How To Buy And Sell A Clinic During Economic Downturns

Whenever I talk to like a buyer or a seller, like usually like I always ask them the first question is what's the most important thing to you? Is it price or the terms? Because sometimes if you can't get the terms that you want then maybe you can negotiate a little bit more on price. But if you, but it could be the vice versa too. So which one, which one's more important? How much money you get or how fast you get out? But if you set up your business well enough then you can probably get both. But if you don't have that option then you got to choose.

How to get smarter in business and in life. This is the question and I'm on a journey get you that answer. I'm going to interview the world's top entrepreneurs and deconstruct their winning secrets. Going to talk about everything from marketing money and living a bucket list life. I'm Rick Lau, I healthcare entrepreneur. I grew and exited my 127 locations in my 30s. Welcome to the clinic boss show.

Yeah, just a quick thing like usually when people buy gold there's the fear of recession. Gold price hasn't been moving but we keep hearing a lot about recession. Like what are your thoughts on a recession? Do you think we're going to get one? Do you think just gonna chop through this hallway, do you think we're still, we're gonna go up? Like what do you, what do you think is gonna happen with the market face?

Well, I mean I think everyone's kind of feeling the heat of the market already. Right. I think, I think we're kind of in already a pseudo recession of some sort. Right. Just spending's gone down quite a bit. You know, like my, my big indicator of what kind of environment we're in was cars, car stock, not like stock prices but like availability of cars. Right. I was talking to a few of my buddies at different dealerships and, and they're saying yeah, stock's gonna getting back up pretty good because no one's buying cars. And we're kind of getting past that crazy uptick in the used car market. It's coming back down again. So which is kind of normal but it's, we're not in that, you know, hyper balloon state where everything was, you know, selling like hot cakes. Now it's coming back down. So I think we're kind of in a pseudo recession. But, but I think it's interesting because I think there's a generational impact where honestly I think my generation and the newer generation, we're just not as good with money, I think, as some of the previous generations. So it's like the impact of the external market sometimes, like, doesn't register fully and you're just still spending. You know, you just.

Honestly, Honestly, though, I don't think it's a. I, I don't think it's your generations, like sort of core personality issues. I don't think it's that issue. I think inflation has really caused people to change their behavior. Right. Because prices keep going up and sort of the mindset is like, well, if price is going to go up next week, I should buy it today. And so you kind of have to spend that money right. Before it becomes a little bit worthless. Right. So, but I guess the other question is, do you think recession is going to impact our clinics and do you see it impacting your clinics right now or like, what's, what's sort of the sort of general tone right now?

Well, I think this is where, Excuse me. This is where, you know, our line of business is a little bit more protected in these times. Right. I think. What was it, we're talking another time. Was it you? I was talking with somebody, I was talking with in, in these times, people, like a lot of these big, you know, finance moguls, they start moving some of their money into healthcare stocks because they're not looking for, like, massive growth, but they're also trying to reduce their downside. Right. And so. So you do have a little bit of that controlled effect. But. But what I am seeing, though is like, people expect a lot more value because they understand that their dollar doesn't take them as far in an environment like this. And they need to make sure that every single cent of that dollar is spent well. So there's a behavioral change, but people are still coming, but they're a lot more willing to leave the business, go somewhere else if they're not feeling they're getting that value.

Yeah, that's such a great point. I think that's. You're absolutely seeing that everywhere. What about, what about inflation? On people's expectations of wages, stuff like that? Like, obviously everybody's feeling the pressure. Yeah, yeah.

Especially, I mean, I guess especially when you look at our businesses. Right. We have, we have like a few different. Every department, you know, has a different, you know, salary level. Right. And especially if we look at some of the departments that have lower salary levels, they're going to feel it a little bit more relatively. Right. And so there's going to be increased pressure on increasing some of those wages, you know, the, the inflation is not just like based on the percentage that's increasing. Like, yeah, there's that, you know, percent that's increased in terms of prices, but just everything's getting less and less livable. So, you know, the, the wages have to change dramatically and very quickly to keep up with that. Right. Especially if you live in somewhere like Toronto or Vancouver. Right. It's just, you know, like kind of that's why the wages are so different now in those areas because, you know, it's too hard to, it's too hard to, to be able to get paid what you were getting paid, let's say, like not that you're getting this exact same amount, but the level like percentage wise of revenue that was being spent for some of the hourly staff that you have that aren't clinicians, you know, that has changed quite dramatically just because of how every, how much more expensive everything is. But I find it's harder and harder to increase the price just as fast to make up for that cost because again, people are also getting tighter with their own money. The consumers are getting tighter with their own money. So you can't just beef up 25%, you know, and just be like, yeah, we'll give you guys extra 25% boost as well. Because you have to consider all the factors because if you do that then less people come in. Now you're taking a hit on revenue. Yes, you've increased 25% but really you've actually taken a 10% haircut because people are coming in. So there's that balance. Right.

