then we start looking at, okay, we're seeing problems here when we're looking at that accrual lens, when we're looking at what's actually happening in the in a period. And then we can start segmenting and going, okay, let's let's look at these different service lines. Let's take a look at, you know, we can slice it this way or that way, depending on what the owner's goals are. Um, that's when we can start getting creative and really um maximizing the strategy.
SPEAKER_01All right, I'm gonna get a little greedy here. Okay. So yes, you've worked with many people over the years. And can you give me a story? Not details or anything, of course. You know, we want to protect your client's privacy, but a story of a turnaround in a practice um that you remember and you're you've you're excited about.
SPEAKER_00Like you know what I mean? Yeah. Yes, no, for sure. Um, great question. And um, there's a lot that I get excited about, but uh one that the the one that initially came to mind was um a dental practice that came to us. They were interested in growth, they had tried on their own to, they had um had started two practices, um, but were getting stuck and felt like out of control. And so um we came in, we we implemented that um, you know, those three lenses that I talked about. We started seeing where we could do, and then we actually helped them save in that first year $400,000 in taxes, which was critical in being able to then acquire um two other practices. And so within one year, they went from two practices to four, had $400,000 back. And it just it was such a a win all around and just created this momentum that led to the continued growth. Um, but that first year was just a bang up year.
SPEAKER_01So I love it. I love it. And for them, what was the when you think about their journey, what was the biggest shift they made? And I know it's not one shift, right? Like, but when you think about the domino, like what was what was the X? What was the thing that created the biggest result?
SPEAKER_00Yeah, I mean, it's hard to say one thing, um, but I would say factors that played into it is that the owner was willing to have the practice be outside of himself, to hire other practitioners to, because you can't grow that much if you're if everything's relying on you. Um, and so along that frame, bringing in our team is an extension too, where you stop thinking, oh, I've got to control everything. No, I've got to get my team in place that's going to build this for me, with me, right? Instead of, and so I think I think that mentality, without that, that's at the base, at the crux of being able to scale at that level.
SPEAKER_01Love it. And and the I I ask that because, you know, sometimes people will think, well, that that's great for them, that's not available to me, and all of that stuff. And while dealing with the team is probably the hardest work there is, it is also the work that has the biggest ROI. And it just is what it is. It's the price for scale, is the price for freedom, is the price for more impact, is the price for, you know, so so it's interesting, right? That that's what that's what came up. And but that's what is required. And so the more we try to control and be the one doing everything, the less scale, the less freedom, the less financial freedom. So that's that's really cool. Um, okay. So I'm gonna ask the same question twice. Um, but the first way I'm gonna ask it is when you when you meet a doctor who says, I want to exit. Right? I want to exit. Um you've done this long enough, right? What are the three things you're hoping? Oh my gosh, I hope this person doesn't have this, because we can't exit if these three three things are here, you know.
SPEAKER_00So yeah. Yeah. Um so I would I would say, you know, the mo the biggest thing, the first thing that is on our list is the financials, because what you're exiting for is going to be tied to your cash flow and and the transferable cash flow. So if your financials are still being done by simply a bookkeeper and then you have a CPA that's doing taxes once a year, it is unlikely that your financials are going to reflect the value of your practice. It just, they're there for compliance, they're there to keep you out of trouble. And the buyer is needing a lot more of a story and a lot more trust because it's not when you're when a buyer is buying a business, it's not like going and buying a, you know, uh, a sauna or a uh, you know, one of these, you know, bigger purchases that you can see consumer reviews and you can get comfortable and you know there's a return policy, there's a lot of risk for a buyer. And so when they come in and your first foot forward does not reflect the sophistication and the value of your business, and that's in your financials, you're really gonna undercut the value that you're gonna be able to exit at. And so I would say, I'd say that's if if the if the owner feels like that's enough and aren't isn't willing to to kind of do that makeover to to get them where they need to be to translate to buyer value, that's that's gonna be, you know, number one thing that we're looking at. Um, second is related to what we've talked about, owner dependency. If everything, all decisions are going through the doctor owner, if you know, all, you know, a majority of the revenue is being made through the doctor, all of those things, we can sell it. It just really limits the pool. It, the, the days of, hey, I, you know, somebody's coming out of medical school and they want to buy my practice and be my apprentice and take over. Those just aren't happening anymore. There's just a different buyer pool out there. And so to be competitive and really, you know, um get the value for what you've created, there needs to be a team built around uh the doctor owner that can transfer with it. Unless, unless you want to be tied. And most of the time people come when they're ready to retire, and that's that's kind of too late. Um, if you don't have five more years than you and you haven't built something outside of you, it's gonna be really tough to be able to sell it. Um and then and then I would say um the the third thing is related to the um the legal um standing behind it. So um having the right contracts in place, having the right indemnification clauses, doing things, and it's the buyer's gonna want to see that, but you want that while you're running your practice anyway. So, so making sure that um those those T's are crossed, I's are dotted, um, because if if they're not, it's not gonna be super transferable. Plus, it it may be creating more risk for you while you're you're operating. So I'd say those are.
