It’s worth knowing how to sell your medical practice, if the time should ever come. The transition could offer lucrative gains, especially as healthcare hums along with mergers and acquisitions. Many clinicians have found success finding bigger buyers at better prices.
And perhaps not surprisingly, the number of physicians who own practices has gone down in recent years, from 53.2% in 2012 to 47.1% in 2016, according to Modern Healthcare. In 2016, for the first time, more doctors didn’t own a practice than did.
The drivers vary: Some people sell as they approach retirement, battle chronic illnesses or move to a new city. Others leave the administrative rat race to focus on care delivery. And as clinician burnout hits all-time highs, some choose to quit medicine for good, as the Agency for Healthcare Research and Quality reports.
Whatever their reasons for selling, it’s not something practice owners do on a whim. Usually, the decision to sell comes after years of thought and planning. If you’re hoping to develop your own exit strategy, get your plans in order with these starter steps.
1. Consider the implications
Selling a well-established practice requires many moving parts, but one of the biggest is finding your peace with the decision. The transition must be something you’re willing to follow through with—and you should be comfortable with the outcomes once the deal is done.
So, explore the implications of a sale, including how it will affect you and your family. Are you willing to stay on as a payroll employee through the transition? Are you OK watching your practice go in new directions? Will you miss the autonomy of ownership?
These deeply personal questions can lead to deeply illogical conclusions. To maintain rationality, surround yourself with a trusted network of peers who can guide you, including former practice owners who have done it themselves.
2. Engage a professional
Plenty of exits are on the table, from selling to a single physician to getting acquired. But often, opportunities fluctuate with market conditions, and if the timing isn’t right, you can always wait it out.
Making these determinations on your own is risky; you may overestimate or underestimate your options. So, engage a professional like a medical practice broker to coach you on how to sell your medical practice. That may even give you more credibility among potential acquirers. Ask them the tough questions, such as:
- What is the market like for my specialty and area?
- Who are potential prospects?
- What are the benefits and risks of selling now? What if I wait?
- Should I consider selling my hard assets, including the land and the building? Or should I sell the business but keep the real estate?
- How long will the process take once I decide to move forward?
- What changes should I make to maximize my opportunities? What changes aren’t worth the investment?
3. Update, clean, and invest in growth
When you sell a house, you might make investments to boost curb appeal and marketability, from fresh paint to new landscaping. Selling a private practice works similarly: You’ve got to spend money to make money.
Doing so can keep the business growing so that it’s more attractive to future prospects. If you neglect it, the practice—and its price tag—may suffer. This means maintaining investments in equipment and potentially even boosting new initiatives you never paid attention to before, like practice marketing.
For example, a nice website and brand identity can improve a clinic’s online appeal. Activating or cleaning up the practice’s social media accounts can also present an established brand that piques a purchaser’s attention. If you can, consider practice improvements, too, like buying new furniture or hiring an experienced stager to help.
And of course, now’s the time to clean the books. Aim to have at least one to three years of financial statements in order so that the back end of the business is just as attractive as that shiny new lobby or Facebook page.
4. Evaluate the practice’s value
Your practice may be worth more than you think, but (perhaps more likely) it could also be worth less. According to Medical Economics, overvalued prices are the top reason why businesses sit without buyers. On the other hand, knowing a reasonable market number can help advance negotiations to a more productive place.
Start by talking to a medical practice valuation firm. The American Osteopathic Association notes that typically, evaluators will provide a comprehensive report of the fair market value, accounting for both the hard assets (like equipment or furniture) as well as the soft assets (like the practice’s reputation and market share).
Be ready to go (but also ready to wait)
Savvy sellers think years in advance, but they’re also ready to let go of the reigns if the right buyer comes. But since you can’t assume they will, it’s best to operate as if you intend to keep the business.
So, plan for the future, but also tend to present-day needs, like marketing, record-keeping and, most importantly, ensuring a satisfied book of patients. That way, you’ll have a thriving, successful practice—and a better chance to earn top dollar for it down the road.