It's kind of, it's a fine balance for sure. It's a crazy balance. And yeah, I've definitely noticed that. I mean, I definitely haven't noticed it in the revenue side of the business or the new patient side, but more on the cost center side. I think there's definitely a lot of pressure there and I think everybody's feeling it for you. But that's, we sort of went on a tangent there. That's not really the topic of the show. The topic of the show is buying and selling clinics, which is we're going to get into. So everybody, I want to welcome you to the clinic box. Joe, you know, I am not Rick Lau. I'm Paul Moon. So if you're kind of confused, here I am hosting the show today and I with rick, we exited 120, we grew and exited 127 clinics. But today we're on a journey to learn from some of the best healthcare entrepreneurs on how to grow and scale your healthcare business. So if you like the sound of that, you're gonna really love this show. And I've never really done this before. I've never done a podcast. So to make sure that I'm in my comfort zone, I brought my business partner, Saroosh. You know, after I exited my last company, I never thought I was gonna get into clinics again. But Sarosh came into my life. He got me all excited about opening and operating clinics again. Super ambitious, really great guy. And so, yeah, I invited you to, to the podcast, man. So what's going on? Why don't you introduce yourself and tell a little bit about your history, your growth story and, and then we'll get into buying, how to buy and sell clinic.

I'll put this out there too. I had invited Paul on many times on my previous podcast and he consistently decline. This is a big deal for me to say yes on your first ask. I'm just saying I'm putting that out there.

I appreciate that, man. I appreciate that for sure.

Yeah. So I think this kind of the journey really started and with actually the podcast with interesting enough, that's when really there was a big shift in my mentality of looking at a little bit on the. The business side, the team side, organization side of healthcare. Cause I felt like there was such a, like this, this, you know, healthcare is so green in general, but this area was especially green and it was just so intriguing because, you know, there's so many really interesting entrepreneurs out there in the industry and I loved what they were doing. Right. And I wanted to.

Yeah, just, sorry, just to give a little background, had his own podcast where he would interview business physios from the industry and he started this podcast while he was in school. So he was very sort of entrepreneurial even back then. So just, just. So for people that don't know what's.

It called again, it was a PTBC podcast. I mean me and Slava, in case you ever watch us, we co founded it together, we created it together with. And Justin was involved too. So it was a really good team. And we had Tej, one of other buddies involved with it as well. Right. So yeah, it was a group of us that were really interested in this. And so through the podcast we. That's when we start to really reach some of the other people in the industry that had done great things. And that's when we first, you know, got in touch with some of the CA team. And Paul, you're the last person I met on the CA team. But you know, Best for last, right? I don't know if that's. If that's the true. Say, hopefully none of the other CAT members are watching that. But hear that guy.

That's. That's. That's truth if I ever heard it.

But yeah, so that's how we got connected. And then we had that conference and you know, after that, that conference that I attended as a volunteer and talking about my experience as a new grad, that's when we connected. And you mentioned about an opportunity in Edmonton. So, you know, Paul dragged me to Edmonton to. To do some work on this clinic actually right here. Movement physio. That's when the rebrand happened and with our current business partner Matt as well. And so that was the first test pilot to see. You know, I wanted to be an entrepreneur in this space. I wanted to be involved with growing clinics and, you know, and I know Paul, you know, I've had like the big end patients since the very day. And, and I think that was the real test to see if this was going to actually work. And I think you have to do that in life. You can have ambitions, but if truly you're not good at the thing you're trying to do, you know, you gotta. There's some realism that has to hit. And, and for me, luckily, it did kind of feel pretty natural in, in kind of the things that I was doing with the clinic. We did grow that clinic to about four times the size in terms of revenue, and so things were pretty solid. We took that as a model, started to kind of continue to put that into the other clinic and market mall and Freedom. And now with cura, one of our newest kind of clinics that has joined the group and just kind of continuing that way to really like on a mission to build really strong businesses. It's not about really now number of locations or anything, but it's really creating really strong clinics that effectively everybody can be proud of at the staff level, the management level, the ownership level. Everyone can be proud of what they built. Right. So that's where we're at now.