SPEAKER_01Yeah, and and you said something that I think is important for everyone, right? That the legal, this is what you want, even if you're not selling your practice, because the conversation we're having now, it looks like we're talking about an exit, or we're talking about an exit and we're talking about running your practice anyway, right? So it was uh a friend of mine, Dr. Dosuma, she said a practice worth selling is a practice worth keeping, right? So you you don't lose you don't lose anything by building it that way. Like even the even the the clients I work with, right, when we help them, you know, like build build profitable businesses and all that from the beginning, yeah, I'm already talking exit. They're like, what are you talking about? Like I've had this practice for one month. I'm like, I will never show you a way of building a practice that will tie you to the practice and help you build something you cannot exit from because you're gonna exit. You either are going to pass it on to family or you're gonna sell it to someone else or you're gonna shut it down. One way or another, you're exiting. So we might as well plan to exit on our terms. You know what I mean? Like it's like, yeah, you know, I know I'm gonna be older, I don't want to 401k, I don't want to invest, I don't want to do anything. Okay, you're gonna stop working at some point. Like something needs to happen, right? So so that's uh that's really powerful. Now you talked about three things that most people don't want to work on financials, you know, de-risking by removing owner dependency and legal standing. Those are like, you know, nails again as a jackboard. We don't want to talk about. Okay, so I'm gonna flip it, but before I do that, um in your experience, like you've what you've watched the market, this is your this is your area, right? What percentage of people actually are able to, and I know it's a rough number, are actually able to sell their practices, like people who desire and people who are who have sellable assets?
SPEAKER_00Yeah, I mean, I I would say that as I'm talking to um, you know, uh physician practice owners across industries, um, that there's probably about, I don't know, 10 to 20 percent that I'm I'm talking to that say that they're ready to sell, that I'm I'm talking to about, hey, I don't, I mean, yes, we can try, but these are the factors, these are the things that are gonna keep it from selling. And they just like and I I love to kind of work with and and help, but there's just some that I'm just like, you you've gotta get in the headspace before we can help you, and and you're not ready. Like there's there's probably not a buyer for you because what you've built is a job, and that's it's really hard to find uh an employee so to take over.
SPEAKER_01So so 10% are not re that are not able to sell, or 90% are not able to sell.
SPEAKER_00Um, so so 10 to 20 that I'm I'm not even able to like engage and help. Okay. And then and then probably, yeah, closer to 10 to 20 that are, hey, we're ready to list you now. And then more like 50% that were like, hey, we're jumping in, we've got to fix these things.
SPEAKER_01Got it. Okay, okay, really good. All right. So let's say I'm your best friend.
SPEAKER_02Okay.
SPEAKER_01All right. So I'm your best friend, and we were at um we were having lunch. Okay, and I mentioned in passing that, you know, in the next three years, I know you said five years, but in the next three years, I would like to exit my practice. Like, you know, I'm I don't want to do this anymore. And you were like, okay, I have to help my best friend because she doesn't necessarily get it. Okay. So you say, I'm I'm Dr. Una, listen to me. Okay, you pull out a napkin. You start, you start right. Number one word, Dr. Una, I'm putting this on a napkin so you can take a picture and take this with you. But do not Pascal, do not collect 200. These are the things you need to do over the next three years so that you will be able to sell this.
unknownYeah.
SPEAKER_01So what do you tell me?
SPEAKER_00Yeah. At lunch. You're having fun. At lunch. I mean, the easiest one, it's not easy, but the easiest one for you to work on by yourself is is getting rid of that owner dependence. Um, and so number one is who are you hiring to replace you and what you're doing. Um, especially if you're still seeing patients, if you are creating the revenue. That's that's the stickiest one because that messes with your EBITDA. And so we don't want it, we don't want to have that at all. So, so that's number one. And again, back to what you were saying.
