Buying or Selling a Practice

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When You are Looking to Sell Your
Practice or Buy a Practice, What you
Should Know About Valuations,
Financing and Payout Options.
Chris Frederiksen, CEO & Chairman
2020 Group USA
The
most frequent questions I get are:
•What’s the Multiple?
•What’s the Multiple?
•What’s the Multiple?
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PCPS Survey
 Sole Practitioner
• 65% are over 55
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PCPS Survey
 Multi-Partner Firms
• 63% expect a partner exit within 5 years
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The Multiple is not the
cause of a practice’s value –
it’s the effect of the 15 C’s
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The 15 C’s
1.Client Retention
2.Culture of the Firms
3.Chemistry of the People
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The 15 C’s
4.Care standards for Clients
5.Comparable Relationship
6.Co-dependency with Clients
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The 15 C’s
7.Capacity to serve the Clients
8.Charging, Billing and
collecting of fees
9.Close enough office location
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The 15 C’s
10.Cost Savings
11.Cash at Closing
12.Contingency Payout
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The 15 C’s
13.Compensation for
services rendered
14.Cutting back
15. Communicating the deal
to Clients
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10 Key Considerations of Valuation
1. Location
2. Size
3. Types of Practice
4. Dependency
5. Staff
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10 Key Considerations of Valuation
6. Recurring Revenue
7. Billing Rates and Realization
8. Concentration of Fees
9. Age of Clients
10.Technology
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21 Key Deal Points
1. Price Determination
2. Cash Down payment
3. Payout Period
4. Acceleration
5. Contingency
6. Collars
7. Tax Treatment
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21 Key Deal Points
8. Financing
9. People and Benefits
10.Use of Name
11.Advising Clients
12.Fees
13.Deficient Work (Fix-it)
14.Uncompleted Work (Catch-up)
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21 Key Deal Points
15.Consultancy
16. “Perks”
17. Tail Insurance
18. Non-Compete
19. Disputes
20. Death
21. Divorce
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So what’s the REAL deal on Multiples?
• Major City
• Suburbs
• Rural
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Final Piece of Advice
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