Yeah, 100%. And, and I really actually appreciate Surush and, you know, all the things he's done. Because one of the key things that I've always known is that if you actually have a struggling business, one of the best things you can do is actually find a great leader. You find a great leader and put them into that business that actually takes care of almost 80% of your problem. So we've done an amazing job. You're on your fourth clinic now, how many clinics do you have in the pipeline that you want to acquire in the next little bit?

Well, hopefully two or six more, but in the next like 12 months I'm hoping. But you know, we'll see maybe, maybe more. We'll see.

Yeah. So growth is really fast and like again, this has only been like a two to three year journey for you. Already on your fourth clinic, going to, you know, hopefully another six, get to 10, that sort of thing. And ultimately the goal is to get much higher multiple, which is great. Okay, cool. So, so that's really your background and you actually deal with a lot of clinical owners who want to buy or sell this their business. What are you noticing right now with buyers and sellers, like, what's the market? What's the overall sentiment in the market? Buyer's market, seller's market, like what's sort of the sentiment going on and what sort of. And actually, maybe I'll just leave it there. We'll get into the mindset a little bit later. But what's sort of the sentiment happening right now?

One of the most frequently asked questions I get is how can you help me grow my clinic? So every year we put together an annual event called the Clinic Boss Summit. It's basically the Woodstock for everyone interested in growing or selling your multimillion dollar product practice. You're going to meet over 300 of the world's top clinic owners. The network is going to be insane. It's three days. You're going to learn everything from marketing, finance, HR recruitment and cellular clinic. And the best part, it's going to be Orlando, Florida on January 26th is one of my favorite cities to hang out in January because you get the sunshine, palm trees and best theme parks we usually sell every year within the first couple of months. So grab your tickets now. Go to clinicxl.com to grab more details.

Yeah, and you know what, in the last few months it slowed down slightly, but in not, not a huge amount. Only because of just everyone's waiting for this interest rate. Is it going to change more? Is it going to go higher? So that inflation piece is relevant to this conversation because that does change essentially the behaviors of some of the buyers especially. Right. Because they're looking at getting the capital and now, you know, if the value of their capital is lower, then they got to, you know, seriously consider it. And especially like even I was talking to some, some banks for financing. Like some banks are, you know, at like 13% interest rates, right? 13, 14% interest rate, which is matching some of the Private debt, like we talked about that it's like, so people giving private debt, which is crazy. Like, usually the spread is big enough where you still want to go the bank route, but now some banks are getting close to the private debt. And, you know, now it's like, well, you can pick whatever one and go for it, right? But, and so what I'm getting the sentiment up until pretty much like maybe January, February this year, when the rate hikes really started to kind of have some effect, there was a huge thirst for buying clinics, right. Lots of people are looking and like, includes smaller PE companies, obviously, you know, about the larger PE companies. A lot of clinics wanting to expand their footprints, people wanting to get out into different provinces. So there's a lot of appetite for buying clinics. Right. But at the same time, there's also a lot of movement in terms of the sellers as well. Because what people are noticing is that there are these buyers out there. A lot of the, you know, we'll get into the mindset of things, too. But a lot of times, you know, a lot of business owners, what I notice is they don't set up their business in a way for longevity. They almost create a job for themselves, right? And at, at a certain point that gets really fatiguing, and you can't just continue that. And, and when there's an opportunity to get out because it's just so tiring sometimes, then they'll do it, right? And they'll want to, they'll want to sell. And they know the big corps are after them too. They know the smaller corps are after them. So everybody's kind of wanting to get into this transaction space in all the different provinces. And, and, you know, we see this too. Even when I talk to some of the, the funders, they're all like, they see this happen in the vet space, it happen in the dental space, right? They're. They're all wanting to get involved in healthcare and physio and, and Cairo is still so fragmented in Canada and same with the US that the opportunity for that is still there. Right?

