Get a FREE copy of Jim’s newest resource, “87 Things an Owner Needs to Know About Selling Their Business”: DOWNLOAD

The Downside of Customer Loyalty When Selling a Business

Dr. Good (not his real name) was not happy with my feedback. “You mean to tell me that because my longtime patients are so loyal to me that I can’t sell this practice? What do I do, just close the doors and walk away?

Dr. Good’s practice is a niche of a niche of a niche, and resultantly, he has patients from all around the United States coming to his Nashville clinic. His patient calendar is filled eight months in advance, and he has been seeing many of his patients for more than ten years. He can offload some of the work to one of three “mid-levels,” but the patients know Dr. Good will oversee every patient file.

I had to tell Dr. Good that his practice did not have much transferable value. First, there aren’t many doctors that specialize in his niche, so the universe of buyers is small to begin with. Second, of those doctors that might be able to buy the practice, we wouldn’t know if the patients would be willing to make the change.

Though frustrated with my feedback, Dr. Good knew I was right. “I know what you mean, if I’m not here I can’t be sure the patients would be so loyal to this practice. They are coming because my name is on the door.”

A fundamental tenet of any business sale (medical practice, manufacturing company, software developer, whatever) is the sustainability of revenue. A buyer looks at a business’s financial history expecting that it will continue after the business owner is gone. But in the case of Dr. Good, we must acknowledge that sustainability is uncertain. Ironic that, because his customers (patients) are so loyal, the practice might not be sellable.

But all is not lost. Dr. Good and I are working on a plan that can transition him out over four to six years. This plan won’t look like a traditional sale when an owner gets a check and walks out the door after a short period of transition. But Dr. Good will be able to capture some value from the loyalty of his patient base while helping them make a transition to a new healthcare provider. Funny how something so otherwise valuable, customer loyalty, can actually work to your disadvantage.

JIM CUMBEE is President of Tennessee Valley Group, Inc. a retainer-based business brokerage and transition mediation firm in Franklin, TN. Cumbee is an attorney and has an MBA from Harvard Business School. Jim is the author of Home Run, A Pro’s Guide to Selling a Business. .  He has a wide range of corporate and entrepreneurial experiences that make him one of the most sought-after business transition advisors in the state of Tennessee. The principles above are true, but the names and fact patterns are changed to preserve the parties’ identities.


The following two tabs change content below.

Tennessee Valley Group

Jim Cumbee established Tennessee Valley Group to help business owners fulfill their dreams for life after business ownership. It’s a mission that his 30+ year career history had prepared him well for—in addition to being an attorney, transition mediator and business broker, Jim has been a buyer, seller, and entrepreneur. His broad range of experience gives him unique insight into how business buyers and sellers can achieve their goals.

Latest posts by Tennessee Valley Group (see all)