What Every Practice Owner Should Know About Selling Their Practice
What’s the biggest mistake medical experts make when they go to sell their medical practice? After 10-40 years building their practice, they think it’s worth hundreds of thousands more than it usually is. When it comes time to sell it, they’re stunned at how much less they get paid. Instead of being set up for a comfortable retirement they end up contemplating getting a part-time job.
How about you?
Do you know what your practice is worth on the marketplace?
All the long hours and love you put into your practice won’t make you nearly as much as you thought, that is unless you take measures like the following.
Quick tip, it’s just like selling a house. If you want top dollar, you don’t just stick a sign in the front yard. I had one friend who was retiring in Greenwich Connecticut, a place where buyers pay top dollar, that tried that. Here’s what happened. He and his wife put their house on the market, and it just sat there for month after month. Their house was in a great neighborhood, and they had lots of people looking, but no buyers.
Turns out the house looked a bit dated and was missing some of the key features buyers wanted.
Finally, a few months later, they had a talk with a Realtor who advised them to spend $87,000 on floor refinishing, painting and decorating. Now that sounds like a lot. But two weeks after they finished the refresh, they sold their house for $1.9 million, making themselves a tidy profit.
Your medical practice is the same. To maximize your profits, you need to include key features buyers are looking for.
Step 1 – Work With An Expert
Just like my friend followed the advice of a real estate professional, when you go to sell your practice, you’ll want to work with a professional too.
They’ll help you list out everything, from your financial requirements, to insurance, to personal goals and objectives that would have to be met before you’d even consider selling.
Working with a seasoned medical business broker, can help you uncover needs you didn’t think of. They can also give you a better sense of your practice’s market value, what kinds of deals you can expect to get, and who might be interested in buying your practice.
Armed with a more complete (and accurate) idea of what you might for your practice, you can talk to your financial advisor and make sure you’d still be on track to retire in comfort.
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Step 2 – Define Your Objectives
What do you want?
What do you need to do to maximize the sale value?
Sure we’d all like to sell our practices for 1 billion dollars and have money left over after taxes to buy a private jet, but that’s probably not going to happen. Key to getting what you want is defining your personal and financial goals within the confines of reality.
Financial Objectives: Work with your business broker to determine your practice’s fair market value and to understand the potential range of outcomes contemplating both deal structure and type of buyer.
Once you have the valuation in hand, meet with your wealth advisor to evaluate the impact of various outcomes on your overall financial plan. Ask yourself a simple question: can you afford to sell at the appraised value, and can you do so under reasonable terms to a buyer that aligns with your non-financial goals?
Non-Financial Objectives: When would you like to retire? Who is the ideal next owner? Which is more important, the amount of money you receive or the type of buyer to whom you sell? Answering this third question enables you to align financial and non-financial objectives and determine the appropriate time to pursue a sale.
Step 3 – Fine Tune Your Systems
Every practice is a combination of the people and processes that make it run. These include your patient attraction or lead generation system, your appointment setting system, your sales system, your billing processes, your personnel management systems and your financial management systems. That’s what buyers are paying for, in addition to access to all the great patients you’ve built relationships with.
Sell a practice with a proven way to keep attracting more patients and it’s worth hundreds of thousands more than one with a worn out list of past patients.
Step 4 – Find Out What’s Involved
Unlike selling a house, where the closing is a single meeting and you hand the buyer a key and get a check, the transition with the sales of a medical practice can take 6 to 12 months. A seller’s obligations are almost never done at the time of the sale. Usually, there are conditions and commitments you agree to as part of the sale. For example, if you sell to a corporate buyer, they will likely want you to work in the practice for several years after the sale to smooth over the transition. Even if you sell to say another specialist in your field, they will want some help during the transition period.
Want to maximize the sale price of your practice?
It’s never too soon to start. Ideally you’d want to build your practice from day one with a plan to maximize value.
Ready to get solid advice Talk to us. We’ll tell you which brokers we can recommend.