PODCAST| 115: I Just Sold My Group Counseling Practice

 

How to Sell a Group Counseling Practice

John reflects on his experience over the past few months of selling his group counseling practice, including how he planned for this since 2013, some mistakes he made along the way, some things he got right, and the valuing and selling process itself. Have you ever thought about what your business would be worth, or whether anyone would ever want to buy it? This is an episode for every therapist in private practice.

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You’re listening to The John Clarkecast, and in this episode I’m just going to get right into it. This is a solo episode, and in this episode I’m telling you about my experience in just selling my group counseling practice. Long overdue for doing a solo episode, so here it is, and without further ado, let’s dive in.

Running a private practice isn’t easy and you need support. It’s not good to do it in isolation, and the chances are any challenge you’ve been through, someone else has been through it, so I want to help you. I want to invite you into my Business Made Human coaching community. These are small groups of therapists that work with me and meet with me every single week for an hour. It’s an amazing community. I’m helping therapists build a better business without all the overwhelm, helping them get new clients, dial in their marketing, scale their businesses, doing it all while not forgetting about the human part of running a business. That’s why it’s called Business Made Human. And on April 18th, I’m launching a new one just for solo practitioners in particular who also want to build an additional revenue stream, so passive income, an online course, podcast, et cetera. It’s a very, very, very exciting time.

So these groups only open up once or twice a year, so it’s opening up now. So if you’re interested at all, hop on a call with me at thejohnclarke.com/bmh for Business Made Human, thejohnclarke.com/bmh, and from there you can click on it. You can read more information and get all the nitty gritty, the pricing, et cetera, and if you’re interested, apply, click on Apply Now from that page. I’ve already got four out of the eight slots are filled. They’re already sold. They sold in four days, so I expect the other four to sell this week. So if you’re at all interested, hop in now, go to that page, click on Apply Now to get in touch for a call with me, thejohnclarke.com/bmh.

Welcome back to the show, everybody. I feel like I’m sitting down with a bunch of old friends right now, more or less, because I haven’t done a solo episode in a very long time. That’s why. And I’m excited to be doing one. I’m excited. It’s been a while, and we have a lot to talk about, so let’s get right into it.

The reason I haven’t done a solo episode in quite a while is just because I’ve been busy, just busier than ever, but in a more focused way, I should say, more focused than ever with the work I do…

…helping therapists get more clients and helping therapists build better businesses.

So we’ve been, yeah, just really, really focused on that, really focused on getting therapists really killer results and going deeper with our work and not wider and a working even better as a team, I would say. I’m going to turn my volume down a little bit and hope that I don’t peak out here.

So yeah, that’s why, but in this episode, I’m going to catch you guys up a little bit on my life for what it’s worth, and then I’m going to talk about really just a preliminary kind of talk about what it has been like to sell my group practice. This is something that I only know one other person who has done it, and that’s Kelly Higdon. Of course, it’s Kelly Higdon, a good friend of mine. And so I’ll preface all this with saying she’s the only one out there that I knew or could get ahold of who’s done it, and that made it pretty tough.

That made it pretty difficult to find help along the way, at least in terms of the nuances of selling a therapy business.

There’s a lot out there on buying any kind of business, right? So that information was helpful to an extent, but what we do is just so unique, and that’s not news to you, but it’s an important part of the equation, and that means that when I started my search for information around how to sell a business, which is probably a highly googled phrase, there was a lot out there. There was a whole lot out there, but it didn’t necessarily mean that I got a lot of good information right away. In fact, it probably just meant that I had to dig and dig and dig to find what I needed and to find information I could actually use.

So let’s start from the beginning. A mistake that I made a long time ago in building my first practice in San Francisco was I called it johnclarketherapy.com, and that was mistake number one because what it meant was, well, a number of things. Number one, once I had reached a full caseload and my marketing was working, I couldn’t really hire anyone to work under that brand. You know? Yes, I could do the whole John Clarke Therapy and Associates thing, but I just think it’s a lot harder to “sell” your associates when you’re clearly the boss of the place, which really implies that you’re the best, even if you’re not necessarily the best. So that would be problem number one.

Problem number two is you can’t sell the business. And you might be thinking, “Well, why would I ever want to sell the business?” Well, because sometimes you move, and it just so happened that I moved recently for my wife’s job, and because of that I needed to sell my group practice. Now, I did run it for a while remotely, and it was more or less fraught with … Is that the right word? Fraught? Gosh, that sounds like a weird word. It was fraught with issues, challenges, stressors, more stressors than it’s worth. Again, the nuances of our business, again, the sensitivity of our business and what we do, helping people who are suffering with their mental health, it’s just tough. Clients need to be very supported. Clinicians need to be very supported, and you kind of need to be there in person.

