How to Sell a Medical Practice

How to Sell a Medical Practice

Instructions

• 1

  You can still sell a medical practice, despite what you hear in the physicians' lounge at the hospital. Practices sell all the time, many for a good price, most with little attention.

  Not every practice can sell, but not every practice is ready to be sold, nor does every physician properly try to sell their practice.

  The harder it is to start a practice from scratch in a location, the easier it usually is to sell an existing medical practice, and the more it is worth. If a physician new to an area wants to have a practice, often the easiest and least costly way to do it is to buy one. It may be the only way to enter the market. Buying a local practice at the right price is also often a cost-effective way to grow your own practice. The more competition there is, usually the more an existing practice is worth. In underserved areas -where all practices in your specialty are swamped with patients- and appointment waiting times are measured in weeks -not days- your practice will may far less value, but not necessarily.

• 2

  Plan at least one year ahead. Planning three years ahead is not too far. A physician who doesn't have a plan for selling their practice risks being forced to sell it at "discount" prices, if at all. You can consider an agreement with colleagues to buy each other's practice, using life insurance as the source of funding, in case of death or disability.

• 3

  Don't slow down productivity in advance, and even increase productivity and profitability if possible during the two years prior to sale. Adding midlevel providers and ancillary services can help.

• 4

  Don't tell your plans to colleagues or staff until the right time!

• 5

  Get a professional appraisal, both in order to price the practice correctly, and to convince a buyer of its value. Use a medical practice valuation specialist that can demonstrate compliance with the Uniform Standards of Professional Appraisal Practice (USPAP) Medical practice valuation is an unlicensed profession in many states and there is much incompetence in the field. Some states like Florida don't even allow CPAs to legally perform a medical practice valuation or sale. The cheapest appraisal might be OK for the cheapest practices. Is that yours? I've seen an extra $2500 worth of research result in an extra $250,000 in value!

• 6

  Prepare a proper professional promotional package, including a dedicated web page.

• 7

  Clean up the office and your desk, to make them appear more modern and attractive before any candidate ever visits. This can take a month or two. You'll need outside help because you can't "see" your own space after having lived there.

• 8

  Consider using a confidential intermediary (broker) to protect the identity of the practice for sale.

• 9

  Require a Non-Disclosure Non-Competition Agreement from any candidate prior to disclosure of your identity and data so that candidates can't use your information compete with you.

• 10

  Be open as to who the buyer is. It might be your biggest competitor, or they might not look like you or sound like you.

• 11

  Make sure your last 1-3 years accounting conforms to industry standards like NSCHBC or MGMA.

• 12

  Try to segregate regular expenses from IRS Sec 179 capital assets, and clearly identify tax-deductible personal benefits, like health insurance, automobiles, employed family, etc.

• 13

  Don't "skim the till". Declare all your income. Undeclared income not only is a crime, but will turn away all but the most disreputable buyers, since it breaks trust up front.

• 14

  Consider offering the buyer a chance to work for 1-3 years at reduced income, then sell the practice for the value of the hard assets, "without goodwill". The reduced income will probably equal the goodwill you would have received, and the price will be more attractive, with less risk to both parties.

• 15

  The key to selling a home is "location, location, location".
 The key to selling a practice is "planning, planning, planning".