No, that's such a great point. I think the interest rate thing is really, really important. Definitely at, at my, my level, where I'm seeing, like, some really big, you know, possible transactions happening, some are actually following through because of the fact that interest rates are so high, because these buyers are not using 100% of their own cash. They're going to maybe use, you know, 60% or 70% financing and 30% or 40% of their cash. But when you're when you're getting a, when you're getting rates like you know, anywhere from 10 to 13% that you would have to pay on that capital, it's going to put a huge amount of stress, not just on them, but also on the operating company that's a purchase. Right. Because they're going to have to try to pay that interest back somehow. Right. And so absolutely, that's, that's a problem. I'm also noticing at the sort of like the, the mom and pop shop level or at the ground level where transactions are happening, loans are getting a lot harder to come by from banks. Like banks aren't really financing as much. There's a lot of, you know, there's, there's a lot of debt covenants that can't be met because of those higher interest rate requirements. And so it's a very interesting sort of situation right now. But I do. What else. The other thing that I see is that because of this pressure and because of inflation and all that sort of stuff, there's clinic owners that are sort of suffering right now and they're willing to sell for a much lower price. Right. So prices, market prices have sort of come down a little bit and those buyers are sort of looking at as an opportunity for them to get into the market. So it's really, I think we're sort of on the same page. I think there's sort of like a very interesting sort of situation here. And what's, what's also interesting is that like Canada typically follows the US when it comes to interest rate hikes or interest rate, you know, pauses or drops or whatever. And Jerome Powell just yesterday said that there will be a pause, but he also kind of hinted that there might be more hikes coming down the pike or it might, his exact words were higher for longer, which means higher interest rates for longer. So again, that might put a little bit more pressure on the market as well. So very sort of interesting time right now. I do think, I don't know what you think about this, but because of all of the issues with high interest rates, it also does affect the government. So at some point the government will probably put pressure on the Fed to bring down the interest rate so that they can handle their debt, their debt obligations as well. Right. So I don't know if you have any thoughts on that, Rouge. But it's a sort of, it's a very, very interesting time and I think we're sort of on the precipice of it going either way. Right.

Yeah. And I think the the market's also not like forcing buyers, but it's, it's creating an increased awareness for the buyers on the deals that they actually take.

Right.

Spending a lot more time on due diligence, a lot more time making sure it's the right decision versus Let' say a year ago they were just throwing money at deals. They were just saying, oh yeah, we'll take it, it's all good, let's do it. You know, now, now it's a lot more sophisticated with their approach. And not that they weren't sophisticated before, a lot of the buyers are, are fairly sophisticated, but I think they're spending a little bit more time and more, more likely to say no than to say yes versus before it was a little bit more of a. More likely to say yes than right.

No.

Right.

Yeah, that's a great point. That's a great point. Now, now, I mean you, because we, we also run a marketplace and you were, you're heading up that certification towards being a buy sell marketplace. What are some of the most common mistakes that people make when they're trying to, let's say, sell their clinic? Okay, so let's say you're a seller, you have a clinic. It's a sort of mid sized clinic, mid to a large clinic. Like what's the sort of common mistakes that sellers make when they're saying, hey, I want to sell my business. Where, what do I, what are the first, first steps I take? Maybe that talk about valuation, talk about list, talk about.

I think the first mistake a lot of people, a lot of sellers will make is actually not understanding on what a buyer is looking for. Because a lot of times I find people put a number on their clinic based on how hard they've worked over the years. Right. And that's, and you know what? Like that I totally, and that totally makes sense. Right. I think the thing that is important to consider here is that when you're building a business over time you have to look at it objectively and all the fundamentals you're putting into place. Because if somebody is buying a business, it's not like they're buying a piece of real estate. Right? You can buy like a piece of real estate and that's a home that's a complete tear down and not touch it. And maybe over time, and if it's in a good area, it'll still increase in value. Right. But a business I find at least functions a little bit differently. Where, you know, I think when you look at it from the perspective of the buyer, they want to, when they're putting money in, especially in a market like this, when they know cash might be tight, they want a, not a guarantee, but they want as close to a guarantee as possible that they're going to make a return on that investment over a certain number of years. And if that's like decades, then that's not going to be a deal that they're going to want to take.

Right?

So, so yeah, first thing really is the buy. The sellers, I think, I think would need to do a better job of better understanding of what they're looking, what the buyers are looking for, because that will allow them then to leverage the, the actual fundamentals that they currently have to get a better price. Because then give me some, give me.

Some real exact like real examples like talk about like you know, maybe some numbers or practical things that people are sort of, you know, maybe their expectations are out of whack. Right, so let's use some real numbers.

