Sankeetha Selvarajah, Esq. on How to Start and Sell Your Business | GP 73

Are there different ways to combine your business with another practice? What is the correct procedure to follow when you are looking to sell your business? When should you hire an attorney?

In this podcast episode, Alison Pidgeon speaks with Sankeetha Selvarajah about how to start and sell your business.

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From building a brand and designing the perfect website to reflect that, to helping you rank higher with search engines. They’ve even created tools to make online marketing simple that are specifically for therapists. Best of all, we’ve worked with them to create a special offer just for our listeners.

Simply visit brightervision.com/joe to learn more and get your first month free of a new website for your private practice.

Meet Sankeetha Selvarajah

Sankeetha Selvarajah is the Managing Attorney of Selvarajah Law P.C., a civil transactional firm located in Boston and New York. Her clients are within the cannabis, technology, real estate, food service, e-commerce sectors as well as, retail manufacturers. Currently, her firm provides outside general corporate counsel services to over 200 companies with legal services from incorporation to mergers and dissolutions. As an award-winning startup attorney, Sankeetha Selvarajah does more than clean up contracts. With more than a decade of legal and business consulting experience, she’s passionate about creating better businesses by making law accessible to business owners. She is also the CEO of STARTUP DOX, a Done-With-You platform designed to assist founders with cost-effective legal options for Corporate formation and document generation, all with Attorney Review. As outside general legal counsel to over 200 small businesses, she has also worked with startups as an advisor, strategist, and reluctant therapist. No matter which role she’s playing, her goal is simple — to educate founders and business owners to enable themselves to drive measurable results.

Visit her website. Connect on LinkedIn and Twitter.

Book a free discovery call with Sankeetha to find out your exit number

In This Podcast

Summary

  • When do you need a lawyer?
  • Are you looking to sell?
  • Steps to merging practices into a group
  • Sankeetha’s advice

When do you need a lawyer?

It’s the same trigger as when do you actually need a contract or need a company. The trigger is: are you creating a debt or obligation to another party or entity, that’s the trigger. (Sankeetha Selvarajah)

If your business is starting to require you to hire people and get involved with legalities, you should consider bringing in a legal person to help you establish a good foundation whereupon you can draft the proper legal papers.

It is important to check the guidelines of your state and your attorney to make sure that you are correctly filing and signing papers in the way that your business needs you to.

Are you looking to sell?

Therapists can opt to sell their businesses in a number of ways:

A – Acquisition: where a therapist sells their business to another therapist. In essence, their business is acquired by another therapist or is absorbed into another business entity.

B – Merger: when two business entities run by two separate therapists get together and merge into one overall business.

We see a lot of mergers … where two therapists want to create a … group practice, that is almost considered like a merger. Many different practices come together to create a group practice … or a working agreement as well. (Sankeetha Selvarajah)

There are many different variables to look at, and therefore it will depend on the outcome that you foresee for your group practice to guide you on how you should merge it with another.

Steps to merging practices into a group

If you are considering merging your group practice with someone else:

1 – see what that might look like. This would be a basic partnership. Envision how it would look like in reality with this person.

  • How does it feel?
  • Who handles client conflict?
  • Who handles taxation?
  • What kind of growth plans do you have?

If you want to sell your business, think about the end and keep it in mind.

The end is great because it allows you to plan and it allows you to have ownership over your growth journey, so you are not just off to the winds, so to speak. Ideally, anybody who is starting a therapist practice should [have at a] basic level an executive strategy, some form of simple business plan. (Sankeetha Selvarajah)

A simple business plan would discuss what might happen over the first year, second and third year.

This helps you enable yourself to pivot and remain flexible instead of being hyper-focused on a plan that is too rigid and does not allow you to shift when and where needed.

Sankeetha’s advice

Some common mistakes that business owners make:

  • Filing their documents incorrectly,
  • Waiting too late to get their contracts and agreements in place,

From the get-go, make sure you have someone looking over your documents before you hire other therapists and start seeing clients in your practice.

