How to sell yourmedical billingcompanyquickly & for free
Selling a business can be as complex and expensive as an owner is willing to let it be. Despite this, thousands of small businesses are sold in the US every year. So how do successful owners exit and keep most of what they built? How can you do the same, and make this a simple and fast process?
Every business sale is different. Large sales might need lawyers, accountants, tax advisors and more; others might not. Your business’ finances, your willingness to do a little research, and the buyer you find all influence the final outcome and the journey to get there.
If you’re a small business founder looking for your next adventure, maybe you’re too small for a lot of buyers or brokers. Maybe you’ve hit some bumps in the road, and want to find someone who can take what you’ve built and realize its full potential.
Data shows that half of medical billing companies sit on the market for more than a year - not including the many practices that give up and wind down. Here are our tips for how to plan a successful sale.
Should I Sell?
One of the best ways to move fast is to come to a clear, confident decision to sell your business. Navigating a mix of personal feelings and business considerations can be especially difficult - a good overview of these from a seller’s perspective is covered in this article.
Sometimes the easiest way to gauge is to step away from your feelings, and ask what the market looks like and what advice you’d give others:
- Look at the competitors that emerged in your space in the past five years. Where do you feel your company stands? The top 10%? Or do you feel you’re falling behind?
- Suppose a friend had similar circumstances, personal pressures, and rewards as you do. And imagine your friend came to ask about starting a medical billing company today. What would you say?
- What other opportunities, goals, ideas and experiences are you giving up to spend time on your company?
- Would I accept an offer from another company to do exactly my job, with my compensation, today?
A strongly positive answer to all of the above is a foundation to keep pushing forward with your company, knowing that you’re competitive and see opportunities worth swinging for the fences. If not, it might be a good time to consider your options.
Whatever your answers, first knowing that you want to sell will help make you decisive about the remainder of the process.
Getting Ready to Sell
Just preparing for a sale can be an extensive process that often lasts an entire year itself.
That’s before your company is ever put on the market.
Here’s an example due diligence checklist that lists the documents needed. Make sure to go through lists like these, dotting “i”s and crossing “t”s. In particular, ensure clients and employees are on current, transferable contracts. Also, make sure you have current financials that you can share.
By having everything assembled neatly in a set of folders, you can save time and money.
OpenClaims Tip: Working with a buyer like OpenClaims can allow diligence to be lighter and faster. Find buyers that specialize in smaller companies, in healthcare, and that can tailor the structure of the purchase to minimize how much diligence is required.
What Is A Fair Price?
Valuing your business can seem challenging at first - a bit of a cottage industry has built up around making it sound harder than it is.
In reality, most companies in the medical billing space simply trade based on multiples of either revenue or “seller discretionary earnings” - the cashflow you receive from the business - plus the value of any extra assets like real estate or bank accounts that come with the company.
It’s a bit like selling a house, where the unit you’re paying for is square feet, and you look at what houses nearby with similar features sold for. It’s actually quite easy. For companies, you pay based on how many dollars of profit you believe you’ll get paid each year instead of square feet.
Our analysis of multiple public data sources and private transaction histories shows that as companies get very large, and as profitability increases, multiples can increase a small amount. So be careful you don’t miss out on good deals by looking at companies that aren’t similar, or that have assets like valuable real estate that come with them.
OpenClaims Tip: You can gather information about pricing by looking at databases like Bizcomps. You can also gain information by talking to buyers offering quick pricing like OpenClaims, and learn how they think about the value of your business.
When do I need a broker?
Brokers were the traditional way a business got sold back when data about company sales were hard to come by, and it was difficult to locate a buyer. Frequently they were accountants who knew other local accountants, and could use more elaborate ways to estimate market value together with asking their networks about recent deals.
With so much information now available online and market value much clearer, the business of being a broker for medical billing companies has changed in the same way as similar types of financial intermediation have changed.
For example, OpenDoor is a $5B public company that will give instant quotes for your home based on transparent data - no realtor needed. The same goes for Sundae, Homelight, and many others. Similarly, if you’re selling your small e-commerce business, you can get an instant offer at OpenStore without having to pay a broker.
Brokers now focus more on high-complexity sales, where their experience can help facilitate large transactions that otherwise would take too long and might fall apart. As a result, most brokers have minimum deal sizes they accept. As an example:
Most good brokers have a minimum of $1M, though their sweet spot starts at $5M in revenue or more.
Also, it should be mentioned that there is risk in selecting the wrong broker. Unfortunately, there are also some who will claim they can help facilitate a sale in return for 10-15% of your company, which then becomes a free option for wasting time. For example:
