10 Tips to Sell Your Medical Practice
Selling a medical practice takes expertise and proper planning, Before you put your medical practice up for sale, consider the following points so you can attract the right buyer. Knowing as much as possible about how to sell your practice, even before you contact a broker, will make negotiations smoother and result in a higher price and better terms.
- Stay on as an employee/physician with the new owner
If you decide to sell your practice to a hospital, the buyer may want you to continue on indefinitely as a full-time employee. You will have to negotiate two different agreements in a situation like this – one to sell the practice, and another to address the terms of your employment.
Once you sell your practice to a hospital, the business may not have the same revenue stream. Hospitals may not be as adept at billing and collections as a private practice, and this results in a weaker salary for you and other staff members. Therefore, it’s crucial to negotiate salary based on your job performance using relative value units or RVUs. For example, if you produce 20,000 RVUs a year, your income after taxes is $400,000, or $20 per relative value unit. RVUs allow you compensation to depend on your performance, not the overall performance of the new practice.
- Upgrade your practice
If you have chairs, equipment or a reception desk that looks outdated, spend a little time and money on modernizing them. Your practice should contain the best, most up-to-date equipment you can afford, and furnishings should be well-kept and attractive, but comfortable. You want to show bidders that you care about your practice and patients by offering a first-class experience. An upgraded business will help fetch you a higher price and provide you with several potential buyers.
- Offer marketing services to the new owner during transition
As a condition of the sale, you can continue in the practice for three to four months and help the new physician with patients. The stipulation to continue with the practice temporarily exhibits goodwill and adds value to the business. This approach is a form of marketing you’ll offer the new doctor. It will also help ease the patients into trusting the new physician, since you will be there during the transition.
- Streamline daily operations
Go over your books and find places where you can cut costs without affecting the quality of your practice. Compare your current billing and pay rates with that of similar practices and change them, if necessary. Adjusting pricing will improve your bottom line and attract higher bids. A medical practice with steadily increasing billings will sell for much more than one with stagnant income.
- Convert paper charts to EHR (electronic health records) before the sale
Buyers are more likely to show interest in your practice if you have already converted to a digital or EHR system for patient records and other information. Changing over to a digital system will add to the expense of buying the business after the fact. Most buyers don’t want to deal with converting to an EHR system on top of buying a new practice.
- If you own the facility space, you’ll need to make two sales
If you own the building or office space where your practice is located, you’ll need to make two separate sales – one for the practice and one for the building or office. There are three potential ways to deal with this double sale.
You can sell your practice and rent the space with an option for the new practice owner to buy within a specified period of time. If the doctor doesn’t buy the space, you can continue to own the property and collect rent or sell the space to a new landlord. You can also sell the practice and turn over rent collection to a property management company.
If you are moving out of the area, sell the practice and the building or office. The physician who buys the practice may not want to buy the building as well, so you may need to find a separate buyer for the office space or building.
- Talk to your staff
Let your staff know about your plans to sell to avoid employees “jumping ship” because they fear for their jobs. When you choose a buyer, let the staff know if they have the option to be employed by the new owner, or any other choices they may have.
- Contact more than one bidder
Let local medical groups and solo practices know that you are selling your business.
You should also contact hospital administrators may be looking for practices to purchase. If you are considering selling to a hospital, remember not all hospitals may want to keep you on as a physician.
Contact as many doctors and hospitals in your local area as you can, to increase your chances of finding the right buyer sooner.
- Determine the dollar value of your practice
One of the best formulas for determining the value of your medical practice is to add hard assets, cash, accounts receivables, and intangibles such as goodwill. Once you’ve figured out you cashflow after operating expenses and physician compensation, determine the needed rate of return on investment (ROI). Divide the cashflow amount by the ROI to get a ballpark figure for the value of the practice.
- Find the Right Broker
Selling any business can be tough, but a medical practice offers several unique challenges. Determining the right valuation for your practice can be frustrating if you don’t have an experienced broker to help you. Selling to a hospital adds another level of negotiations to a sale.
Let the staff at 1-800-BIZ-BROKER handle the details of selling your practice so you can concentrate on treating patients. Call us at 1-800-BIZ-BROKER or visit our website at www.1800bizbroker.com to find out how we can help you sell your medical practice to the right buyer at the right price.
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