SPEAKER_01So, so I'm your friend at lunch, right? And I'm gonna say, okay, I'm here, I'm I'm taking notes. What's EBITDA? What's Ibida? I don't know what EBITDA is right. So somebody's asking.
SPEAKER_00Yes. So EBITDA is it's a long acronym that I don't even need to go into. But what it essentially is, is your cash flow. It's it's because you're gonna be as a business owner, you're taking stuff out. You know, you have expenses for your cell phone or your car that's not really a business expense, right? And they're all legal, you should be taking them. It's part of the the payback for for wearing all the hats as a business owner, but it's not gonna transfer to the to the buyer. And so there's things that, yes, you can see what's in your bank account, but there's it's it's the calculation of what cash flow, what your profit is, um that that you can then transfer to somebody else when they're buying it. So so it's it's a calculation that that we're looking at um to, and that's what there's multiples. So your business may be selling for three to five X, but it's gonna be three times that cash flow number or that EBIT. So um, so it's your profitability is is essentially what it is. So um, yeah. Did that answer your question?
SPEAKER_01Yeah, that answered my question. My friend Dr. Una.
SPEAKER_00I put it on the napkin.
SPEAKER_01All right, let's go. What else do I need to do?
SPEAKER_00Yeah. Um, and and my point, well, what I was gonna say with that too, it's great to your analogy, right? Or your your statement that we're building something that if it's sellable, it's it's also worth having. And um, and when you are replacing yourself, you're gonna see your revenue go up and you're gonna see, oh, yes, it is difficult to manage people, but once you cut through that and you start doing it, you not only are making it less owner dependent, but you're making it more profitable. Um, and so, and you're going to enjoy it more. And it's and I I I use that and the analogy all the time of when you're getting ready to sell your house. If you get it ready to sell all of a sudden, and I literally, this happened to us, and and we started doing things thinking we might sell our house, and we're not selling it now. It's so great to live in now. We fixed all the things that we've been waiting. And so it, you know, eventually we will. And what we did is gonna make it more valuable. But in the meantime, it's a lot more enjoyable to live there. So, um, so number one thing on our napkin, owner, get start, start replacing yourself. Um, and uh, and then the second thing is get the right financial team in there. Um, if you are not um the the buyer isn't, and it's something we can help, our team can help. You can say, I'm ready to sell now, we can come in. But buyers are looking at at least three years history. And so if you have the financial team with you on the side by side and you are showing month over month consistent, reliable numbers, and you're meeting with a team that's helping you look at those, you're like what's measured is improved, right? And you may not want to look. At it, but if you're looking at it, it actually motivates you. It helps you to see, oh, that didn't work. Let's try this. And if you're doing it month over month in those three years before you're ready to sell, the buyer is going to see that consistency. And they're good, that's just gives them so much peace of mind that I've had the buyers say, if if a seller only knew that what you guys do, I'm willing to pay a higher multiple because I don't want skeletons in the closet. And when I have those clear financials that show me the clear story and there's not any funny business in there, there's not any things that are for tax compliance or your tax return, because on your tax return, you're trying to minimize your profitability, right? For a buyer, you want to maximize it. And if you have the right reporting, you can do both at the same time and have that bridge that instills buyer confidence at that higher number where you're still saving all those taxes. So number two is that right financial team that's that's strategic, not just compliance, not just hey, make sure that I can make payroll. Um, but actually forward thinking um with that end in mind.
SPEAKER_01Um I got it on the napkin. Okay. And I'm like, yay, three years. I have three years to work on this. Okay.