So it’s not to say you can’t do it or can’t do it with the help of like an in-person manager, right? But it just basically happened that that just wasn’t really the path for me. That wasn’t really something I wanted to do. That wasn’t something I wanted to do longterm, so I started to make the transition to sell the business, which is, again, just a crazy phrase to kind of toss around, right?

Yeah. So going back to something I did wrong in San Francisco was naming the business after myself and only after myself, so that personal brand, so to speak, could never be sold and could never really grow except for my own full caseload. So after years of building that practice in San Francisco and then wrapping up that practice, it was effectively worth nothing. Right? It was really worth nothing. And so it meant that all the work I did out there to build that business, to, quote, do the SEO for that business, to build the ads, to build the Yelp profile, the Google My Business profile, everything that went along with it, was really worth nothing at the end of the day.

What it was worth was these skills that I acquired in building it so that I could replicate them when I moved to Charlotte. Now, when I moved to Charlotte, about six months before I moved, I built a website. I built a Squarespace website and I did a decent job with it. I really focused on a site that would convert well, good client-centered copy, a nice visual. I had my good friend Trey, my graphic designer, create the logo for me and I said, “I don’t want this to look or feel or read as a therapy practice,” and he did that. I did some keyword research and plugged some keywords in, and then I started blogging my tail off.

What happened was…

…when I arrived to Charlotte, I had about six clients on the books for the first day that I was open.

That’s not very common, but that’s how it happened. Now, when I did that, I moved to Charlotte and I bought the domain charlottecounselingandwellness.com. Too long of a domain, first of all, but it ranked quickly and still ranks well, so you don’t have to have a keyword rich URL, but it helped at the time. I think it maybe accelerated the process a little bit, maybe 5%, a little bit. But overall, it wasn’t the URL that made the difference. It was all the other stuff that I did.

So anyway, I didn’t make the same mistake twice in that I named the business something generic with the knowledge that I might not be in Charlotte forever, and just the knowledge that, what if I ended up selling the business someday? So if that day ever came, well, I would want to have at least the option to sell it or transition it or whatever, even just sell the domain or just the website or whatever. And so I kind of held onto that, that little inkling, and I didn’t want to make that same mistake twice.

So that’s how it all started, so that would be kind of step one I think if you are looking at your business or thinking right now, like,

“What would my business be worth? Or how could I ever sell it? Or would anyone ever buy nancysmithlcsw.com?”

Probably not. So if you’re in the early stages of building your practice, you could certainly make a pivot now to something that could be sold. Otherwise, you just might think a little more carefully about other business ventures that you find yourself in and thinking about longevity and thinking about a “exit plan” for your business, which again, most people don’t think about, and most people are going to either leave or move or retire from their business, and again, it’ll be worth nothing. Why do all this work for nothing?

So that’s the first thing to think about is, if at some point I transition from this business five, 10, 15, 20, 30, 40, 50, 60 years from now, then what could it be worth? Would it be worth something, and effectively, could it run without me? I think that’s the absolute biggest question that you have to ask yourself if you’re thinking about any of this at all.

Again, if it’s Nancy Smith and Associates, then it’s going to be hard for that to run without Nancy Smith or without an Nancy Smith who comes and buys the business, which is profoundly unlikely I think. You can always look at the numbers on that, but probably pretty unlikely. So I think that’s really the first thing to think about. How could this business effectively run without me? How could it keep running just as effectively without me? Do you know what I mean? If someone just replaced me, how could this thing keep running? And that’s exactly what I built through my group practice. I did that very, very much on purpose, right? And I did it using the same strategies and techniques that I teach therapists now.

So that’s really the idea behind it is that I built something that would continue to churn, that would continue…

I built a machine that would continue to be a machine

and could showcase whatever clinicians were within that practice, and so that’s kind of the way I approached it from the ground up.

You also know, if you’ve ever heard a single episode of this show, that I’m a big fan of digital marketing and a not so big fan of things like networking or networking events or whatever. It’s not that I don’t value relationships, it’s that I don’t like to build my business that way for a number of reasons. I find it time consuming. I find it taxing. I find that everyone is just trying to get clients in those sorts of things, and again, in the perspective of a group practice owner, you can go out there as a group practice owner and network your tail off and then everyone will want to send clients to you, maybe. Best case scenario, they want to send clients to you, not your clinician. So there’s just, I just see a lot of problems with it.

