**Automatically Generated By Artificial Intelligence**

Good morning and welcome to another episode of Paul Martin's Guide to Finishing. Well, I'm really excited today to talk to you about the importance of being able to provide to an acquirer reliable and accessible data. So we're going to focus in on the data that you need to provide to and acquire in order for you to find the best match for you and your company.

Let's jump in. So again, what we're seeing in the industry very currently is that there is a cadence that these acquirers seem to be going on and that a cadence cannot be broken by what we call deal delay. So when we're looking at providing reliable and accessible data, it is in order to not get into any kind of deal delay.

Because what happens when you have delay in a transaction is, you know, I was a college football coach at one point in time, way back when. And I can remember we had a recruiting board with a list of the top recruits out there in high school. And if anything, if a player got hurt or a player had a bad game, you know, they would get moved from the top of that board down lower.

And so think of you with these acquirers. Multiple companies have put their hands up and said, you know, I think it's time to transition. And so there's a recruiting board that you're on and you do not want to get moved to the bottom of that list. That is a huge risk to you, because if you are involved in a transaction and you get moved to the bottom of that board, that causes a deal.

DeLay and deal. DeLay typically ends in a deal that does not come to fruition. So let's discuss where we see this deal delay and where that is most common in today's market. As I mentioned at the very beginning, accessible and reliable data, providing acquirers with data that is accessible and reliable is absolutely critical to getting to the finish line.

All right. So I'm going to give you a little test today and what I want to be able to go through is the data that you're going to need to provide and how well you are able to have that accessible for an acquirer. So can you produce data quickly? Is it in the right format for an acquirer to see and that format can be a variety of formats depending upon what you're providing to them.

You know, a lot of companies will put a whole bunch of Excel files together and send it off to an acquirer. Remember, they're going to have to manipulate that and move that. And, you know, so while that sounds like a great way to go, just punch it, send it, punch it, send it. Many times the accessibility of that is overridden by the fact that they then are able to manipulate it.

And is it accurate? And we find so often that when we look at data from companies that things just don't seem to add up. So can you put a checkbox in there? So can you produce it quickly? And that's like a 24 hour turnaround. Is it in the right formats and is it accurate now? What are the major areas of data that you will need to provide to what acquire?

Today we're going to focus in on financial data, but we also have operations data, payer data and referral data, and we're going to cover that in some different episodes, those other three areas today we're going to focus on financials. All right. We're back to our test again. Okay. So as far as your data, do you generate a profit and loss statement as well as a balance sheet and do those interplay properly?

Do you have a monthly cycle timing to your profit and loss and your balance sheet? Can you generate at a moment's notice the most recent month past if you are in the next month, do you have that prepared and is it accessible and it is reliable and accurate? So check their can you show historical profit and loss and balance sheet going back 3 to 5 years?

Check there and can you show if you are a multi clinic company, can you show this data reliable, accessible and accurately by clinic as well as a combined clinics combined panel and balance sheet? Not send it to them and have them add it all up and hope that it adds now a combined profit and loss and balance sheet as well as by clinic.

Can you generate a profit and loss that has very specific revenue line items? Now, just a couple but many times you have your services that you're providing to your patients. That's patient service revenue, but you may also sell supplies. You may also do some form of fitness. So if there's or you may also have rent that's coming to you and coming to the business, are those broken out by category in your expand your revenue line items, check their do you have your expenses combined into the 5 to 8 major expense categories, those being do you have a staffing expense line item?

Do you have a rent expense line item? And everything that goes into that rent, administrative services, marketing, those are some of the major line items. Or is your PNL broken out into about, you know, 50 or 60 line items? Because that's going to be very hard for an acquirer to very quickly understand your financial performance. Do you have a check there?

Can you show trailing 12 months? So for example, if we are in the month of March, so you're at the end of March, can you show a financial statement that takes you through February and goes back to March 1st of the previous year that is a trailing 12 months and that is the gold standard for the acquirers. They want to know very currently what your financial performance is.

So can you check there? And in terms of your EBITDA, which is that cash flow, your earnings before interest taxes, depreciation and amortization and adjusted EBITDA, can you show very clear and clean adjustments to that EBITDA? Absolutely. Crucially and critically important, I will tell you that there's a lot of talk from some of the top acquiring companies out there that what they're seeing from some business brokers outside of this industry that have now tried to get into this industry, that those adjustments are not true adjustments to EBITDA and what they get directly from sellers is that those adjustments are not real, that immediately becomes a big red flag that goes up.

You get moved to the bottom of that recruiting board. So check there. And finally, you know, depending upon how you work with your accounting firm, depending upon the size of your company, we also have absolutely we would persuade you to consider having your financial statements either compiled, reviewed or potentially even audited. For example, a company, let's say, in the 3 to 5 clinics or less, if your financial statements were compiled either monthly or produced, and then compile quarterly, that would certainly be a big step ahead of well, it just comes out of QuickBooks and whatever comes out of QuickBooks.

And then the accountant looks at it at the end of the year to do my taxes. No, they really need to be compiled by an outside financial firm, CPA firm, for the purpose of making sure that they're accurate. 5 to 10 or 12 clinic company potentially. You want them reviewed. That's a whole different level of accounting invested nation.

And for companies that are 10 to 15 or more clinics to have audited financial statements is gold. Because, again, in acquirer is going to want to dig into those financial statements if they've already been dug into by an outside CPA firm, outside accounting firm. You're going to be way ahead of the game. So do you have a checkmark there?

And the test I'm running with you today is if you don't have a checkmark in each one of those boxes, as we should be talking, because these are absolute critical things that you will need in order to go to the market with requires in today's industry. So how do acquirers, as we're talking about financials, how do they view your operations performance?

What are they looking for? Well, first of all, understand the reason we did financial. First is this is actually the most critically important piece of what you're going to generate for an acquirer, because as callous as it may seem, they are buying your stream of cash flow. That's how they will pay themselves back for the money that they have borrowed in order to acquire your company.

So it is critically important that that stream of cash flow is very consistent for what they're looking for as they're acquiring companies. And just to give you a general idea, what we commonly see out there as industry benchmarks, if you look at staffing expense and this does not include your owner's compensation, but if you look at staffing expense, somewhere around 47 and a half percent to 50% of revenues, when we look at percentages and this is the way acquirers look at it, too, they're looking at line items, percentage of revenues.

So as your revenues go up, your staffing and other line items will actually go down as a percentage of those revenues, your rent somewhere about seven and a half percent, your marketing expense line item around 5% and then other around 20%. You have I mean, some companies will have general overhead and administrative expenses. There's multiple other expenses that will go in that other category.

And if you add that all up, that will drive a margin, a a profit we call net operating income of about 20% of your revenues. And once companies go through those EPD adjustments, again, an industry benchmark would be somewhere in and around 20 to 25%. As that EBIDTA margin. So that gives you an idea of what companies are acquirers are looking for and if any of your line items or any of your expense categories are significantly different than this, you definitely want to have and give and provide clarification on why that is really, really important.

The last test question I would have for you is what is your financial performance and can you prove it? If you're not sure of that, click below. Give me a call. Let's talk. Thank you.