OBSERVATIONS ‘07

Q&A OF BLUNDERS, CAUTIONS AND STRATEGEMS IMPACTING THE PRACTICE SALE THROUGHOUT 2007 (PART III)

by Sam Reader

Compliments of S.G. Reader & Associates, Inc.

Q:  Is it common to get cold feet with selling a practice?

A:  Yes!  And it can make for a bloody mess for all families involved.

Doctor A decided to sell his rural practice in the Midwest collecting $500k annually.  He had low overhead – allowing him to take home a cool $415k before taxes each year.  He was the only game within a 50-mile radius.  His family traveled regularly to get their “Big City” fix once a month.

Doctor A went to a seminar and learned from the practice building coach that practice building was all in the “head space” – not the fishing hole.  As Doctor A contemplated that message for several weeks, he drew the courage to leave his protected rural practice cash cow and duplicate it in the Big City.  His family was excited.  They had waited a long time to get out of what they felt was an isolated lifestyle – even a padded cell.  The wife and kids had often complained that what good was all the money if their quality of life was one of loneliness and un-fulfillment.

Doctor A listed his practice.  With his attractive numbers, it didn’t take long before several buyers came knocking on the door.  Doctor A thought how funny it was how one man’s discontent all of a sudden had become another man’s dream come true.

Doctor B and his good friend, Doctor C, were chosen as the potential new owners of this once-in-a lifetime practice opportunity.

Contracts were signed, deposits made – it was a go!

Doctors B and C sold their homes, pulled the kids from school, and relocated to their new rural home.  Doctor A was taken back that the families of Doctors B and C had arrived in town so quickly.  This was a concern for Doctor A because the sale of the practice was a secret from all those in the community, and Doctor A had yet to find a new location in the Big City.

With the passing weeks, as all parties awaited the funding to come through, Doctor A grew weary looking for his new location.  Doctor A was also approached by several of his old DC friends from the Big City.  They proceeded to tell him that he was crazy for selling his cash cow and that he would never duplicate in the highly competitive Big City.

Doctor A approached Doctors B and C and had a grand idea that all three of them could become partners!!  Doctors B and C declined his offer.  Tensions grew between Doctors A, B and C as the funding process crept along at a snail’s pace.  Doctors B and C had coached their elementary and secondary school aged children not to say a word about the practice sale.  The parents had sworn their children to secrecy.

Doctors B and C felt that funding was due any day now – no longer than one more week.  The week grew into several more weeks of waiting.  Doctor A had also convinced himself during this waiting period that he could never duplicate the mighty clinic he already had.

Trouble also broke out in Paradise when a couple of the children of Doctor B slipped and accidentally told their friends why their family had moved into town.  After all, people seemed to grow suspicious.  After two months, folks were curious what Doctors B and C did for a living.

Doctor A found himself in a pickle with his patients when he was confronted about Doctors B and C.  Pressure was mounting – funding had not happened.  Doctor A had made his decision.  The sale was OFF!

Doctors B and C were in shock.  How could this be?  They had sold their homes – they uprooted their families – this was a travesty!!

Doctor A reminded Doctors B and C that they were not to move into the community until the project was funded.  He also reminded the doctors that funding was now overdue by four weeks and the Purchase Contract was null and void.  He also challenged the young and financially strapped doctors to get their lawyers.  He was prepared to outspend them on the best legal team money could buy.

Doctors B and C threatened Doctor A that they would set up shop in his protected turf – that they could do serious damage to his cash cow unless he sold to them.  Doctor A told Doctors B and C to “go for it” – he did not feel threatened.  To Doctor A’s surprise, Doctors B and C opened up their own practice, and within weeks Doctor A’s weekly visits dropped in half.

Three months and three weeks from Doctors B and C arrival in town, their funding was finally available.  Doctors B and C called one last meeting with Doctor A on the sale of his practice.  Doctors B and C felt gracious enough to give the full value, even though the numbers had dropped in half.  Doctor A voiced his frustration with the carelessness of Doctors B and C and the damage done when instructions were not followed.  Doctors B and C apologized for the stupidity in their naïve eagerness to purchase this “once-in-a-lifetime cash cow dream come true clinic.”

Doctor A accepted the apology, along with a check, and then proceeded to move his family out of Dodge into another rural community.

Lessons learned?

1. Contracts can always be broken – he who has more money, buys the legal dream team.
2. The seller shall never invite, nor buyer invade the seller’s turf until funding is complete.
3. Most sellers all experience some level of “cold feet” – especially those who have successful clinics.  This is a natural feeling.  Be decisive once you make the decision to sell – then follow through.  Indecisiveness is a weakness and can lead to disappointment, heartache and headaches for all parties and/or families involved.

Be Smart.   Be Strong.   Be Helpful.   Enjoy!