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Exit Strategy: How to Treat Your Practice Like an Investment

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1.  Practices that are overly reliant on which three things present additional risk to buyers and therefore can be harder to sell? Key Employees, The Owner, and Third-Party Payors Third-Party Payors, Good Pricing from Manufacturers, and Direct Mail MArketing The Owner, Third-Party Payors, and Key Referral Sources The Owner, Key Referral Sources, and Key Employees

2.  What is the length of time of the standard employment agreement to which a corporate buyer will ask a practice owner to agree? 5 years 3 years 1 year 6 months

3.  What is one likely outcome of overpricing the practice when listing it for sale? Discourage potential buyers from looking at the practice and increasing the amount of time it takes to sell it Make the seller rich beyond his/her wildest dreams A very quick and uncomplicated transaction None of the above

4.  Which of the following scenarios is most attractive to a practice buyer? A growing practice with stable employees, a diversified customer and payor mix reporting that 80% of its customers are private pay, and an owner who contributes to 20% of total sales A sole practitioner with flat sales who shows very little net income on her tax returns and cannot provide documentation about the source of her patients or her payer mix A 30-year-old practice with multiple offices and multiple audiologists that generates over $1 million in annual revenues and reports that 70% of its patients are third-party payers A practice listed for sale for 1.2 times sales with the disclaimer that the owner, who is the sole audiologist in the practice, expects to retire immediately upon selling the practice

5.  Why is a practice with a strong concentration of third-party reimbursement less attractive than a practice with a high percentage of private pay patients? Risk of reduction in reimbursement Delayed payments from third parties Time and expense required to bill third parties All of the above

6.  As a practice owner, how do you reduce the risk associated with the practice being overly reliant on you? Agree to work for the new owner for a period of time after selling the practice Hire additional audiologists so that your contributions become a smaller percentage of total revenue Hire and train your replacement before selling your practice All of the above

7.  What is the self-serving bias? The artificial inflation of one’s self-esteem by convincing oneself of one’s superior importance People’s tendency to attribute positive events to their own character but attribute negative events to external factors Extreme narcissism Using all of your practice’s cash flow for personal gain

8.  What is the number one reason companies don’t sell? Seller’s unrealistic expectations Buyer’s unrealistic demands The economy Government interference

9.  When deciding upon the right time to sell your practice, which of the following drive company value? Personal Timing Company Timing Market Timing B & C only

10.  Which of the following describe an owner who treats his or her practice like an investment? Owner takes steps to better understand company value so that expectations are aligned with reality and business priced properly for sale Owner takes measures to make practice turnkey and understands both short-term and long-term benefits Owner understands buyer perspective and balances personal goals with buyer objectives (e.g. win-win scenario) All of the above