09/08/2018
Have you ever thought about selling your practice?
A major thing to consider is that most practices, no matter how successful, will sell for a lot less than the owner believes they are worth.
The reason for this is that a business is valued primarily on its profitability, using a metric known as its EBITDA, or Earnings Before Interest, Taxation, Depreciation and Amortisation.
The sticky bit here is that most practitioners don’t realise that profit is what is left over AFTER the practice owner has paid themselves a wage - which is generally a much different amount to what they are earning per year by working in and owning the practice. Hence, the practice valuation is far below what they expected.
The upshot of this metric is that is a profitable, well run practice can sell for around a three times multiple of its real annual profit.
This gives you an amazing amount of leverage. In other words, if you are showing a profit of lets say $100,000 per year after your wage was taken out, its possible your practice could be worth 3 x $100K = $300,000. And increase your profit by $20K pa and suddenly you could make an extra $60K at sale time.
The second big consideration or shock to avoid is that you would think that once you optimise your practice, you should be able to sell and retire on the proceeds right?
Well, for most its still not as simple as that.
Lets say you want to retire on $200,000 per year, so you are roughly going to need $2M in the bank at 10% to provide this. (NB. talk to your financial planner on this one - don’t just take my word for it!)
In other words, selling your practice for a few hundred thousand dollars is unlikely to keep you in the manner in which you are accustomed, so you are going to need another source of wealth creation.
If you were to channel some practice income into some sound investments for the next three to five years (or even longer would be better), you will be far more likely to retire financially independent, even if you are only on a moderate income.
Its at this point that I’m at the limit of my professional expertise, but I generally refer to a colleague David McElveney, who has himself created an extra million dollars in wealth within 3.5 years whilst earning less than $200K pa, and is also happy to share his exact strategy with those that are interested.
If you would like to find out how you can apply the same strategy as David, plus learn three straightforward methods to optimise your practice's EBITDA to achieve a maximum sale price, I’m hosting a live online meeting with David as my guest at 12pm AEST on Wednesday 15th August (next week).
Click below to reserve your spot if you would like to join us (its free).
https://zoom.us/meeting/register/91dc6a68cb8e344cc5b9141539e44ee6
Cheers
Adam
PS. This will be a highly informative but informal discussion, there is nothing to buy, and you are welcome to join us in person or simply register for the meeting so we can send you a recording of it to listen to later.
https://zoom.us/meeting/register/91dc6a68cb8e344cc5b9141539e44ee6
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