Whether you’ve been affected by the COVID-19 pandemic, are thinking about retiring, or are keeping an eye on the trend towards consolidation, you might be thinking about selling your medical practice – now, or in the future.
Here’s what to keep in mind for when that day comes.
Know Why You’re Selling
Your reasons for selling your medical practice or building will inform your overall sales strategy. For example, a retiring physician may want to pass along their practice to a successor or, if no successor is apparent, sell into a larger group. A physician whose practice has been negatively affected by the pandemic or other factors will be looking to either cut costs or remove the administrative burden associated with running their own practice. A strategic sale to a business-minded buyer or working as a contractor for a larger group can help with this. Finally, a physician interested in an expansion will probably want to approach larger groups. This will allow them to cut costs through resource consolidation while also reaching a larger pool of patients.
Know What You’re Selling
When preparing to take your practice to market, you need to understand the value of your practice. In the medical industry, practice revenues are a key figure. Typical general practices sell at around 0.5-0.7 times their annual revenue, with many specializations achieving figures as high as 100% of their annual revenue – and rare specializations with little competition coming in higher again.
Other factors to consider include:
- Referral patterns
- Insurance mix
- Whether the selling physician will remain
- Tangible and financial assets
- Prepaids such as insurance
- Accounts receivables
- Goodwill or reputation
- Existing lease agreements
If you own the building in which your practice is run, you’ll also need to determine the value of the property. Location, use, and the improvements to the building are all critical factors in reaching a valuation – along with certain key market indicators.
Before you prepare to sell, getting your paperwork in order is a must. Gather any and all documentation that relates to your practice’s day-to-day running, accounting, and legal aspects. This information should be ready to hand over immediately upon request.
Know Who You’re Selling To
Your prospective buyer will request extensive paperwork, and you should do the same. Selling a medical practice or building can be a major undertaking, and it’s essential that your buyers demonstrate a firm financial standing. You don’t want to find yourself weeks or months into a negotiation only to find that there are issues with the buyer’s financials. To avoid this, build a team that can help you do your due diligence, and involve them as early as possible.
Involve The Experts
As you consider selling your medical practice, you’ll want to be sure to evaluate all of your options and call in an expert to go over the process. For an accurate valuation of your building, speak to a specialty medical real estate agent at Gittleson Zuppas Medical Realty.