The Art of Preparation and Negotiation: Knowing Your BuyersIn this second instalment of the series on Optical Practice Sales, Dominic Watson, Director of Myers La Roche, explores the main profiles of potential buyers:
As a business owner you will no doubt have had plenty of experience of interviewing staff during your career. It is amazing how well some candidates present in an interview situation and how different they can be when you engage them. With more regular contact the interview mask soon slips away and the real person and their true attitude, ethos and motives are revealed.
Exactly the same applies to prospective practice buyers, but the stakes are significantly higher. Most buyers present well during early communication and contact. It is only with further, deeper contact, normally during preliminary due diligence, negotiations or once a deal has been agreed and is with lawyers that the truth is revealed. The sale of your practice and getting the measure of prospective buyers is one character judgement you cannot afford to get wrong.
We have developed a simplified buyer classification to help you appreciate and obtain a basic understanding of some of the most common buyer profiles. Obtaining a full understanding of their merits, motives and tactics will go a long way to ensuring you don’t back the wrong horse for the sale of your practice.
For owners, the optical practice sales ecosystem is a whole new and unfamiliar world. After 20 years in this niche, my team and I have developed a pretty comprehensive understanding of the motives, characteristics and tactics of the different types of buyers in the marketplace.
Know your buyers: different types of buyers carry different merits and risks
LearnersTheses are inexperienced prospective first time buyers usually with good intentions, but learning on the job. Our team work hard to mentor them through the buying process.
Value BuyersInterested in any practices within their catchment area or regional territory. Their practice acquisitions strategy is a numbers game: E.g. In any given year, they may place 30 low offers on 30 different practices to locate the one distressed seller prepared to take a low offer in return for a quick and certain deal. For smaller practices they may only be interested in the record cards, which they may move to a neighbouring practice already under their ownership.
The Straight ManOpen, honest and frank. Play it straight down the middle. Generally easy to deal with. Tend to have a clear understanding of what they want and are prepared to pay what they think is fair value on reasonable deal terms. Can be inflexible in a competitive situation.
PlayersThe type of people who give business and capitalism a bad name. Ruthless and hardnosed they seek to agree a deal on good headline terms, but then deliberately apply a strategy of attrition to wear down a seller during the legal process, often changing the terms of a deal at the last minute. Fortunately there are not many of these type of people in modern optics so we don’t want to overegg this risk, but get involved with one of these pirates and the cost will be high.
CharmersCharismatic, likeable and successful existing practice owners.
Understand that there is a significant emotional aspect to a sale for most retiring owners. Use this knowledge to capitalise on their charm, likeability and charisma to persuade other practice owners to sell to them, even though their offer is unlikely to be the best available deal.
Charming ChameleonsNormally highly experienced: ambitious – fast growth companies. Fiercely protective of their reputation within the industry and masters of wining and dining, charming and schmoozing – both directly and indirectly via carefully crafted networks.
Highly adaptive in their acquisition strategies. In carefully managed sales, where the seller has invested in a professional negotiator they may pay decent prices and agree good terms. However, they are masters of using historic deals and third parties as case study references, whilst offering less attractive terms when in exclusive negotiations.
If you have a quality practice in the right area, then you are likely to be approached by a charming chameleon who will seek to keep the dialogue as personal and exclusive as possible. They will try to influence how the practice is valued – using anecdotal evidence from another person then sold to – or recommending a particular preferred [pet] party to value the practice using an overly academic and technical valuation not fully reflective of market conditions.
Chameleons often leave a seller feeling like they got a great deal, when in fact they have been hoodwinked into relatively poor terms.
Strategic BuyersSome practices carry a strategic value that increases the appeal to a particular buyer and the price they may be prepared to pay. Motives include:
• Protecting a local practice they already own from new competition, or where there is scope for a merger
• Securing your glazing contract
• Cross selling audiology to your patient base where they have an existing underutilised audiologist available
• Fulfilling ambitious growth targets as part of a wider business plan
It is important to note that many of the other buyer profiles can with the right situation change their motives and strategies for a strategic purchase.
* This is not an exhaustive list of 'buyer' profiles, more an illustration to provide a feel.
Getting it right
We hope this high level overview of buyer profiles proves a useful introduction to this aspect of the marketplace. Over the coming months, we will continue to publish further information on the optical practice sales market. It is our hope that by increasing awareness of the true nature of the market place and what is involved in obtaining maximum value from your practice, more owners will proactively engage in exit planning at as early stage as possible.
In the meantime, tread carefully with any approaches or unguided forays into the market. If in doubt, please pick up the phone and talk it through.
As the market leader in the optical practice sales field for more than 2 decades, we have built our reputation by providing high value, honest, impartial advice with integrity. We can help you confidentially understand whether a party is truly to be trusted and whether a deal on the table represents full value for your practice. Call 0161 929 8389 to find out.