Useful Links:

Meet Alison Pidgeon

A portrait of Alison Pidgeon is shown. She discusses ways to grow your group practice on this week's episode of Practice of the Practice. Alison is a serial entrepreneur with four businesses, one of which is a 15 clinician group practice. She’s also a mom to three boys, wife, coffee drinker, and loves to travel. She started her practice in 2015 and, four years later, has two locations. With a specialization in women’s issues, the practices have made a positive impact on the community by offering different types of specialties not being offered anywhere else in the area.

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.

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Podcast Transcription

[ALISON PIDGEON] Do you need help building your brand? Feel like you don’t even know where to begin when it comes to marketing your practice online? Whether you’re a seasoned clinician with a website in need of a refresh, or you’re fresh out of school needing your very first therapist website, Brighter Vision is the perfect solution., from building a brand and designing the perfect website to reflect that, to helping you rank higher with search engines. They’ve even created tools to make online marketing simple that are specifically for therapists. Best of all, we’ve worked with them to create a special offer just for our listeners. Simply visit brightervision.com/joe to learn more and get your first month free of a new website for your private practice. Again, that’s brightervision.com/joe.

You are listening to the Grow a Group Practice podcast. Whether you were thinking about starting a group practice or in the beginning stages, or want to learn how to scale up your already existing group practice, you are in the right place. I’m Alison Pidgeon, your host, a serial entrepreneur with four businesses, one of which is a large group practice that I started in 2015. Each week, I feature a guest or topic that is relevant to group practice owners. Let’s get started.

Hello and welcome to the Grow a Group Practice podcast. I’m Alison Pidgeon, your host. We are doing a series of podcast episodes right now of interviews with business owners that I have met through a membership community that I’m a part of, called We Should All Be Millionaire, if you are interested in learning more about that. Rachel Rodgers, a woman who started it has a business and a podcast by the name of HelloSeven. Today I am interviewing a lawyer named Sankeetha Selvarajah She is the managing attorney of Selvarajah Law P.C., and she’s located in both Boston and New York. She works as both a business consultant and an attorney, and she does a whole lot more than just clean up contracts.