SPEAKER_00Yes. Three years is perfect. Three years is perfect. Um and then I mean, and that that financial team I kind of covers the the tax piece. Because if you're thinking about the taxes ahead of time, um you are going to be saving more um when you are selling it. Because if you're not tax planning now and you get that big uh equity event, you don't want all of it to be eaten up in taxes. So um, so that's a key there. Um, and again, I'm I'm a little bit of a broken record, but the third thing I would say is is the the right legal team um because um legal risk is is a real thing. Um we had a client that came to us after they sold, and they were coming to us because they were in a lawsuit, they had sold their business, um, but they had misclassified some employees as contractors. And the contractor had sued them after they sold the business. And so now the buyer, and there was indemnification clauses and things, and so ultimately the seller was on the hook for this lawsuit. And so they were paying $400,000 in addition to the legal fees. Um, and and had they had some ducks in a row, that would have made it a lot cleaner. And I mean, kind of lucky for them, it was after they sold. But those kind of things, if the buyer discovers it, they walk. They don't, they, you know, you've been months in due diligence, they discover this issue, they say, yeah, we're not touching that. And so being able to have that clean legal bill of sale is is critical for deals to go through, for you to keep the money in your pocket, um, and and for the transferability to to take place. And again, having that while you're operating in those three years is super helpful that you can have somebody you can call, hey, I've got this employee that's asking about this. Can we, you know, what about this non-compete, or what about this, you know, and so being able to navigate all those things, um, people are in every industry, but medical, you know, you're a service business. And so being able to have have the right legal structure around your people is is critical.
SPEAKER_01Okay. Written in the napkin. And I'm like, okay, so three things in three years, is there anything else I need to do? Like, for instance, is there a revenue threshold? Let's say my practice has been running at 700,000. That's what we've been doing forever now, right? So over the next three years, um, is there should I attempt to grow? Should I attempt to hit some like, or is is it at seven, like what would you say to that?
SPEAKER_00Yeah. So I would ask you, well, what what are your goals? Because every every business owner has kind of a different plan, right? Some are, hey, I I am happy with that 700,000 that I'm making and I don't really care. You know, I want to exit, I want to get, you know, something for what I've created and I want it to pass on. You know, a lot of times that's a big factor, right? Is I want um I want my legacy to continue. I've created this special niche and I want someone else to be able to service my patients and to continue this on. Um, and so if if that's the number one goal, right, then then what your revenue is probably doesn't matter that much. And is it worth like killing yourself and doing things? And it's it's not necessarily killing yourself, but if there's not a value to you in your in your value system, then then don't change it, right? And so keep it at 700,000 and and we'll talk about what that means. And I can kind of show we work with our clients and do kind of a three-year forecast on, okay, what is your exit number? What are your exit goals? And then we can work backwards from there, right? On the flip side of that, if it is, I I want to retire on this and I want to travel, you know, and live in Europe for three months out of the year, or what, you know, like, okay, well, let's let's think about what you're gonna need. Because the the interesting thing about um the the MA world, the deal world, is that where your revenue is and more specifically where that fund EBITDA, that cash flow number is, um, is that how big that is, those multiples get bigger. So at 700,000, you're probably selling between, depending on your industry and things, you know, between a 1x of revenue um to uh maybe a two, you know, 1.5. Um it's typically off of the EBITDA because the buyer doesn't care how much cash flow you have, if you have as many expenses as you have revenue, then then there's not a lot of value there for the buyer. So um, so on that, you know, 700,000, if you're bringing home 200, 250, you know, it's gonna be like a a three to you know, two to four X on that. If you're getting your EBITDA, that cash flow, what you're bringing home above a million, all of a sudden you're in a different bracket. You have institutional buyers, strategic buyers that are gonna be interested in in buying you. And there's there's a space in between there. They're they're going lower and lower, but your multiples are gonna be higher. Instead of trading at like a two to four, you're now at a four to seven. Or, you know, so again, all the industries, this is just for for uh example purposes only, but it is part of the deep dive that we do. Um, but but that's a significant jump. And so, you know, two times 200, now if that 200 is one million and you're multiplying it by five, that's it, that's an exponentially bigger number. And so if if that's your goal, that's something that we work with our clients so that, hey, you need to meet these markers and end of year one, you should probably be at this revenue and and this EBITDA and this year, end of year two. And you need to have it for a few few years or months, because if you only are at that, that for the last month before you sell, the buyer is gonna say, nope, we're going back to the previous year. We're not gonna give you credit. Great that you're growing so much, but we're gonna, you know, base it off of historical. So so those are those are factors that are are so um, they make such a big difference and are so fun to be able to work with strategically with our clients on okay, what what is your end goal? How do we help you get there?
