In this months Morgan Cox physiotherapy blog we publish an interview with a physiotherapist who successfully built up a small chain of physiotherapy clinics but unfortunately ran into problems during the sales process.
Can you tell us about your physiotherapy clinics?
I qualified as a physiotherapist in 1992 and after a short spell in the NHS went into the private sector. I initially worked as a freelancer and advertised in the local paper and in various gyms and health centres. After 6 months I had enough work to take on my own freelancers and to leverage the brand I had developed and the good local reputation and demand. Within 5 years we had purchased the freehold to a terraced building and had 5 treatment rooms, mainly for MSK work but also other therapies.
This model served us well so we used this business model in another geographical area so as not to compete with our current customer base. Within 15 years of starting we had 3 clinics, 2 freehold properties and plenty of staff.
Why did you want to sell?
You are right, we had developed a very successful business however all our equity was wrapped up in the business. We wanted to cash in and take out some of the equity we had built up. We also decided to privately educate our children so we needed some cash to finance that.
How did you go about selling.
We put a couple of adverts in the CSP journal front line however this really started the next cycle of events. We also approached our major competitor to see if he wanted to take over our clinics.
Why can you explain more?
Unfortunately it wasn't difficult for our staff to guess that the advert was us. Two of them immediately left to work for our major competitor and others started to think about getting employment elsewhere. They were all worried about work and what might happen once the clinics were sold and if they would be kept on.
We also arranged various meetings with the owners of our major competitor. It made sense that he took us over as he would have had economies of scale in the market. He asked to see various financial information and to conduct due diligence on our business. We thought this would be confidential however within 2 months he had poached several of our large clients by offering them better terms than we had agreed with them. We believe he also used the fact that we might sell as a deal clincher.
Did the local competitor end up buying your business?
No.
Did you speak to a lawyer to get some legal advice?
Yes. We were told that had we signed a non disclosure agreement then we could have taken action to prevent the information being used against us and also to claim lost revenue. Unfortunately I didn't know about non disclosure agreements as this was the first time I had tried to sell a business.
Way did you do next?
We paid for the services of a UK expert in this field to provide consultancy to help us get out of this mess.
What was the advice?
the Morgan Cox team advised me that we had initiated a fire sale. We could no longer service our work due to staff shortages, our income had dropped due to the loss of our larger contracts. Their advice was that the goodwill value had been damaged and hence the achievable value for the business was likely to have been reduced. We were advised to focus on rescuing the business, reinstate it to a sustainable level and to take the business (and any thought of a sale) off the market.
What happened next?
It took us several years to get back to where we were previously. We subsequently sold the business for an amount which we were very pleased about. Naturally we used the UK experts Morgan Cox to represent us during the sales process. They were very professional and made the whole process a lot more bearable the second time around.
What lessons did you learn?
Know your limitations. I was we'll outside my comfort zone and expertise trying to sell a business. It's a professionals game and even a minor mistake can cost hundreds of thousands of pounds and years of hard work.
Utilise the services of experts as it is cheaper in the long term to get things right the first time.
