1. 1 Setting up or Buying a General Practice Presented By Manoj Miranda Director Healthcare Capital Management

2. Discussion Topics What Do I Need To Know When Setting up and Buying A Practice Financing – What does the Bank look for Loan Covenants – What are they and Why are they needed? Practice Succession – Unlocking value from my business Pitfalls and traps

3. Important steps when Setting up a Practice Surround yourself with the right people – Accountants, Solicitors, Finance Consultants, and Peers. Selecting the right business – Location, Market and brand. Lease negotiations – Utilise resources which specialise in this area. If there is no lease there is no business Entity – Individual, Company or Trust – Short Term vs Long Term. Get it right the first time Create your structure to operate your practice with the exit event in mind…even though it may not occur for a long time Fit out and Equipment required Have a live Business plan Have your finances ready including a buffer

4. Important steps in purchasing a Practice Surround yourself with the right people – Accountants, Solicitors, Finance Consultants, and Peers. Selecting the right business – Location, Market and brand. Contract Process – confer with your solicitor and condition the contract to due diligence which specifically addresses the Lease and Finance as a minimum. Due Diligence – Engage industry specific professionals Lease negotiations – Utilise resources which specialise in this area. If there is no lease there is no business Entity – Individual, Company or Trust – Short Term vs Long Term. Get it right the first time. Have a live business plan Have your finances ready including a buffer

5. Financing the Purchase/ Set up The following Points will require your attention and will need to be factored into the funds you require to purchase the business. –What is the Purchase Price/Set up cost – Finance contributing vs Equity. –What are the stamp duty costs $ –Bank Costs $ including Documentation being prepared by solicitors and Valuation costs. –Legal Costs $ including the due diligence process, Lease negotiations, Entity establishment and settlement –Due Diligence/Accountancy cost $ factoring pre settlement and post settlement functions –Does the business require additional investment ie Fit out, additional stock levels required and or equipment purchase.

6. Financing the Purchase/ Set up Bank requirements: –Business Plan –2Years Financials in the form of P &L and B/S in case of a purchase. –Application form completed with Statement of Position –Full Copy of the Lease –Forecasts –Where is your equity coming from

7. What are covenants and why are they important Monitoring the business performance. Impacts the value of the business/banks security Covenants examples –Regular provision of financial information in the form of a Profit and Loss statement & Balance Sheet. A business in a good position will be required to provide this information annually whilst a business not performing or going through a transition will be required to provide on a quarterly basis. –Provision of a cash flow each year forecasting the expected sales activity of the business for the next 12 months. –Provision of a tax portal – including all entities involved with the individuals. –Financial measures – IC, GPM, Stock turnover Why are covenants important? – This is the minimum Westpac expects that you as a business owner compares, monitors and strives to improve your business. In case of a problem – be pro-active and talk to your bank

8. Succession Planning A significant portion of business owners in Australia, including medical professionals, will be looking to sell their business over the next 5 – 10 years More Women coming out of school – may not necessary want to own a practice and may look for work life balance Unlocking your goodwill - Bringing in a minority partner Practices sold as a going concern are traditionally valued using capitalisation of future maintainable earnings (FME) Earnings = Revenue – COGS – Overhead Expenses A capitalisation rate, or a measure of business risk, is applied to earnings to determine the business value

9. Pitfalls & Traps Having a business plan Purchasing the right business, in the right structure with the right partner Finance - Gearing Level. Pay down your debt as quickly as possible Having a buffer. Businesses run into trouble mostly because they run out of cash Controlling other expenses – either personal or other investments which draw cash from the business. Acquiring larger space – make sure the necessary assessment is taken into consideration. Partnerships – No agreement in place to back up the process to follow when a dispute, death or exit arises. Do not venture into activities that you do not know