SPEAKER_01So that's answer your question. I'm almost out of napkin space, okay? Okay, yes, this is a lot. I have I have space for one more question, okay? I have space for one more, but this is so good. Napkin is full, front and back. Okay, you know, I do this in real life, like all napkins are at risk when I show up. It's so bad. But anyway, I love it. Um there was someone who's like, Oh, I have this opportunity, and she couldn't translate the opportunity. And I'm looking at her like, what did you just say? She says, So I pull out a napkin, I'm like, let me show you how this translates to a million in revenue. I gave it to her. I was like, go and prosper. Okay, so anyway, yeah, um, the other question would be so I'm thinking, I'm like, okay, I like this whole Ibidah, you know, like working the Ibida thing going on here. So is is uh is revenue uh not not the multiples, right? Is is is the ibida the only thing that affects the multiple, or is there anything else I can do that would uh have me at the same revenue or same ibida, but a higher multiple?
SPEAKER_00Yes. So anytime you talk to an advisor, it is a great question. It's a great question. Get get your napkin ready, okay? I'm working. They whenever you talk to an advisor, they're gonna give you a range because there is a range, and EBITDA is gonna put you kind of in a bucket, but within that bucket, you're gonna want to get the premium on that. And where that comes into play is yes, you've got you're kind of tethered by your EBITDA, but then you can spread based on a lot of these factors that we're already talking about. The financials, if the financials support the story, you're gonna, you're, you're ticking towards the higher end of that multiple range. If you are not owner dependent and it's gonna sell, and it all ties to the risk to the buyer. If you put yourself in the buyer's seat and they go, I don't know if this is gonna continue with it. That Dr. Una is such a great personality and everyone loves her, but when she leaves, are the patients still gonna come? Right. And so that's a real risk to a buyer. Um, customer concentration or referral concentration, if you are a hundred percent Medicaid, that could cause a problem, especially in today's world. Um, and so um there's there's factors, or if you are, you know, a behavioral health clinic pediatric, and you get all of your referrals from one pediatrician, that's gonna cause a red flag to uh to a buyer. And so, so there is a whole analysis that we do, and the buyer's doing it on their side, by the way. They're doing a quality of earnings. So it's not just what the earnings are or what the EBITDA is, it's the quality of it. It's how transferable is it? And so there are these different factors um that, and those are those are some of the main ones that are recurring revenue. Like if you are set up as a um, you know, uh a model, a membership model where you have ongoing payments and someone's in and they're paying every month, that's gonna put you on the higher end of the multiple because they're not gonna have to do the work. You're already in the year contract, right? Versus, hey, let's bring you back in, let's do another service. It's just it's more unknown. And it, it's it's not good or bad. It is what your practice is. But these are some of the things that you can look at and go, hey, if I'm switching my model up, this is gonna make it more valuable. It's gonna, it's going to trade on a higher, a higher end of the multiple stream. And so, so absolutely you what the base is is that cash flow number, that EBITDA number. But then how that cash is coming in and how how you're managing it is that quality is is gonna determine what range of multiple you're going to get within that bucket.
SPEAKER_01All right, the map, the the napkin is officially full. No space to write anymore, but I have three years to execute this. I had a friend who sold, she's not, she's not a physician. She sold her business, which I think you, I'm trying to remember, I think it was a marketing business or so.
SPEAKER_02Okay.
SPEAKER_01And she got a much higher multiple because she had a podcast that was um it was an engine that created clients. Like people would just, you know, come on the podcast. And of course, it's evergreen and it will work forever and ever and ever. And so she got an Ibida she shouldn't have had that, not a multiple, she shouldn't have had these of her Ibida and all of that, but it but it was because of that podcast, which I was like, that is very interesting, right? Like so I'm selling you the business and I'm selling you the marketing engine.
SPEAKER_00So yeah, because if if somebody can come in and just repeat and grow it, I mean, it's that's that's a moneymaker, and so they're willing to pay a premium.
SPEAKER_01Love it, love it. Okay, so tell me about, and thank you, thank you. This was I thought we were just gonna have lunch and it turned into this great consultation that oh my goodness, that was just fantastic. Okay. So tell me about like when should somebody consider working with you, right? Like who is the ideal person for you? What stage of business? What mindset? What like who do you love to work with? Talk to me about that person.
SPEAKER_00Yeah, um, ideally, it's three years in advance. It's close enough that you're motivated to make the changes that you need to, um, but uh far enough out that you're gonna make some you're gonna be able to make some real traction and real um leverage decisions that can really um maximize that exit for you. Um and so, and then the mindset is is that I need the team, I want to grow, I've gotten it here, and that's great, but I want this is where I want to be. And so an owner that thinks, well, I'm I can do it, I'm doing okay, I'm gonna figure it out. That I, I, I does not make an ideal client because they're just not as willing to to implement or do the things that that we know work. So um yeah.