Yeah, okay, So a common example I've seen in the last year or two with some of the people that are looking to sell is, you know, and this is very common in our industry. We have owner operators, right? So essentially clinician owners, I call them, right? These are people who work clinical hours and, but they're also the owner. And so you look at their financials, they have for example, 3 to 400k EBITDA on their profit on their financials. Looks awesome, right? You're like, wow, this 200k, but 150k. But whatever the number is, it looks great. But when you actually do your due diligence and take a look at how the fees are being paid, you might notice that, well, this person might not actually be paying themselves a salary at all, right? Or they're paying themselves a salary. I mean if they're not being so fee split, but they're paying themselves a salary, that's a fraction of what the market would pay for a clinician in their, in the amount of experience they have and in the role they are in. So let's say they bill 500,000 a year, but they're only taking a hundred thousand dollars in income. So obviously their financials and look great, right? And so, but you're not going to find a Cairo or physio or massage is willing to take 25 fee split or 20, sorry, if my math is off 20ft, like there's no way, right? And so, and if you, if the person is going to leave and some of the, again, some of the sellers want to leave very quickly, like let's say they want to sell within like six months, they want out. If I'm coming in as a buyer, and I see that, and you're going to leave, you're taking $500,000 of business probably with you. And I mean the ideal is that business stays, but let's be realist, think about it, doesn't stay all the time and maybe a fraction of the space. So now let's say your profit was 200k off that 500, 000 and you leave and you take the 500k with you. Well, yes, I saved a hundred thousand in salary, but I'm actually still taking like 150, $200,000 loss every year. And so you have to, you have to understand like what the buyers are looking for and what's securing that investment for them and then work backwards from there. So if you're seeing that a sentiment from a buyer, the first thing you got to do is get your revenue to less than 10% of the clinic revenue, for example, because at that point it's a little bit more flexible and if you actually pay yourself fair market value, then even more reason that those financials are going to be a true reflection of what the actual performance of the clinic is.

Yeah, I think that's such a great point. A lot of this happens to a lot of like mom and pop shops where yeah, they actually do quite a bit of the billing. And what Surish said there was key. The goal should be to try to get your revenue down to about 10% of the total revenue. It doesn't mean you stop treating, it just means get better at recruiting, get more new patients through the door, increase your top line revenue so you become a smaller portion of that total revenue. Right. And I think that's critical. And the way to do that clearly is through setting up systems and processes and all that, like putting up your work structure like things that we feel really strongly about. Those things are the, are the things that are going to make your clinic a turnkey business. That's what a buyer really wants at the end of the day is something that is just running, can continue run. And it doesn't matter if they're a single physio or a big private equity firm. They want to know that your business has stability and can be run literally from day one with the same numbers, same metrics, same profitability. Right. What like does that, does that align with what you're saying there?

Yeah, 100%. And I think the key thing is if you do look at all the things that they're looking at work backwards and try to achieve those goals. Every both parties actually end up winning, right? So a lot of buyers, they already have other clinics, for example, or they're growing a network of clinics. So let's say you, you know, fix that situation. You diversify your assessments, you've got a org structure in place, you've got your scoreboard, your systems in place. Everything's running really well. So the key test is can you take four weeks off the clinic and the clinic doesn't take a hit. Right. If you take four weeks off and the clinic is taking a hit, then it's not at that level yet. It's not a true business. You know, you're still in that job like situation, right? So once, let's say you do get it to that point and you're truly having a $300,000 EBITDA number, and let's say somebody comes, it's a one clinic location, just as an example, they buy for four times right now you got $1.2 million price tag on your clinic as an example. If the person's paying $1.2 million, they're going to also win because if they have five clinics, then you're, this is the sixth clinic. Then off the 300k, instead of a four times multiple, they might actually get a six times multiple in the future. So they're getting a 2x return immediately because they're bringing the network. So they're willing to pay that 1.2 million because they're going to get that return as well. So everybody wins. You get what you want, they get what they want. And the business is actually really strong and it's better for the industry because now we actually have good businesses.

Yeah, 100. 100. That's such a great point. So what about, what about like, I know there's a common objection with clinical owners who are selling where they're saying I don't want to trans, like I don't want to have a long process or I don't want to stick around or do I have to stick around? Like what are my obligations with that? Like what are you noticing lately with like the transition obligations of like the seller?

