How to Prepare Your Practice for Sale

Selling a practice can be the largest and most important deal of an entrepreneur's career. Whatever prompts the sale, selling a business has both financial and emotional consequences.

In the best of all worlds, the owner must prepare the practice for sale at least one year in advance. Assessing the financials with a view toward creating audited financial statements and projections that illustrate the practice's revenue and growth potential should be the starting point.

All financial records should be documented so that potential buyers can evaluate the practice and so that a new owner can transition with minimal training.

Next, examine your supplier and customer contracts. Make sure terms and conditions will not expire or require renegotiation as a result of the change in ownership. And consider terminating any contracts that might not add value to the potential buyer.

Take time to review and document company policies and procedures that exist as unwritten rules. If necessary, create formal documents that clarify how the practice actually operates.

Review your real estate and equipment leases, and material contracts, especially if your practice is tied to its location. Make sure the lease or contract does not expire or require renegotiation at the same time you plan to sell your practice. If the location will discourage buyers, consider moving the location before you put the business up for sale. Take a view of the leases and contracts from the buyers prospective.

Fully evaluate and catalog company assets, including property and inventory. If you delayed investing in computer upgrades designed to manage and control the flow of inventory, now is the time to modernize.

Finally, don't forget about your employees. The loss of key employees during a sale can jeopardize a deal. Document your historical and current employee headcount by job and function. Key employees may be crucial to the new owner's success, so it's important to determine which employees are prepared to stay with the company both during and after the transition. And remember, its important that employees don't hear about the pending sale of the company from a third party.

- By Hedley Lawson, Jr.

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A Performance Appraisal Check-Up

A performance appraisal system is key to helping employees grow and develop on the job and can help you to identify and reward your top performers. At the same time, a good system will assist you in identifying sub-par performers and developing plans to either improve their performance or transition them out of your practice.

If you're updating your appraisal program—or looking to implement one—here are some points to consider:

1. Appraisal form. Companies today are taking many different approaches to formal evaluation systems. Some organizations rely on a brief form of two or three paragraphs, while others use elaborate rating schedules and multi-page documents to evaluate their workers. How elaborate a system your organization uses depends on your needs. You may need to use different forms for different categories of employees. However, all appraisal forms should embody these two elements: 1) They should cover all relevant performance criteria; and 2) They should be understandable to both the evaluator and the employee.

2. Ratings. Rating scales are relatively easy to develop and can be adapted to many kinds of jobs. In any event, try to focus on qualitative aspects of one’s performance as opposed to numerical ratings.

3. Job description. Accurate, detailed job descriptions are the building blocks of your evaluation system. Make sure that all of your job descriptions clearly describe the skills, knowledge, abilities and competencies needed to do the job, and the duties the position entails.

4. Appraisal period. Most organizations evaluate employees periodically, usually annually on the anniversary of each employee's hire date. Some firms review all employees at the same time each year. Quarterly formal evaluations are never too often to provide positive or negative performance feedback to employees.

5. Delivery. In most cases, the supervisor or manager will be delivering the employee’s evaluation. In some situations where job performance is sub-par, a human resources representative may choose to sit in on the appraisal with the supervisor.

6. Training. Make sure your organization's managers and supervisors are thoroughly trained in the specifics of the performance evaluation and in how to effectively conduct the meeting.

- By Hedley Lawson, Jr.