It’s Hard to Sell Your Practice

Selling a healthcare Practice could be difficult a process. Key challenges in selling your practice include finding the right buyer, wading through legal and financial complications, and handling clinical matters. Coupled with a lack of knowledge about the process, some healthcare providers can be discouraged from selling their practice when they retire, relocate, change positions or change careers. However, with diligence, attention to detail, and willingness to compromise, you not only can reap the financial rewards of selling your practice. You also stand to gain the satisfaction of handing off a business that took years to develop to a competent successor who can continue to provide beneficial services to the community.

Coming up with a Profitable Formula

Plan everything. Planning ahead is the first step toward selling your practice. Consult with your lawyer and your accountant or financial advisor early in the process. They can help you anticipate and handle legal and financial issues, comply with any state laws governing the sale of your practice, and evaluate your insurance needs as you wind down your involvement in the practice.

Craft a solid business plan. Creating a business plan is a crucial step in charting a path to successful practice. It will help you paint a clear picture of your practice to potential buyers. Additionally, having a business plan demonstrates your seriousness as a small business owner and the care you have taken with regard to the business aspects of your practice.

I’d appreciate it if you could get an independent appraisal of the practice. Assigning value to practice is challenging because the value is largely based on intangibles, such as reputation and personal relationships. An independent appraiser will typically consider the factors in valuing a practice like tangible assets (including real estate, equipment, and furniture); intangible assets (including goodwill, the value of the practice’s name, client base, reputation, and established relationships); and other factors like the practice’s area of specialty, location, age, reputation and earnings history, as well as liabilities and accounts receivable.

Determine the best legal model for your practice. If your practice is currently structured as a sole proprietorship, you may want to consider other models that can better protect your personal assets and facilitate the transfer of ownership in the event of a sale. Although some practitioners choose a general partnership model when bringing a colleague into the practice, it is important to take steps to adequately protect yourself. Not only are your personal assets at risk, but you also take on responsibility for your partner’s actions. Opting to create a corporate structure adds complexity, but limits your personal liability and can streamline the transaction via the sale of stock to the buyer.

Set a realistic asking price. No matter how much you think your practice is worth if your asking price exceeds its fair market value, it will be difficult if not impossible to find a buyer. In setting a price, take into consideration the availability and interest of buyers in your region as well as recent practice sales.

Join and actively participate in professional associations. Your state, provincial or territorial associations are a valuable resource for providers in many ways. As it relates to selling your practice, such associations represent the practice community from which prospective buyers will most likely come. Joining them can facilitate developing close connections with your colleagues at the local level, which can help you spread the word when you begin the process of putting your practice up for sale. When you actively begin your search for a future buyer, word-of-mouth communication through your network of professional contacts often produces the best results.

Market your practice. Having a well-developed network of professional contacts and referral sources can open the door to a variety of professional opportunities and help you reach those who could benefit from your services. When it comes time to sell your practice, the years of network building can have the added benefits of helping you spread the word to potential buyers and actually increasing the appraised value of your practice. Your marketing efforts should, therefore, work toward building the name recognition of your practice and transferring your positive image and reputation to the business entity itself.

Be ready to compromise. Most sales require both the seller and buyer to make compromises. As the seller, you should stand your ground, for example, don’t let the buyer set a price and dictate contract terms that you can’t abide. But you also need to be flexible. Offer to take steps that can add value to the deal and ease the owner’s and the clients’ transition. For instance, if a buyer can’t meet your price, consider accepting payment in installments. You might also consider offering your services as a consultant for a period after the sale or indicate your willingness to introduce the new owner to your professional contacts and clients.

To Summarize,

Selling your practice isn’t easy. It will require your active effort at every step along the way, from finding potential buyers to negotiating the contract, to helping the buyer get up to speed and make the necessary connections to keep the practice afloat following the transition. Throughout the process, be ready to compromise. When selling a practice, as in most business transactions, the various parties involved have different goals and perspectives. For example, although it is in the seller’s best interest to get the highest price possible for the practice and most will have a strong opinion about what they ‘should’ get for it, a practice is only worth what someone will pay. Buyers, on the other hand, have the incentive to get the best deal possible.

Medical Billers and Coders (MBC) is a leading medical billing company providing complete revenue cycle services. The information shared in this article is for informational purposes only and does not constitute financial or legal advice. Every practice is unique and will have specific issues that need to be addressed. Healthcare providers thinking about selling a practice should consult with their attorney, accountant, and other practice consultants, as appropriate.

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