Well, I think it kind of goes back well. So there's the obligation, so there's the need and the want. Right? So I think we gotta separate those for a second. So the, the want, I want to address that first because based on the market, like what you were, we were talking a little bit about once somebody gets the pain point of wanting to sell their want is to get out as fast as possible. They don't want to deal with the BS anymore, Right. They just want to get out. And that's totally fair. Emotionally, I get it, right? Like, you want to be out, you don't want to deal with it. Right. But the need is a little bit different there because again, if you do want a deal to actually be positive for both parties, there needs to still be a transition period. You can't just up and leave because the risk of attrition goes up significantly the shorter the term of the transition. And one of the things that is a big risk for any of these clinic acquisitions is the attrition piece, right? If, like, you know, let's say you. You're typically somewhere around, like, you're expecting like 10 to 20% of attrition, that typically happens when a client acquisition occurs. But if that risk goes to like 50% or 60%, because you're kind of heading out and now all the staff are like, well, I don't know this owner who's this person. And they're not even in the province, you know, that's going to create a huge tension point for the buyer. Right? And so that's why a lot of buyers are trying to mitigate that risk with the transition period, which, again, if you were to do an ideal situation, is that if the business is set up properly and you have all those fundamentals in place, then your transition, you can get away with a shorter transition period. But if your fundamentals aren't in place and the business is completely out of whack and. And it's going to need a lot of work to actually get it to a stable state, then your transition period is going to be longer. But at least you know, you still have a way out, right? So whenever I talk to, like, a buyer or a seller, like, usually, like, I always ask them, the first question is, what's the most important thing to you? Is it price or the terms? Because sometimes if you can't get the terms that you want, then maybe you can negotiate a little bit more on price. But if you. But it could be the vice versa, too. So which one. Which one's more important? How much money you get or how fast you get out? But if you set up your business well enough, then you can probably get both. But if you don't have that option, then you got to choose.

That's such a great point. I love, I love how you put that right. Like, it's the. It's. It's one or the other usually, right? It's do you want the terms or you want the price? And then you got to make some concessions on either end. Yeah, I love that. That's cool. Okay, so. So again, like, going back to the seller mindset, like, you know, one of the key things in a stellar mindset is, well, I know what my. I know my business, I know how it's performing. Maybe assume that you have all your stiff and processes in, like, how do you find buyers? Like, that's because I think that's like one of the key things is, you know, if you look at the real estate business, for example, lots of avenues to buy and sell your, your house, right? You got real estate agents, mls, ca, you got apps, you got all of this liquid marketplace, right? Like, what's a good way to forestell it where any city to sell? Like, how do they find their marketplace?

Well, I mean, you know, I think one of the things that, you know, with the accelerator team that, you know, we're trying to do is to create that marketplace because truly it doesn't really exist in Canada. It is hard. You can, you can look at some of the, like, business for sale pages. But, you know, I've done that route too before personally. And it. You don't find a lot of the businesses that you're looking for or maybe they're not the right type of businesses. Right. So right now I think, like, the best bet that probably is to actually go through the CA marketplace. You know, that's not, not a plug.

Right?

I'm just, just.

Yeah, yeah, I wasn't planning that, guys.

No, no, no. And I know, I know, but like, I'm, I'm being honest because, like, you know, I'm trying to think Back to like 3 years ago when we were looking for clinic acquisitions. Like, it was really hard finding, you know, clinics. You could door knock. Door knock, Right. Obviously don't actually show up at the business. A little different than house door knocking. Right? You can. You try to reach out to the owners directly. Some people want to sell, want to sell as a buyer. But, you know, you could probably reach out to different organizations or brokers or, or people that are looking to sell business. But again, you have to. Do they have that network of buyers as well? Right. So, you know, there's private equity groups I may want to buy, there's investment groups, there's some investment groups that are specifically looking at buying healthcare clinics or, you know, you might have internal people that want to buy into your business. Right? Those are, those could be Another pool of buyers, Right. So there's. There could be buyers in a lot of different places. I think the key thing is trying to reach out to all the different avenues while still maintaining the sensitivity around not having to put your entire laundry out there so that everybody knows you're selling. Because the other thing you want to consider is how fast does the staff know. Not that again, you're going to put them in a bad position. But people just immediately get internally scared. That was my job safe. What's going to happen. Of course, as an owner we typically have that in mind all the time, but they may not perceive that or you know, or think that. So I think it's important to keep that sensitivity. But yeah, you could have the internal pool or the external pool through the different business for sale sites and see if they have any buyers as well, right?