She has been working with businesses for over a decade, and she’s passionate about creating better businesses by making law accessible to business owners. She’s also created something called STARTUP DOX, which is a done-for-you platform designed to assist founders with cost-effective legal options for corporate formation and document generation, all with attorney review. So she has experience working with therapy practices and starting businesses, helping people sell businesses, so we kind of run the gamut of all of those different things. So here is my interview with Sankeetha.
[ALISON] Welcome to the podcast Sankeetha.
[SANKEETHA SELVARAJAH]] Thanks for having me, Alison.
[ALISON] So I thought we could start out by having you introduce yourself and what you do, just so the audience has some context.
[SANKEETHA] I am a corporate attorney. I practice in Massachusetts and New York, but I provide business consulting nationwide as well. I’ve been in practice for about 12 years now, but I’ve been a business consultant or advising businesses for the past 15 years.
[ALISON] Excellent. So I know you do specifically law around mergers and acquisitions, is that correct?
[SANKEETHA] So it’s part of our practice, yes, but we’re outside general counsel to small businesses and startups. And from the start from advising them through incorporation to contract and negotiation all the way to exit, exit as mergers and acquisitions, if someone buys them or merges their practice with someone else or a straight up sale, they just sell it to another entity or person.
[ALISON] So do you work with a variety of clients with different types of businesses or do you specialize in specific types?
[SANKEETHA] Generally, we work with various types. Over the years, obviously we’ve done everything from e-commerce to physical and mental counseling therapists as well as cannabis, as well as manufacturing. So we’ve run the gamut because generally a business is a business, it’s just different trajectories of growth or sector requirements. So we still have to comply with accounting as well. And then each sector has a different like nuances between.
[ALISON] So we connected through the, We Should All Be Millionaires group and I know when we had our initial conversation, you said you’ve worked with quite a few therapists. So obviously that’s our main audience, group practice owners. So what do therapists typically, therapy practice owners, what do they come to you for typically?
[SANKEETHA] So they come to me to create the company, their practice, or to create an agreement with their partner as well, and to basically get good contracts up in place, whether it’s a HIPAA waiver along with a client agreement or patient agreement as well, that’s more robust and built out. So that certain nuances such as how does someone cancel an appointment or reschedule appointment? What are the penalties? So all of that is built out because most therapists just have the HIPAA waiver and that’s it. That’s not enough to protect you and your practice. So there’s the actual practice of providing the mental health services and there’s actual running the business that provides mental health services. So we acknowledge both hats that the that the owner has.
[ALISON] That’s great, because I think that’s so important to make sure all of that stuff is set up correctly from the beginning. That’s something that we always recommend our consulting clients as well. Like you may have a template or something, but you still need to have it reviewed by a lawyer just to make sure everything is taken care of in that respect.
[SANKEETHA] Absolutely. Absolutely, because it’s one of those things that this might not be your zone of genius. Your zone of genius is really just providing the best mental health services that you can provide in your capacity. And legal and accounting should be outsourced and delegated to the people that actually that’s their zone of genius, so to speak or what they are familiar with as well.
[ALISON] Yes. Yes, I totally agree. So obviously you’re really working with businesses from the beginning all the way till the end. So is there anything particularly salient that comes up maybe when somebody is kind of in the middle of their business or they’ve gotten started, maybe they’ve hired some people? Like, are there typical things that come up for them at that point where they need some legal or business help?
[SANKEETHA] Yes, absolutely. So you want to look at it as like, when do you actually need a lawyer? The real trigger is when it’s the same trigger as when do you actually need a contract or need a company? The trigger is, are you creating a debt or an obligation to another party or entity? That’s the trigger. So we think of that as like the benchmark rule. If that is coming up, then you should probably get a contract and then follow up with them and turn it into a new contract.
[ALISON] Yes. And I think too, there’s just various things that come up along the way of owning a business that obviously is more of a legal question that you need to ask. Like you said, that person, who’s the expert, you need to have that already established relationship so that you can get those questions answered and make sure you’re doing things correctly.
[SANKEETHA] Absolutely. Some states actually require a specific type of certification before you can apply for an LLC or a corporation. Like you might be classified within that state as a professional LLC or a professional corporation. And each state differs. We’ve had issues where clients who are therapists or own mental health services that have mistakenly filed their company wrongly, where they have actually created just a regular LLC when they needed to be classified as a professional LLC. So these things are important and you want to check with your state and an attorney along the way to actually advise you on that as well. And really starting off with your small business team from the beginning is really, it’s not you that runs a practice. This is your team, your accountant, your attorney, your insurance agent, since you’re a service provider.
[ALISON] Yes, absolutely. That’s something we also always recommend that they have those other professionals in place to help guide them along the way. So I’m curious about the mergers and acquisitions piece, like you said, sort of towards the end of the business, or maybe the end of the time the owner wants to be in the business. They may look to either sell or get acquired or I’m not sure exactly all the terms. Maybe that’s something you can describe for us.
[SANKEETHA] So if they’re looking, generally what happens is that people, we found in our experience that their bests or people that run mental health services usually exit in a number of ways. A, they sell their company, they sell their business to another therapist, so that, that new therapist or that mental health service acquires. So that’s an acquisition where they sell it to be acquired by another party. What happens is they just step away at that point, or they can also remain as an employee in the new acquisition. It’s up to them.
[ALISON] So typically, sorry to interrupt, so typically when a company is acquired, do they then become under the name of the company that’s acquiring them? Is there like a sort of typical thing that happens with that? Or is it just sort of on a case-by-case basis?
[SANKEETHA] Definitely a case by case basis, just because it depends on the deal terms. So we were speaking before we went live was the fact that there’s an acquisition company or a portfolio company that just goes around buying therapist businesses. And then the therapist business retains their brand, retains their clients, but they’re owned by someone else. Another way is the fact that they buy out the business assets that, so there’s a difference between selling the company and selling the company and the assets. If you were just selling the assets, what they’re getting is the client list, the employee contracts, any other contracts or assets that go with the business, but not the business name or the actual company. So what they’re just taking is the goods, basically the meat of the business and they roll it into their portfolio.
[ALISON] Ah, so does that include the employees and all their clients?
[SANKEETHA] It absolutely can. So employee contracts and client contracts or patient contracts are considered assets and can be transferred in a sale.
[ALISON] Okay. And then was there any other terms that I missed there? I know we talked about acquisition.
[SANKEETHA] So a merger is when two entities or two therapists, businesses get together and they create one entity together, two becomes one. An acquisition is when one swallows up the other one or buys.
[ALISON] Do you think one is more common than the other?
[SANKEETHA] I do see a lot of mergers, we do where two therapists decide that they want to create a consortium or a group practice. That’s almost considered like a merger. So many different practices come together to create like a group practice or sometimes small consortium or a working agreement as well. So these are very, very broad terms. Obviously talking to your own attorney for what is the best situation or recommendation for your specific practice is really recommended.
[ALISON] Yes, absolutely. There’s so many different variables that you really need to get somebody looking at all of the different details related to your own business in order to make recommendations about what would be the most helpful. So is there any sort of, from a broad point of view, anything that like, if someone was listening to this interview and they’re like, oh, I would love to form a partnership with this colleague of mine who has her own practice and then we can be business partners and maybe we could start hiring people, like, are there things that people should sort of think through or ask themselves before they take that step?
[SANKEETHA] So if you’re considering merging your practice with someone else, number one, you want to see what that looks like. Because that technically is a basic partnership. So you’re entering into business bed with someone else. So it’s really understand how you work well with them and what that looks like in real life. So it’s not just to flirt with the idea. It’s to actually plan it out and talk through the scenarios that could happen; who handles the billing, how do you handle conflict or any sort of client conflict, who handles taxation, what kind of growth plans do you have? You can have two very separate personalities and two separate business models as long as you both share the same vision for the merger, the new company.

