Are you thinking of selling your practice? At which point should you start contacting brokers when you want to sell? Can you start a practice knowing that you will sell it in the future?
In this podcast episode, Alison Pidgeon speaks with Kathleen Coughlin who Sold Two Private Practices: Part 1 of 2.
Podcast Sponsor: Brighter Vision
It’s Brighter Vision’s biggest sale of the season!
With the holiday season in full swing and the new year right around the corner now is the perfect opportunity to think critically about your future marketing initiatives and consider what improvements can be made to ensure you’re attracting the clients you need to grow your practice.
If you find yourself in need of a professional website that’s properly optimized to rank well in online searches and targeted to speak to your ideal client, Brighter Vision would love to help.
Best of all, as a Grow a Group Practice listener, you can get your first month completely free.
So, if you’re ready to get started or just want to learn more about how Brighter Vision can help you grow your practice, head on over to brightervision.com/joe.
Meet Kathleen Coughlin, LCSW
Kathleen Coughlin is a Licenced Clinical Social Worker and Private Practice Strategist. As a Behavioral Health Consultant and Strategist, she tailors services to meet the specific needs of her client’s team and organization.
Kathleen has owned, operated, and sold 2 behavioral health group counseling practices since 2001. She launched her first practice in Pennsylvania in 2001, later selling it in 2018. The practice on average would provide 600-650 sessions per month.
She then started the initial steps to open a new group counseling and consulting practice in Florida. In less than 3.5 years, the group practice was started, scaled, and positioned to be acquired. The practice on average provided 400-450 sessions per month and continues to provide outpatient mental health counseling in the local community.
In This Podcast
- Starting the selling process
- You can work with the buyer
- Transitional periods
Starting the selling process
Meet with potential brokers to find out whether selling the practice is something that needs to be done publicly or can be done internally.
There are many moving parts to consider when it comes to selling a practice, such as:
- Keeping an eye on the financials
- Laying out the marketing value
- Privately looking at the business evaluation
- Considering the business growth throughout the years
- The relationships your company has built within the community
It took time to put all of that data together and looking at that moment for us was … if we’re going to do this, is this something that we can do independently where we have more control in the process, or is it something that we’re going to be more [public] with and [negotiate] the risk of potentially losing some of [these things] along the way. (Kathleen Coughlin)
You can work with the buyer
Depending on the agreement that you make with the new buyer, you could continue working with the new owner after the sale is complete as a consultant.
For a period of time I do stay on as a consultant and will remain as an available consultant throughout the years after as those are some of the agreements we had made in our initial plan of sale. (Kathleen Coughlin)
Work closely with the staff to keep them informed of the change of ownership process so that they feel included and aware of the changes.
You can help them build repour with the new owner as well, and assist the transition period so that it is easier for everyone.
- The buyer spent two months looking into purchasing the practice, and had their attorney and financial advisor go over the proposed contract,
- A period of five to six months came before the transition occurred, wherein the practice, staff, and community were prepared for the transition,
- An additional six months of on-site work was necessary until the end of that year for the change-over to be fully complete.
It can go faster, or slower, than this. It depends entirely on the buyer and the seller, and how they want to set up the transitional process.
Maintain the valuable aspects of your business, such as your website and the relationships that you have established between the company and the community.
Useful links mentioned in this episode:
- Visit Kathleen Coughlin’s website
- Connect on Facebook, Instagram, and LinkedIn
- Check out brightervision.com/joe for your first month free
Check out these additional resources:
- How to Grow a Large Practice that Serves the Needs of the Community with Sherry Shockey-Pope and Jill Johnson-Young | GP 92
- Group Practice Launch
- Group Practice Boss: www.practiceofthepractice.com/grouppracticeboss $149 a month
- Email Alison: email@example.com
- PoP Group Practice Owners Facebook Group
- Free resources to help you start, grow, and scale
- Work with us
- Consult With Alison
- Alison Pidgeon on Therapy for Your Money Podcast
- Practice of the Practice Network
Meet Alison Pidgeon, Group Practice Owner
Alison Pidgeon, LPC is the owner of Move Forward Counseling, a group practice in Lancaster, PA and she runs a virtual assistant company, Move Forward Virtual Assistants.
Alison has been working with Practice of the Practice since 2016. She has helped over 70 therapist entrepreneurs start and grow their businesses, through mastermind groups and individual consulting.