And again, I prefer to set up automated systems online to get new clients consistently. That’s just how I roll. That’s how I’ve always done it and how I like to do it. I like to leverage the power of the internet to get more clients, so that’s the way I do it. You don’t have to do it that way, but that’s the way I did it, and that meant that what I could do in transitioning the business was to really just transition it and then have and trust that it’s just going to keep rolling. It’s going to keep rolling and growing and going to be a really good thing.

So yeah, so that’s a lot of what was behind it, was I think it all starts with the foresight that you might sell the darn thing at some point. Now, how do you figure out how much a business is worth? I’m going to tell you about a new acronym that you’re going to love. It’s called EBITDA. That’s the way they say it. People say it really fast, and someone in my own mastermind group that I’m a member of told me that. These are all business guys who’ve been doing this for like a lot of years.

EBITDA is basically how you value a business or one metric to value a business. What does it stand for, you ask? Oh, so first of all, it’s E-B-I-T-D-A, EBITDA. It stands for earnings before interest, taxes, depreciation, and amortization. I read that like I speak Spanish. I read it like in Spanish. Amortization. I don’t know what that is. I should look that up. Amortization meaning. Oh, okay. So I think that’s like…

…the opposite of depreciation, so the action or process of gradually writing off the initial cost of an asset, the action or process of reducing or paying off a debt with regular payments.

The key difference between amortization … Hope y’all aren’t listening going, “You’re a dummy, you don’t know what amortization is or even how to pronounce it?” Oh, gosh.

Okay. So I’m just going to say that it’s generally the opposite of depreciation. A period in which debt is reduced or paid off by regular payments. Okay. So basically a lot of … Most of the time, someone’s going to take on a bit of debt in order to buy a business. So in short, I think EBIDTA is really about, is your business going to keep being a business without you, right? Or after the day that you sell it, right?

Now, whereas a car, the day you drive it off the lot, the second you drive it off the lot, it depreciates like no one else, like nothing else. Depreciates really, really, really, really fast, and that’s not a good thing for consumers. A business, on the other hand, if you can kind of guarantee continued performance, it’s going to appreciate, it’s going to go the opposite direction, which is this thing that you built is going to keep building if the right kind of regular and normal routine maintenance continues to happen, which is part of the transition. So that was the first starting point was learning about this idea of EBITDA.

In short, what my understanding of EBITDA became was, what is the net profit of the owner, and could that net profit continue without you? Right? So basically my net profit or my income as owner of the group practice, and again, that’s minus expenses, minus taxes, things like that. So basically, again, what a new owner could potentially make from the business, and it’s effectively a shorthand version of evaluating a business is people usually buy businesses for anywhere between 1 to 5X that amount. So then let’s say if a business, if a group practice owner makes 50K a year from their group practice, then the business could theoretically be a worth … could sell for between 1 to 5X that. So worst case scenario, 1X, best case scenario, 5X, maybe more, again, depending on things like the market, the systems, the business, the number of employees, et cetera, the projected revenue basically.

Now, the only problem with that formula is, how do you find a buyer?

That’s really hard to do. So in other words, how are you gonna find a therapist that is ready to pay you 50 or 100 or 150 or 200 or 250 or $300,000 right? A really meaningful amount of money. Well, that’s really hard to do.

So the first place that I went was no place at all. It was in conversation with my friend Maureen Werrbach from The Group Practice Exchange. We were actually in Hawaii for Ernesto’s event, and we were sitting there and we were just talking about it. I told her that I was moving and so I wanted to be thinking about this transition and potentially selling the practice, and she pointed me in the direction of a company that basically does … They buy group practices or private practices. They’re called Refresh, refreshmh.com I believe, something like that.

Now, I’m not going to go too into detail about my interactions with them or that process or whatever, but I mean, they’re great. They do exactly what they say they’re going to do, which is that they buy practices and they keep growing them. Basically they come in, they buy practices that are looking good, are in a good market, and they keep growing it. That’s basically what they do, and I think they systemize the whole thing like a franchise would do.

