- Published on 27 September 2022
Hearing business consultancy Audiology Business Central looks at the options for a new generation of audiologists to own their own audiology businesses. This article is the last of a series of three articles published in Audio Infos UK.
TIME is our most precious resource. You cannot buy it and you cannot get it back! So, owning your own time must surely be right at the top of most people’s priority list.
And working for someone else puts you at their mercy - effectively they ‘own’ your time.
As a business owner, you are not beholden to an employer or franchise owner. You can dress how you wish, work the hours you want, dispense the brands you choose, and deliver the services you enjoy most.
While for some people owning a business is all about the yield, for most it is also about lifestyle and outlook. Living a rich life isn’t all about money. You spend the prime healthy years of your life at work; and your working life forms the major part of your waking hours.
Although buying a business is not easy, it can be made easier by going about it in the right way.
Should I buy a business or start one myself?
With costs of entry into hearingcare and wax removal being relatively low, there is always the temptation to simply rent a suitable premises, buy an audiometer and suction kit and start marketing your services.
This is certainly an option. However, in a market the size of the UK, hearcare provision is pretty saturated so you will almost certainly be opening in someone else’s backyard. They are not going to simply roll over to the new kid on the block.
Customers of existing local independent audiologists who have purchased their hearing aid within the last 2-3 years are unlikely to be open to persuasion to replace their aids for at least another 2 years. Similarly, a customer with a 4-5 year old hearing aid is going to go back to their friendly audiologist who fitted them last time before considering any alternative. Both of these scenarios point to the 36+ month time lag between opening a new business and establishing your own strong database of customers. Yes, you can target new hearing aid wearers, however that puts you in direct competition with the nationals - Specsavers, Boots, Hidden Hearing, Amplifon - who have budgets larger than you can ever dream of!
The alternative is to buy an existing audiology practice, including its brand equity, reputation, customer base and immediate cashflow.
The downside is that the buying process can be complicated and you will need to be ready for a potentially difficult journey into ownership. As an audiologist, you probably have never learned about how to buy a private practice, so you are entering foreign territory and need to prepare yourself for the journey ahead.
In addition, with the UK independent audiology sector being relatively small, potentially suitable businesses in your desired location won’t be available all the time so you will likely need to play a bit of a waiting game.
How much money will I need?
If you start a business yourself, you are free to choose the equipment you want to use, the location, negotiations on the lease, and how much you commit to operating costs in the early years. These costs are likely to be lower than when buying a business, however you will need to set aside a considerable budget each year for marketing to attract customers from competitors - as well as first-time users. You definitely won’t be making enough money for the first few months to be able to pay yourself anything like your true market value.
Buying a business is totally different; it gets you instantaneous sales, meaning you should be able to pay yourself something from the outset. You are, however, unlikely to be in a position to fund it yourself so you will need to find a backer to provide the finance for the acquisition.
How do I fund the purchase of a business?
This is always a scary prospect for a first-time buyer. Thoughts of corporate finance, commercial banks, interest rates, and personal guarantees put many a first-time purchaser off. But it doesn’t have to be like that.
The audiology world is lucky to have suppliers with pretty deep pockets. They are obsessed with guaranteeing product supply into a business (called share-of-wallet) and consequently are willing to help new owners fund a purchase in return for security of product supply. More often than not, the interest rate you pay on the capital sum borrowed is at least as competitive as the banks, if not significantly below (or even 0%).
Beyond the manufacturers, commercial banks are expressing increasing interest in independent audiology on the back of recent private equity investments in the sector. Finance houses will typically work to commercial interest rates and look for repayment of their loan in full over an agreed period of time.
There are also some 3rd party investors in audiology – businesses that are willing to top-up the funds committed by the purchaser to reach the asking price of the business being purchased.
Where should I be looking to purchase a business?
It goes without saying that if your objective is ultimately to improve your work/life balance, then you are not going to want to buy a business that is so far away that you spend all the time hoping to get back commuting, or even staying away during the week.
Location is vital. It has to work for you as the new owner in a way that you won’t mind putting in the extra hours in the early years to ensure you have a rewarding and successful business in the future.
What is key is to fully understand the demographics of the population where you are looking to purchase. Is the age profile right for an expanding business? How strong is the local independent competition? How good is NHS provision in the area? How close are the national chains to the proposed location?
Spending time looking at the local market dynamics will help you narrow down your preferred locations so when an opportunity arises, you are ready to express your interest.
Another key aspect is understanding why the current owner is looking to sell. Frequently this will be a lifestyle decision, with the current owner wanting to exit from the business for retirement reasons. Unfortunately, many business owners look to sell because of a negative influence, such as ill-health or bereavement, but this doesn’t necessarily mean you shouldn’t look at the opportunity as it arises.
How can I minimise the risks of going it alone?
You’re buying a business for the first time. It is extremely likely that the business owner is selling their business for the first time. So you both have some things in common: nervousness at not getting the best deal; lack of understanding about the motivation of the other party; lack of trust as you probably don’t know the other party (nor they you); fear about divulging sensitive information to the other party.
Such perfectly valid concerns can make your opening gambit in negotiations tricky and giving away too much (or not enough) information when you first develop a dialogue will influence the direction the rest of the conversation follows.
As a potential buyer, you need to have all the information to hand in order to make an offer and take the process to completion. Inexperienced sellers, however, will likely be reluctant to part with competitively sensitive information when you ask for it and may be circumspect at responding to your well-meaning questions.
This is where the advice and support of a professional intermediary (or broker) will prove to be priceless – helping both you and the seller to understand the bigger picture and providing assurances on confidentiality and discretion about the information being shared.
In addition a seller who has engaged a professional intermediary to support the sale process should already be armed with the information you require in order to value and potentially offer on a business. They should have effectively carried out a due-diligence analysis of the seller’s business in advance, meaning there should be no surprises in the detail and the information shared with you is up to date, relevant and accurate.
Audiology Business Central is a specialist management consultancy supporting independent hearing care business owners with strategic business development, exit planning and business sales, as well as working with optical companies looking to enter the audiology field.
Source: Audio Infos UK issue 150 September-October 2022