Transformation From A Private Practice To Group Practice
In addition, she is a private practice consultant for Practice of the Practice. Allison’s private practice ‘grew up.’ What started out as a solo private practice in early 2015 quickly grew into a group practice and has been expanding ever since.
Thanks For Listening!
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Hi, welcome to the Grow a Group Practice podcast. I’m Alison Pidgeon your host today. We have actually a two-part podcast series for you. I’m going to be interviewing Kathleen Coughlin. She is both a clinician, she has also owned two different group practices and has sold both of them. That was actually a big reason why I asked her to come on the podcast because I wanted to ask her all the details about how she decided to sell her practice and what that whole process was like. She also has moved into doing more business consulting now and so we’re going to talk about that as well.
So just wanted to point out that because she had so many interesting things to talk about, we did split this interview into two parts. So this is part number one and so if you want to continue listening to the episode, make sure you check out the episode that will come right after this one. That will be the second part. Yes Kathleen and I kind of start out talking about the process of how she sold her practice and I hope you enjoy.
[ALISON] Hi, Kathleen, welcome to the podcast.
[KATHLEEN COUGHLIN] Thank you for inviting me. I’m really looking forward to our meeting today.
[ALISON] So can we start out just with having you introduce yourself and what you’re doing currently?
[KATHLEEN] Sure. I am working as a private practice consultant. I’m a licensed clinical social worker. I’ve been in practice since 2001 and presently working as a licensed clinical social worker in Pennsylvania, Virginia and then also Florida, so maintaining a small private practice. Primarily majority of my work has been on private practice building, consulting, and then helping organizations as they scale up operations, whether that be individual providers or group practices.
[ALISON] Awesome. We’re definitely going to talk about all the things that you do related to consulting and I think that’s really interesting work you’re doing, but the reason that I wanted you to come on the podcast was to talk about your experience with selling practices. I believe you’ve sold two practices now at this point, correct?
[KATHLEEN] Yes, that is correct.
[ALISON] So that’s a question that we often get from folks, even if maybe they’re not ready to sell anytime soon. It’s kind of, one of those things is never too early to start thinking about it and like getting ready and really positioning yourself to hopefully get the best price possible. So I wanted to ask you kind of your experiences with selling the practice. Did that come about because you just were ready for something new, you were moving? I guess kind of just, maybe we could start there.
[KATHLEEN] Absolutely. So my initial practice I had made the decision to begin to look for a buyer about six to 10 months out from a plan to relocate to Florida. So that’s how my initial sale had begun and at that point, really working to stand what it would look like to sell a practice, having some legal consults, kind of going through the, I actually had business brokers come in to kind of do evaluation of the practice, understand financially as there was building and real estate involved in the initial transaction my first time around. So just really trying as an individual provider.
Also my husband, I work in the practice together. He’s not a clinician, but he does the operational management, really as a family to understand what are our options and then working to identify buyers that would potentially be interested and taking over our practice. And looking within our communities, but then also looking even within our group practice that we had running. We did identify in my initial practice, someone that was interested initially in the Pennsylvania practice, which helped us be able to grow with her. She was able to learn a little bit about the practice and determine if that was an opportunity that she wanted to pursue individually.
[ALISON] Great. So what would be somebody’s first step? If they’re looking for a business broker, how did you go about finding that person?
[KATHLEEN] So really, I did two interviews with two brokers, really to gather information, to understand if this was something that we needed to put out in the marketplace, or would this be something that we can do internally? Because I think a lot of the work as you’re a practice owner, and you’re looking to take the steps towards selling your practice, there’s a lot prep work as a business owner that you need to put in to really understand the financials. You have your marketing aspect, privately looking at the business valuation, the business growth that’s happened throughout the years and also looking at the relationships that you’ve built within your community, within the panels that you’re credentialed with, if it’s insurance.
So it really took time to kind of put all that data together and really looking at that moment for us was, if we’re going to do this, is this something that we can do independently as we kind of search around or is this where we have a little bit more control in the process or is it something where we’re going to be more public with it and the risk of potentially losing some of the staff along the way? Because our goal was to really protect the staff that were on site, protect the business integrity and then also building the practice from there into the next step as the owner took over because for a period of time I do stay on as a consultant and will remain as an available consultant throughout the years after, as those were some of the agreements that we had made in our initial plan of sale.
