How to Find the Right Buyer for Your Medical Practice
Selling your practice involves a lot more than placing an ad. You’ll need to prepare your business for sale long before you even write the ad, and devise a strategy to help you reach the right prospects.
The easiest ways to attract a buyer will find you the wrong buyers- or no prospects at all.
Anyone can list a business for sale on a generic website, tack up at flyers at colleges or place ads in trade publications. All of these methods are easy and anyone has access to the. They may bring you some prospects, but it’s likely they’ll be window shoppers who will waste your time.
The best way to sell your medical practice starts long before you place any ads. Prepare the business for sale before contacting any potential buyers. Write a non-disclosure form, and have prospects sign them before any negotiations take place. You also need to figure out how much your business is worth.
Overpricing your practice will dissuade many qualified buyers; underpricing it will attract lots of window shoppers. You need to ask yourself the following questions as you prepare your sales plan –
- Are you selling the entire practice or just its physical assets?
- When you sell the company, will the new owner keep your employees or hire new staff?
- Will you stay on as an employee or advise the new owner during the transition period?
Write a one or two page executive summary expressly to sell the business. Describe the practice, its assets, location and why you’re selling the business. Explain exactly what the buyer will receive after purchasing the medial practice. Have a financial forecast ready to show potential buyers that the practice will continue to attract patients and show consistent financial results in the future.
Why Rule of Thumb Valuation Doesn’t Work
Some doctors believe they should charge 60 to 70 per cent of the practice revenue. Buyers will want to know how profitable a practice is before buying. If they are deciding between a practice that’s 50% profit and on that’s 60% profit, they’ll always take the one with 60% profit.
The revenue approach is easy, just like placing on generic websites is easy. A quick, rule of thumb approach to valuation usually gives you poor results, just like looking for buyers the easy way.
Using Multiples to Determine Practice Value
There are many ways to value a practice, and multiples are one of the most popular. There are several multiples you can use to determine the value of your practice. They include price to owners’ equity, price to EBITDA, price to EBIT, price to net income, price to total practice assets and price to gross profit. Some experts recommend using several of these formulas for the most accurate selling price. You can average all of the estimates to get a sales price.
After determining the business value using each method, the average will give you the selling price. Other valuation methods include the Capitalized Excess Earnings Method, which includes a valuation of business goodwill to determine the practice sale price. The Multiple of Discretionary Earnings method is excellent for figuring the value of professional, owner-operated businesses. It includes scores for many areas of your practice, which will help determine the final price. The business factors examined are:
Earnings track record
Nature of business
Ease of operation
Industry growth prospects
Business growth prospects
Once your business valuation and summary, you can write your sale ad and work with a business broker on the best way to attract prospects. Your broker may already have contacts in the local medical community and bring certain prospects to your attention before even placing the ad. The broker may also know of specialized websites or publications that feature for sale ads for medical practices.
How to Find a Broker for Your Medical Practice
Finding places to advertise besides generic websites and trade journals can be difficult without the research methods and expertise of a qualified businesses broker. You need to talk to several brokers before deciding on the right one. Make sure the broker knows how to value and sell a medical practice, not just generic businesses.
If you need to hire a business broker, 1-800-Biz-Broker can help. The site provides information about business brokers throughout the United States. Research business brokers in your area and read reviews from business owners who have hired them. Contact several brokers and compare their rates and experience before deciding on the best one for you.
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Thinking about selling your medical practice or business? You should start with a Business Valuation. Contact us today.