So that’s the way that we definitely recommend is the fact that you all get together first and grab a drink, alcoholic or otherwise, and have a real conversation of what this looks like. For most partnerships, we actually send out a 30 question questionnaire for most partners to consider what it would look like to enter into business together. So who retains certain patients? Does only one therapist have ownership over specific patients or can the other one see them as well, too? So really going through it with a fine tooth comb before you even consider.
[ALISON] I’m glad that you brought that up because I feel like there’s so many folks that I’ve talked to who were like, “Oh, but so and so, and I are friends and like, we always get along,” what I mean? But it’s like a whole nother situation when you’re in business together and it really is like, I always tell people it’s like a marriage. The only way you’re going to get out of it is if somebody dies or you get a divorce. So you have to be really careful about who you marry, right?
[SANKEETHA] Yes. In many ways you are in a business marriage at this point. So this is something where having those conversations is absolutely key with this.
[ALISON] Like you wouldn’t just marry, like the first person you met on the first date. You’d want to get to know them pretty well and trust them and all of that kind of stuff. Yes, so I know you were telling me before we started recording that you do something really interesting. I feel like now I’m may not describe this accurately, but you can correct me. You said you help people figure out what the, like, when they’re just starting what their business is going to look like at the end or like kind of what their goal is in terms of selling it. Can you explain that a little bit more? I know I’m not explaining that very well.
[SANKEETHA] So basically it just means that we start with the end in mind. So it’s something called the sale ready VIP day. So what happens is we talk about how you would exit your company. I know it’s kind of scary, it’s kind of insane for someone to think I’m just leaving. Most of the responses I get is, “Lady, I just started this. Why am I thinking about the end?” So the end is great because it allows you to plan and it allows you to have ownership over your growth journey. So you’re not just kind of off to the wind, so to speak. And then ideally anybody that is starting a therapist practice or so forth should be having basically, at basic, a level an executive strategy or some form of simple business plan to talk about what their first year, third year, fifth year it looks like.