So there’s a lot of due diligence that the buyer will need to look at, but there’s a lot of prep work on our end in regard to having the financials available, having available tax returns, having profit and loss sheets available and going through that and helping the buyer identify what are some opportunities for small business loans. Because I think that can take a lot longer if you’re going into small business association versus if you have capital in hand and are able to do a transaction through maybe a venture group or also, and obtain funding that way. Small business is another option or definitely cash. With sometimes there are providers that may need to over a period of time, do a small payback to the business owner, maybe a period of six to eight months post sale as they work to scale up operations.
[ALISON] So what did you ultimately decide in terms of whether or not to kind of approach people maybe that you knew that would be interested versus like, I know some business sites that just say they don’t necessarily say what the business is. They say like counseling practice for sale and this is how much it costs and this, I mean, how did you decide that or what did you ultimately decide?
[KATHLEEN] Ultimately, that’s the first place I went because I figured that would be the best option to look at. Then I also went to a larger organization that does purchase practices and had a consultation at that time with someone and learned a little bit about how that process would work. I just didn’t think it was a really good fit for planning purpose so I decided at that time to make a determination to look within the community, which we found a person who really had a lot of strength and I think the ability to grow and even grow even to a larger practice, which I think she’s definitely done an amazing job on and being present to help facilitate that process.
Because it definitely did take time and it took diligence on both parties to put together a proposal that’s going to work in the best interest of the business, in the best interest of the staff, because that’s very important as you transition a practice over; is that your staff understand what’s going on, that they can trust that things will remain the same things will even get better. That there’ll be more opportunities for them and then developing that rapport with a buyer, if that’s something that the clinician did not have before bringing your team on eventually as well so that they can get to know the individual that they’ll be eventually working for.
[ALISON] So this person who eventually bought the practice, was this somebody who was already working in the practice or somebody you knew, like a colleague?
[KATHLEEN] This was a colleague that was actually working in the practice on a part-time basis. Then she had also started her own practice in another area focusing on parent coordination, focusing on co-parenting relationships and helping in another county with a program that was developed, that she developed specifically for the court system. So really looking at what are her goals and would this be something that she would be interested in. So we had some initial talks and then really kind of started to look at if this was something that she wanted to pursue, what are some opportunities? How can we explore this with her?
And we made an agreement verbally that we would kind of give a period of time, further exploration and let her do due diligence surrounding what the information that we’re providing so she can determine if this was going to be a good fit for her. Because it is really important when you’re taking over a practice. At that time we had, I think it was 12 to 15 providers. Previously I had a board certified psychiatrist that was also working with us. We were doing psychiatric evals, medication management. So there was a lot of working parts that kind of needed to be, you know also bring that person along to understand the journey. And it’s very important to have that trust in that relationship to help them see the inner workings of the practice because there’s so many pieces and we wanted to make sure as we were doing that transition, that that person would be successful in what they’re doing.
[ALISON] So it sounds like you knew already she was entrepreneurial and it sounds like you could tell it was just a good fit maybe from a value standpoint or a philosophy standpoint that she could kind of take over what you had built and keep improving it and potentially make it better?
[KATHLEEN] Absolutely. It’s definitely helping that person see that there’s a real great opportunity as to, you have a real, you have a program that’s working, you’ve had a program that’s been working for 17 years. It’s just continually developed and grown throughout the years and that you’re coming in, you’re coming in with a set group of people to help you run that practice for period of six to 12 months, whatever’s necessary or needed until they take over the daily functioning of the organization, but still being physically present and obviously on a consultative role, always being available for a phone call.
That’s something that I’ve always prided myself in, is being there in any way, shape or capacity to support that individual as they go through new things. For example, hey, I have an audit coming up. How do you handle this? Or how do you respond to these situations? Because there’s always a lot of questions as you take over something of that nature.
[ALISON] Yes, absolutely. I’m sure that was a whole thing in, and of it itself, like the transition period. I definitely want to ask you about that, but before we get to that part of it, obviously we’re kind of talking about approaching this person, would you like to buy the practice and there’s this period of due diligence, like you said, where she could ask you any questions you wanted about how the practice functions and look at financial reports and all of that kind of stuff. So how long did that period last, where she was just sort of like doing all her research about if she wanted to buy the practice or not?