Oh yeah, I think, I think that was a good list. So you got your people in your clinic, you got all these other sites like the association websites and whatnot. You got potential brokers, other spots, but you also got people inside your clinic that might be insurance interested in, in buying them. So that's a good list. And you know, like we said, like shameless plug. Like we do have a marketplace. But again, no pressure if you guys don't want to use it. Edward Shane was asking actually interesting question here. What's a reasonable amount of time to stick around for a transition period? Like what, what is you being Bruce, in your experience?

I think some. I think deal size is important here too. If the deal is big enough, sometimes the transition is going to be a little bit longer. But on average, I've seen somewhere between two and three years is kind of the average.

Yeah, yeah, no, I like that. And if it's a really. What if it's like a really small, simple deal? Like what are you, what are you seeing there? Like let's say it's a clinic selling for, you know, it's only doing about 2,300,000 of revenue. It's selling for like the 80 to $100,000. Do you still see that long of a transition process or is it a little bit?

No. Yeah. The smaller the clinic that it gets, again, the risk of that attrition having an influence on the business goes down. Right. It's just, it's about just that attrition risk. The bigger the clinic. If it's a $5 million clinic, like 20% loss of 5 million is a big deal. But 20% loss of 300,000, could you replace that pretty quickly? I think so, Right. So realistically, it kind of depends on that. So you can have these deals that could be six months to just basics or even some of them if they're small enough. It's more of an immediate thing. Just come in, take over, jump in. Maybe it's a few weeks, couple months, something like that. But on average, when we see our deal size, that clinic selling for somewhere between 500, 000 to a million dollars is somewhere between that one to two minimum years and then up to about three years.

Gotcha. Okay, cool. All right, so we're gonna, I'm gonna, I wanna shift gears a little bit and you know, ask you about your, your sort of personal goals here. What kind of valuations are you looking to get with your business? What's your mindset and what are your targets? Your target the next several years?

Well, I think the clinics that we're building, I'd like the valuation to be somewhere between 1 to 2 million minimum, to be honest.

As a multiple. As a multiple. When you sell as a group.

Oh, as a group. Oh, I say per clinic. Okay. As a group. I mean, it depends if we, if it's just a four or if it's the 10. Right. If we're somewhere in the like five to 10 mark, I'd prefer to be at least on the five times. Right. And somewhere in the six to seven. But again, right now the market's a little bit tight, so my expectations may not match the reality. Again, had we talked about this in 20, 21, summer, let's say, I think that could be a much more reasonable ask. Right. Because it was a little bit of a hotter market then, but, but at 4, for example, I think. Yeah, still I'd want at least a 5x on that. Just because there is four strong businesses all doing over a million, you know, that's a pretty strong business. There's lots of work, structures, fundamentals in place. So those are much more sellable businesses in my opinion. So I think I could argue for higher multiple. Right. I want to be reasonable, but not, not too cheap about the multiple either. Like something.

Yeah, yeah. It's really interesting because I think in the last little while, well, I've heard of clinics that, that are at the, let's say six to ten number of locations. So six to ten locations in the. A couple years ago, going for a 10, 10 to 12 times multiple. Right? Yeah, that number has come down to about an eight times multiple, which is very interesting. Right. And so I know for you, I think you're being a little Bit humble, but you're not going to stay at four to 10 locations. You're probably going to go to 2030. And so if you do try to achieve those goals then we are looking at like a 10 to 15 times multiple when the market turns around. Right. So I think that's going to be a little bit interesting time. But I do think what they, they also say a lot of like people say like recessions or down downturns in the market is the time to grow. That's where the opportunity is. You can pick up clinics for cheap, you can sell clinics at the same time, but you're not going to get as high of a multiple during the market. So for us it's the time to grow. If you are interested in selling, definitely you want to sell with a, you want to sell with a like minded group so that you get, you can, you can take advantage of those much higher. Right. So I guess maybe let's peek behind the kimono a little bit. What is your strategy to get them? Like how are you going to actually grow to a larger number of locations with having good systems and processes in place?

Well, I mean that's the first step, right, what you just said.

Right.