So don’t go about five years because life is fluid and so is business. So you want to be able to keep yourself able to pivot and able to consider different avenues, should something happen? Like no one envisioned pandemic. So same time a lot of therapists pivoted to online. So having that flexibility was a great way because of the fact that most of it was you were forced into it. But if you understood that this is where you’re going to go, it allows you to be flexible in how you’re going to actually implement your goals as well. So the sale ready VIP day is really about deciding what number you want to sell your company for or how you want to exit your company.
[ALISON] I know this is probably a gross generalization, but do you have some kind of rough numbers of like, let’s say, I eventually want to sell my business for $5 million? What do I have to get it to in terms of revenue or what does the structure need to look like in order for me to get that kind of a price for my business?
[SANKEETHA] It depends on how many assets you’re putting out or how, well there’s a number of factors. Number one, it definitely needs to have a solid structure. This isn’t something where a sole provider would work for you. You do need an LLC or corporation. For one, it protects your own personal assets so that you can call the shots better on that end. And it decreases your liability as well. Malpractice is not going to cover you. It’s best that you do get a company. The second portion is to make sure that all of your client agreements, your employee agreements, your independent contractor agreements, are all documented in actual written form, which is a contract. And they should be housed as well. If you do have any IP intellectual property, you need like your trademark, your logo, or, any sort of trade secrets and so forth has to be protected as well.

So this is a foundational aspect and we haven’t even got to the full aspect of you actually putting out anything. This is you just protecting what you have currently. And then what would happen is you would then take it to the next step and how you would be, what are your products that you’re putting out? What are your services? How are you monetizing your services as well? Are you putting out any courses? Are you putting out, any how much are you putting out for your therapist’s hours? How many people are in your group? So there’s many different ways that you can skin this guy. You just have to create continual assets. So the assets are products or services that either can be protected and have a future value or can be created to sell and bring a revenue. Am I explaining that?
[ALISON] Yes. I’m curious, and I don’t know if you have any examples of this, but in a group therapy practice, what would be intellectual property? Would that be actually like how you run the business or is that something else?
[SANKEETHA] So that’s considered, that’s more about business processes. So how you run the business or business model, unless it’s novel or new, it’s not your intellectual property. Like you didn’t create it. But what we’re talking about is like the group practice has a logo and you file a trademark as intellectual property, or if you have a patented design or patented system that you file that patent with the United States patent and trademark office, that’s an asset. We’re talking about intellectual property at basis, what if you all created a course together and that’s content that’s could be copywritten with the United States copyright office?

So all of that is intellectual property. Who owns it? If you guys it together as a joint ownership, or did someone create it and then basically brought the other therapists on to maybe have a section on it or module on it, and then they would pay them for their time, but they have no ownership over the course? There’s again, many different ways. And for that, you’d probably get guidance from either a business attorney that does IP law, like trademarks and patent or copyright law as well and then you would get guidance on how that would be either created and then licensed out.
[ALISON] Okay. Interesting. I have a question about the trademark. So is there a certain point at which you feel like it’s worth it for a business to go through the process of getting their name and or the logo trademarked?
[SANKEETHA] Well, it depends if you understand where your exit is going to be. You have to protect everything first. You can’t enforce or assert your rights to something you don’t own. It’s that simple. And the greatest seal of ownership is to file for a trademark with the United States patent and trademark office, filing, and then receiving that trademark registration. However, some things just can’t be trademarked or some things just can’t be copyrighted or some things just can’t be patented. So a lot of protection comes from making sure you have solid NDAs, which is non-disclosure agreements; the street name for that is confidentiality agreement.
[ALISON] Okay. You can please shed some light on this, but my understanding was, if I wanted to have my practice be in multiple states, it would make sense to have the name and the logo trademark, versus if I’m just going to keep it within my own state and it’s already registered with the state, then I don’t necessarily need to go to that extent. What do you think about that?
[SANKEETHA] It’s a terrible answer, but it’s a solid one. Is it really depends. Filing a trademark is a national filing. The office is actually out of Alexandria, Virginia, and it protects you on a national level. You’re creating an office. So here’s the deal. Your company name isn’t going to be most likely the name that you’re going to trademark. Your product name is probably what you’re going to be trademarking. Like let’s use Better Health, as an example. Better Health is the name of the company and they probably have a trademark on the name as well, too, just because of how much it’s used, but you could be Leslie Therapy, LLC, which is the name of the company, but you have a product that’s called, ‘have your best life course.’ So you would trademark ‘have your best life’ because it’s going to be utilized and more recognized by more people and more people would have access to it.
[SANKEETHA] Okay. That makes sense.