[KATHLEEN] I would say like the initial period was like definitely about a period of two months to really look and say, yep, we’re going to go forward with this. Then looking at how the financials were going to be structured everything was pretty much able to be the agreements be structured by an attorney. We have that, she had her attorney and her financial team be able to look at the agreement, make sure that we weren’t missing anything. I think at the end, I think it was probably about five months to six months until the actual transition occurred and then approximately an additional six months of onsite work until the end of that year to assist with the transition, physically having someone on site to assist with the transition.
[BRIGHTER VISION] It’s Brighter Vision’s biggest sale of the season. With the holiday season in full swing and the new year right around the corner now is the perfect opportunity to think critically about your future marketing initiatives and consider what improvements can be made to ensure you’re attracting the clients you need to grow your practice. If you find yourself in need of a professional website, that’s properly optimized to rank well in online searches and targeted to speak to your ideal client, Brighter Vision would love to help. Best of all, as a Grow a Group Practice listener, you can get your first month completely free. So if you’re ready to get started or just want to learn more about how Brighter Vision can help you grow your practice, head on over to brightervision.com/joe. That’s brightervision.com/joe.
Okay, that’s helpful, just to get an idea of the timeframe, because I think you think it’s going to happen fast, but it doesn’t sound that way.
[KATHLEEN] Sometimes it does. It really depends on the person. It also really depends on how they structure their new organization and if you are going into it independently as a sole therapist and you have your therapist hat on it’s one thing. But there’s also this whole other side of business that they don’t teach us in grad school that takes us time to kind of learn and I think operate things a little bit differently, especially when you have the aspect of clinical balance and then also the business management balance and trying to balance that time. And the importance of having somebody that you can trust on your side to be able to assist with billing, claim follow-up, your first person that answers the calls.
I think that’s the ideal, I liked how you had on your website, I think it was director of details. I mean, like that just says it all is because the person that comes through that door or the person that makes that first phone call, that that person is like the face of your practice. So that was always something that is really, really important as you go through that transition as you know identifying who’s perfect to stay on board, but identifying those that might have an interest of moving on or developing their own group practices or their own individual practices as you make that transition. But then really bringing on that one person that’s going to help you, kind of your personal assistant to you bring forward the overall goal or mission of your organization.
[ALISON] I wanted to ask you about the financial side of the transaction and you can certainly share as much or as little as you want. But just curious, like what the valuation process was like, what were they looking at in terms of how do they determine what the business should actually be sold for? Then how did you structure the payment? So I know you kind of alluded to there’s different options. I was just curious in your case, how that actually looked.
[KATHLEEN] I think there’s, the one practice was that we had the clinical aspect and then we had the real estate. So it was structured a little bit differently. I think practices, they do a formula which is called [inaudible], which is the earnings before taxes, interests, depreciation, and harmonization. So private practices, medical practices it’s like one to 10 times where I think for our sweet spot, it was like one and 0.75% of the gross operational expenses. So working with a buyer to understand, I think each person that’s running a business has things that are different in what they’re doing, maybe the services that they’re providing, maybe how they’ve structured their business for tax reasons or tax purposes. So all of that kind of has to be coming, I think that’s where that due diligence part is.
How do you have things structured? What are the costs that you have that might be different from the buyer and what might their initial kind of expenditures be? We always wanted to make sure staffing and payroll was 100% there and ready to go for like a two to three month period of time on both sales and transactions. So those are the things that can easily be incorporated where maybe over a period of six to 12 months or after the initial business is running for six to 10 months. Maybe there is a payment scale that starts of like an X amount per month or just a balloon payment is due at 12 months as an example. So you can structure things very differently and I think depending on how it is, if you’re having a property with physical real estate or you’re taking over a lease and working with the landlord to understand, are they going to transition the lease over to the new buyer?
What we learned on the second transaction was my lease might have run till December of 2022 as an example, but they’re only having the new person’s lease run from the date she signed for one year. So that kind of leaves an interesting six month gap there that I might need to take over those six months at the end, or we work together to try and figure out what a solution is. So those are some things that might come into play where you have to really take into consideration that you have to have those communications and discussions and really get it clearly in writing, which is what I thought we had as an example. But I think we needed to be more specific on the date. I was assuming that the entire lease would be covered. So that’s an example of a learning curve that you kind of experience when you’re kind of working with maybe a larger developer that has numerous buildings that they lease and really under standing how they do things differently or what their intent, when they say they will allow you to transition your lease over to someone different.