Now, there is a few reasons why it didn’t work out for mine. They like large group practices that are insurance-based. Mine is a small group practice that’s all cash pay. Right? Some of my clinicians were going to be leaving during this transition. All right? My lease was going to be ending. Things like that. So there were a number of variables that basically pointed in the wrong direction in terms of a deal with Refresh, but it was an eyeopening experience. They were good to work with. It was a pretty fast process to get the business looked at by them. You do have to share things like financials and contracts with your clinicians and how much they’re paid and how much they charge and projections and things like that and KPIs and website traffic, so it’s intense. You have to share all those things. You have to have those things readily available, which you should already. But yeah, you have to have those things available and then you have to have conversations with them based on those numbers, and it’s all about numbers.

So again, they effectively didn’t have further interest in my practice because of those variables, but again, if I had a bigger insurance-based group practice and a longterm lease or owned a building or something and had a lot of employees that wanted to stick around, yeah, it could have worked. Certainly could have worked. So if that’s you, I highly recommend you think about the future of your business and even look into a company like Refresh. They’re the only ones that I know of who do it, and they’re still pretty new at it. So interesting stuff, very interesting stuff. But again, didn’t work out, so.

Now, so what I did next was I basically tried to sell the business privately. I said, “Okay, well it’s not going to work out with the only company I can find out about who buys practices.” Now another option would be to do something like sell my shares of the company, right? Or sell my interest in the company, but keep some of it and potentially earn some dividends from the business. Well, I could have done that, but part of what I wanted and part of what I was kind of ready for was a clean transition where I could fully focus on, again, the work I do online and remotely and with therapists now.

So that was kind of a decision point as well, is basically selling all of my interest in the business and all the assets. So that’s basically what I did and started heading in that direction, so I made an announcement. I announced on Facebook and some local groups in my area and whatnot, and I got a bunch of people interested, and I told them generally what I was … Well, I told them I was open to offers. Most people either didn’t offer anything at that point because they probably didn’t want to low ball me or they just low balled me, which is fine. It happens, and that’s what I thought would happen because most therapists, unless you’ve tried it, you don’t really understand what a practice is worth or how hard it can be to do what I have done over the past few years. So that’s fine.

So now, basically from there I had some conversations with private individuals who were interested in the business, but again, couldn’t give me even a third of what I wanted for it. So the next step was to re-approach some conversations I had with current clinicians in the practice and former clinicians in the practice, so that’s what I did. They know me, they know the business, they know what it’s like. They know where the clients come from. They know what it’s like to be on the website, to work in the practice, to work with the kinds of clients that our practice attracts. And so with those conversations I had two people interested, and from there, one said … I said, “This is what I would ask for it,” and that person said, “Okay, I respect that. It seems like a fair price, but it’s a lot of money. I’ll get back to you,” and that was kind of off the table, and then effectively that ended up looping back around. Right?

So we looped back around for another conversation like a month later when I was still just kind of sitting on this whole thing, and this person came back and said,

“Hey, I’m good for it. Let’s do it. I’m good with the price, let’s move forward.”

And I was like, “Oh, wow, that’s great.” And I still think it’s great. I think it’s a great price, a great opportunity for both of us to get what we want and to move forward meaningfully.

So selling the business, and really what it means is the assets of the business, which are mostly digital, so yeah, everything from the website, the directory listings, the logo, the copy, the tagline. You’re paying for the organic search rankings, you’re paying for the Google Ads account and everything that comes with that, the Google My Business, the Yelp profile, social media accounts, email lists, the EHR, everything, just pretty much ready to go. Right? So it’s a lot of stuff, and again, a lot of marketing stuff that is really, again, the hardest thing when it comes to running and growing a practice.

So basically, yeah, we figured that out and said, “Okay, cool. So the price is good, so let’s move forward,” and basically then we found a lawyer and worked with a lawyer who has done this sort of thing before and on a regular basis. We figured out how to divvy up the lawyer costs and we moved forward, and like a day later we had a contract, which was pretty wild. So this whole thing happened really fast. It happened when I was on my way to a wedding, my best friend’s wedding, which is a movie as well, I think, and it happened really fast. It was kind of a whirlwind. Before I knew it, the deal had basically gone through, and what I did is we basically did a deposit and then something called a promissory note, and that promissory note is a legal thing that, of course Kelly Higdon told me about. It basically says, “I’ll pay you this amount of money per month until it’s all paid off.” Right? So it’s kind of like an IOU, and a legal one. It basically says, “If I don’t pay this amount of money next month or whatever, every month, you can take the business back, or the deal’s off.” Right? So that’s basically what it says.