So I think you need to evaluate as to again when I work backwards I'm looking at all the things that a future buyer is going to look at. So you know, do if we have multiple locations like let's say we're at 20 clinics. I think the need for some of the centralization things that we're trying to do now is going to be very important. And I've talked to some of the bigger buyers like who wanted to buy us frankly, and that's what they've said. They said that the multiple like this is directly from them. Right. They said that the multiple will actually change if you have a more consistent central system across the clinics. And what I mean by that is your accounting is the same. Maybe it's under the same corporation or under a Queen Corp of some sort. You same EMRs, same standard procedures, you can have differences within the clinics but the more you create that connection and that standardization across the clinics, the better the chances are that the multiple goes up. This is again directly based on a conversation that I've had. Right. And so that was really interesting because it kind of validated what we're doing. Right. Which is what we've been doing all along. Right. Outside of the fact that when you do centralization, you know, strategies and put that in place, it reduces your headaches just on a Growth perspective. Like that's one piece of it, but, but the other piece is definitely that consistency is really attractive to people who are looking to buy a business that's multi sites versus having multiple different businesses with different strategies and different kind of standard procedures because it's like they're just being buying a package of four clinics versus a true organization of four clinics. Right. So yeah, and so when, when we look at like and we've sent this out to I think to some of the CA people too, but you know, I think the five like key things that we've been looking at is four or five key things at least is org structure looking at, you know, the people that you're recruiting, looking at your like procedures, looking at the diversification of the business revenues coming in as well as actually having a, a plan to centralize some of the, the main procedural items that you have in the clinic.

Like your EMR functions.

Yeah, yeah, the key functions. Yeah.

Awesome. All right, that's great. So I think we're getting to the end of the podcast. Do you have anything else that you want to kind of add? Like, is there anything, any sort of little tidbits of, of, of like really, you know, like things that you've learned over the last couple years that you think can make a difference if someone like someone's clinic owners, a clinic owner is selling or buying journey? Like what's, what's. Give us a little, a little piece of gold.

I'm gonna give two pieces of gold because I want one to be a message to the buyers and one to the message to the sellers.

Okay, perfect.

So if I'm talking to a seller, like just one like piece of like at least comments or advice or however you want to take it is that there's a lot of attachment to a clinic when you put your blood, sweat and tears into it. A lot of pain that a lot of owners go through that most of their staff don't know and probably will never know. I get it. As an owner, I totally get it. But you got to understand that the objective markers are really important in, in the sale. So the emotional piece is not going to get you a better price. Right. So you've got to know what are the objective things that the clinic needs or your business needs to get the best price and try to work towards that. If it's going to take you some time, take you some additional support, mentorship, coaching or whatever it is, seek that out, get that in place so that when you do go for a conversation with a buyer, you're best prepped to have an effective conversation versus saying, well, I worked really hard on this clinic, although it's losing money every year, but I've worked really hard and I'd like to have 800,000 for it. That's not going to work. Right. I think we have to be honest about that. Right. And then a message of the buyers is that it's kind of on the flip side is that you got to remember that these people did go through some emotional trauma running these businesses. So there is going to be emotions that you have to consider that emotion piece and have a conversation about it. Right. Keep an open dialogue and just know where they're coming from as well. And when you're trying to talk about transition or price, you know, understand that if they are truly in pain, that there is emotion involved and you got to separate that emotion and don't take it personally. Right. It's just, you know, if they have a different perspective, maybe the seller doesn't have a sophisticated understanding of how clinic valuation works or how you know or what you're looking at, which as a buyer you're probably looking at, when do I get a return on my investment or how long is it going to take for me to actually pay back just the price I'm paying for this? Right. They may not know all that, so it's good to educate them about those things because it's always a dialogue. Right. And then one message between the two people that I always say to make a deal actually close is it's oftentimes in these situations, it's never going to be the best deal for you as a seller or the best deal for you as the buyer. It's going to be always somewhere in the middle. So you got to be aiming for that so that everybody feels like they. They partially won.

Yeah, I love that. I think the best, the saying I heard from, if you know, it's a successful negotiation, if everybody feels like they've won or everybody feels like they lost. Right. Yeah, that's probably the best negotiation. So on that note, I think we're going to end the podcast. If today's podcast was the interest to you, whether you're buying a science clinic or want to get those double digit multiples, check out our links below. Check out the show notes below. I want to thank you very much for coming to the podcast. That was awesome. I actually learned something from a couple of things from you today, which I did like, I didn't know that you thought that way, so I thought those are great. Little tidbits that I'm going to take away as well. So that's great. And yeah, if you guys are interested, just check us out. Check out our link.

Thanks.

Have a great day guys. We'll talk to you soon.

Thanks guys. Talk to you guys soon.

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