SPEAKER_01That is so good. Okay, so somebody is wondering where they can they can find you. Maybe they heard you say all that and they're like, uh, that would be me. Um where can they find you?
SPEAKER_00Yeah, uh, visibilitycfo.com is our website. We've got a link, you know, right on the the front page to be able to book a call. And we'd love to just uh you know do do an initial consult, see where you're at. And um, we're very uh white glove and people first um in a in a world of AI. We love AI and and being able to use it, but uh there's nothing like that that initial conversation to really understand, you know, we can have all the data and tell you all the things, but really, really getting to know what what you need.
SPEAKER_01So oh man, I tell you this, right? Um, for the last eight years, um, I've formally been supporting private practice owners, and it is so great to have an ally, right? Because we don't look at insurance companies as our allies. Yeah, we don't look at the hospital as our allies, you know, like sometimes that's what happens in government, not our allies. Um, but it's really nice to have somebody who is supporting physicians. Um, there's a very common narrative, like, why would you buy a practice? You know, it's not worth anything and stuff like that. Which I'm like, why would you build something that's worth nothing? You know what I mean? And but you know, what you're doing is kind of helping people, you know, um, to get rewarded for the work that they've done. It's no mean feat to be an entrepreneur. And if we're gonna exit anyway, we might as well plan for the exit, right? So I just want to thank you. And I think I say that on behalf of a lot of physicians, you know, thank you for for what you do. Um, and I want you to give us some final words, like for private practice owners in general, like you own a private practice, you know, there there are a lot of challenges out there. No, they're you know, many are doing really well and all that, but it's a it's a challenge. There's a reason why 36% of private practices are owned by physicians. Um, you know, there's a reason for that. And if you could give every physician who owns a private practice just some final words, um, you know, what what what would that be?
SPEAKER_00Um this this is kind of probably more niched than what you're you're fishing for, but I um a piece that has come up a little bit. I mean, this is not just the general like happy bow, like keep keep it going. Um, but what the kind of actually the impetus why we got into this is we were helping primarily on the growth side in this industry, and our clients started getting unsolicited offers. And so I think my big takeaway, my piece of advice is to don't don't go it alone, right? There, there are people, you probably have five emails in your inbox right now. Are you interested in selling your practice? Um, they're they're everywhere and they um and and sometimes they're legitimate and they really are, but there is a game to be played. And if you are they come with their team of attorneys and accountants and and they are ready, they come with big numbers and and lure you in to an offer that you weren't expecting or or even looking for. But then if you're not ready on the back end, that big number all of a sudden through the the due diligence process gets lower. And so um, you know, we were able to, before we got into the full deal process, we were helping our clients as advisors because they just needed it. They were like, oh, I don't need, I don't need an advisor, I don't need somebody to navigate this. And yes, they did because it there's all sorts of things um that that come up. And so um, so if you are getting those offers, they they may be legitimate and you may want to look into them, but just look at them um with the team behind you so that you're not you're not uh caught unawares.
SPEAKER_01So the way I like to say it is when you are talking to a lawyer, it looks like English. It is not English, you do not speak the language they're speaking.
SPEAKER_00And that's my background. I'm actually an attorney, so attorney.
SPEAKER_01It is it is it looks it looks like English. It is not English. So don't speak with that.
SPEAKER_00Yeah. You need to get someone else to be. I'm bilingual. So that's that's why I'm here.
SPEAKER_01You're bilingual. I love it. Thank you for being bilingual for us. Amen. Okay, so this was such a great conversation. I want to tell you thank you. Um, I it's not unusual that I'll hear someone say, Oh, I'm done, you know, I really want to retire. I'm like, that's not how this works. This is a three to five-year process. Like, it's a whole thing, you know, and this really gives people some pointers, some things to think about, a resource if they're ready to go that way and all of that. So thank you. Thank you so much again for what you do for physicians and for coming to share all of that uh with us. We'll include your links and all of that in the show notes. So, guys, um, if you are thinking about that, you're like, I have a three-year runway and all that, then this is someone you want to have a conversation with. So thank you again, Emily. This is of course really, really good. And everyone, make sure you share this with the doctors in your world. And I will see you on the next episode of the Entrevue Podcast.
Podcasts we love
Check out these other fine podcasts recommended by us, not an algorithm.
Profitable Private Practice
Cheta Unachukwu