[ALISON] I think that’s a good example of, like you said, things you don’t know until you get into it and then you learn the hard way. And I think, I’m glad that there’s a lot of different variables and circumstances that go into how much a practice ultimately sells for. What do you think, did you get a sense, I guess, of like, what were the most kind of valuable things that added to the sale price? I know when, I talked to Joe Sanok when he sold his practice, he said the most valuable thing was his website.
[KATHLEEN] I would say definitely website. I would also say the established relationships that you have in your community, whether that be working with in your county organization, contracts that you’ve developed over time. When I initially started my practice, it was just me. So I had it under my name. So it was my name and associates as Kathleen Coughlin associates versus my second practice. I actually came up with a very generic name. So having your practice named after yourself doesn’t make it impossible to sell because the new owner can come in and make that transition.
It just makes a little bit more logistically challenging with contracting changes and things of that level. And that’s also something that really needs to be taken into consideration as well as you go into, if you especially have large insurances. Some of your practice is making sure that the insurance contracts are started, that we can kind of get those rolling and then over that period of time ideally like that one to three month period of time, working with a buyer to help them get things so that once they’re up and operationally running and can easily start to transition it under their own tax ID.
[ALISON] So did she ultimately change the name of the practice?
[KATHLEEN] The first professional did because it was under my name and the second professional did not because it was a very generic name.
[ALISON] I guess we should mention too that you, I know you keep referring to the first transaction, the second transaction. So you’ve sold two practices and the second one was in Florida, correct?
[ALISON] And you had that one for how many years?
[KATHLEEN] So I sold my practice in Pennsylvania in April of 2018 and I started my practice in Florida in January of 2018. The goal was to have it kind of an end point where as I transitioned down to the Florida area, being able to get that up and running and start the initial process of contracting. The second part of it is building community relationships. Then my goal really was within a three year period of time to be able to do the same, which would be to turn the practice around and sell that again to someone. So it was about three months, three years and five months later we were able to do that, so a little bit over that. It was again, to someone within our practice who was interested in taking on a new venture, a new opportunity.
[ALISON] Wow, so you started the practice knowing that in three years I want to sell this?
[KATHLEEN] Yes, that is correct.
[ALISON] And what was the thinking behind that or the motivation behind that?
[KATHLEEN] Well, I think that creeping up of the age of 50 is one of them. So kind of kind of moving into what I like to be doing when I kind of get to that next chapter in life and I thought definitely in that period of time, I would be able to develop a good program, being able to scale it up. My goal was to scale it up with a less amount of providers instead of like 13 to 15 clinicians, maybe five to maybe long-term, possibly seven clinicians. So I was able to around that five clinician mark begin to market, begin to talk about some opportunities.
I approached someone who I really saw as kind of like would really shine. She is just like at a perfect age to take over, I think an opportunity that will be life changing for her and definitely just has the desire to excel. So it’s really looking at who’s around you and taking into consideration like maybe this is something they would be interested in and you never know, everybody’s story’s a little bit different and really working with them to say, hey, here’s a confidentiality clause. I’d love to have a conversation with you and talk about what we’re considering and see if this is something that you might be interested in and giving them time to sit with it a little bit as well.
[ALISON] Thank you so much to Brighter Vision for being a sponsor of this podcast. I have been a Brighter Vision customer since 2016 and have always been really happy with my service. The tech support is great. They’re quick to get back to me and make changes to my website. We’re actually in the process right now of kind of revamping my original website because it is now five years old. So they’ve also been great with that process as well. So definitely check out the special they have going on right now over at brightervision.com/joe.
Thank you so much for listening. I hope you found this interview to be really interesting, even if you’re not at a place where you’re ready yet to sell your practice. I think it’s always good to hear about other people’s experiences and just sort of file away some of those nuggets of information so that if you get to that point or when you get to that point you’ll have some frame of reference for what that all looks like. And like I said, in the beginning, we’re actually doing part two of the interview in next week’s episode. So be sure to check that out and I’ll see you all next time.
If you love this podcast, will you please rate and review on iTunes or your favorite podcast player? This podcast is designed to provide accurate and authoritative information in regards to the subject matter covered. This is given with the understanding that neither the host, Practice of the Practice, or the guests are providing legal, mental health, or other professional information. If you need a professional, you should find one.