So yeah, I mean, that was basically it. That was basically it in terms of the deal and getting it ready and finalizing it, and then letting folks know and getting ready for that, and then I had to spend basically a couple of days getting everything ready, putting all the documents together, transferring the PLLC name, and then basically creating a big Google Drive folder with everything in it. Right? So all the documents of the business, login information for everything, and then actually just today we sat down and did like a two and a half hour Zoom conferencing call on video where we did like a screen share and walk through and transferred all the accounts to their name and everything and got them all transferred.

So there’s a couple loose ends to tie up and stuff, and like something with the EHR to get it fully in this person’s name and whatever, so we’re going to do that, but other than that, that part was really the least painful part of the whole process. So it’s kind of wild, and it’s really hard to believe I’m at the end of this process. You know?

That’s the short of it. I’ve been talking for 26 minutes 43, 44, 45, 46 seconds now about it, and I could talk for 74 minutes about it, but I’m not going to. I’m just going to talk a bit here, and then soon I’m going to post some YouTube videos about it and I’ll be more coherent, a little more succinct, if you will, in some YouTube videos. So I will talk more about it. I will take questions about it if you’d like. You can get back to me however. You can find me on Instagram or on YouTube and ask me questions there or whatever. Happy to answer questions. But again, it’s been a process of learning for sure. I did some things well, I did some things that I would like to do better, but that’s life.

So again…

this is what it’s been like for me to sell a practice.

If you do it, it could be a different experience. I’d like to hear from more folks who have done it or thought about it or whatever. I do know one person who’s bought a practice in the DC area, but yeah, again, it’s just, it’s basically … Yeah, I mean, it’s been really neat. Again, I’m grateful for the experience, I am, and I think it’s taught me a lot and it’s taught me a lot that I can also teach the therapists that I work with. So, again, if you’re thinking about this stuff, you should be thinking about it and at least pondering it, think about it now. Think about the longevity of your business. Think about a potential exit plan, and from there you can start putting the pieces together. From there, you can start getting the help you need, et cetera.

So again, I’ll talk more about this soon, but I wanted to just fill you in right away, kind of make the announcement right away, and what this means for my work with therapists is, well, I’m going deeper into my work with therapists. The thing that I realized is I felt on one hand, therapists could go, “Well, then how do you know about private practice now?” Well, I’ve been helping therapists pretty much full time for a long time now, and now I’m doing it totally full time. Yes, a lot of the lessons that I’ve learned and that I kind of teach are through my own group practice and my solo practice in San Francisco, and also on the other hand, a lot of my lessons are really from the coaching work that I do in helping therapists every day to problem solve and work through and break through challenges. Right?

So the more I help therapists, the more collective knowledge I have from therapists and from the work that we do. So in a way, I think my knowledge will only grow from here because I’m going even deeper into my work with therapists as a business consultant. So that’s kind of a cool thing and a very exciting thing. I’m excited to go deeper into this work, and I still do some therapy work as well with some clients online, mostly from San Francisco, so I’m still licensed in California and in North Carolina.

So yeah, more on that soon. I will say it feels good to do a solo episode. It’s really fun. I really like doing this. I know you guys are listening. With that being said, I will say that I really need you to tell a friend about this show if you like it, and if you listened to this episode, I guess you like it, but it’s not easy to do this every week. I know I’ve been doing a lot of guest episodes, but it’s not easy to put out a podcast, to produce, to pay for it, to pay someone to edit it, right? To do all this stuff. And so I want to keep doing it, and also it’s just one thing that I do. It’s one part of what I do, right? I have content kind of everywhere. I have a lot of different things that I do, different ways to reach you, but this podcast is free, always will be free.

At the moment, I’m not working with sponsors or affiliates and stuff like that. I’m still trying to figure out kind of how I feel about all that, but right now, I just, I need more listeners. I’m telling you that. I need more listeners and I need you to tell five people at least about this podcast. Just copy and paste the link on iTunes or my website or whatever, or text it to some friends right now. Just copy the link, put it in an email, send it to your therapist directory, post it to your therapist’s Facebook page, write your colleagues, your alumni group of therapists, whatever it is, but I need your help growing this thing, so I’m just going to … I’m just flat out asking you.

With that being said, guys, it’s good to be back. It’s good to do this whole episode. This has been a really fun episode for me, and really, really nice to reflect on what I’ve just been through. Anyway, if I can help you build a better business, let me know. You can always head to thejohnclarke.com, click on Work With Me. Otherwise, I will see you very soon. See you next week for another episode of the podcast. Thanks again for being here. Take care of yourselves. Keep doing good work out there in the world, and I look forward to seeing you very soon. Cheers. 

https://www.privatepracticeworkshop.com/workwithme/

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