Well, it’s kind of like you’re kind of doing the scales here as to see which one is worth more for you to do. Ideally if you’re going to stay within your state and you’re not going to be doing any excessive products or courses or whatnot, which I do recommend that you do or do something where it does push your boundaries so that you actually expand beyond your current offerings at this point, then I would recommend that you trademark. Now you shouldn’t, it depends on whether you trademark your company name or your trademark an actual product. If it comes to that, I would trademark your product because that’s the one that is most accessible.
[ALISON] Okay. That makes sense. There’s so much to all of this and I feel like there’s so many things that I could ask you about, but I guess just kind of sticking to things that are relevant to service-based businesses or therapy practices, are there other things that you feel like, having worked with that population that you see people overlooking or something they should be doing that they’re not doing? Any advice?
[SANKEETHA] So generally what happens is most people don’t file their documents appropriately or wait too late to get their contracts in place, their agreements in place.
[ALISON] Yes. So really just from the get-go making sure you have somebody looking over your documents before you hire anybody or before you start seeing clients yourself, that kind of thing?
[SANKEETHA] Yep. Yep.
[ALISON] I know you said that you have a giveaway for the audience. Do you want to tell us about that?
[SANKEETHA] Sure. It’s a, you can book a free discovery call with us, and me specifically, where we would actually talk through your Sale Ready VIP Day. So what that means is we’ll find out your exit number. Your exit number is the number that you would sell your company for and when that would be. So that’s your discovery call, to sit down and we can talk through what you currently have. Now it’s a lead into the VIP day where we actually give you a plan of action on how to get to that number. So we break it down over a course of four to eight hours in one day and we talk through your current assets and give you a plan of action of what to do and how to do so and what kind of assets you should be creating as well too.

So we start with the end in mind, and then we break it down from that point. This first call is completely free and it’s just for us to figure out, when are you ready? What would be your sale ready? How can you be sale ready? The idea is that you would create something, a number and goals, so you’re always ready for someone to buy your company or for you to sell it to the best buyer at that point.
[ALISON] Awesome. We’re going to have that link in the show notes in case anyone wants to schedule that call. so definitely check there for the link. And Sankeetha, if anybody would like to contact you or learn more about what you do, what’s the best way for them to get ahold of you?
[SANKEETHA] So you can definitely check us out at www.selvalaw.com. That is the law firm that advises Massachusetts and New York residents and companies. And you can check me out specifically at www.sankeetha.com. And that’s usually where most of the speaking or podcasts interviews already happen as well too. And you can contact us directly there.
[ALISON] Excellent. Well, thank you so much for joining us today. I really appreciate you taking the time and all of your expertise. It was great.
[SANKEETHA] Thank you for having me. Appreciate it.
[ALISON] Thank you again to Brighter Vision for being a sponsor of this podcast. I’ve had a Brighter Vision website for five years now, and I love it. I would recommend it highly to anyone. And if you want to get the discount that we mentioned earlier in the beginning of the podcast, go to brightervision.com/joe.

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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.

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