Address All of the Issues
Selling a medical practice involves a myriad of complex issues, ranging from legalities of employment, taxes, business organization, to accounting and leasing. These types of issues permeate the entire sales process, from preparing for the sale and throughout this business transaction.
Failing to prepare is preparing to fail, the old adage warns.
A physician who doesn’t adequately prepare his or her practice for sale risks a result of receiving less than the maximum valuation of the practice.
Many physicians have opted to sell their practices to a larger medical group or hospital and sign an employment agreement with the buyer. Some see this as a way to better achieve a life balance or to do away with the added stress of running a business to devote more time on treating their patients. Finally, some physicians will sell their practices when they are ready to retire. Regardless of the reason, there are important questions to be addressed with the help of an experienced business broker specializing in health care concerns that will ensure that the sale realizes its maximum value and adequately protects the patients.
Here are a few reminders that are a good place to start:
Make sure your books are in order
This should be a given at any point in time for a successful business, but if a physician is planning to sell his or her business within 18 months, remove expenses from the books such as cellphones and cars to show little or no expenses on the books that impact the net revenue and that may be hard to explain. Another scenario is to create a separate professional association for those expenses. Physicians should discuss strategies with an experienced business broker to make certain their balance sheets show as positively as possible how their practice is performing.
Show your billing and collection data
Just like other business owners, a physicians should show potential buyers what the practice bills out and the amount of money it collects during the most recent 12-month period—this can help maximize the value of the medical practice. If your records indicate that the practice collects on average 75% of all billing, this will command a better price than a practice that’s less successful and collects on only half of its bills.
Make Sure Your Practice is Right-sized
As another measure of the performance of the practice, a physician should make certain that he or she is employing the right number of employees for their workload, and to show that all of the support staff are being fully utilized. Physicians should review job descriptions, responsibilities, and tasks, as well as the benefits for each of their employees. While this may not result in downsizing, it should help to more fully describe how the practice’s employees are utilized.
Do Your Homework
These are just a few on the issues physicians need to address when preparing to sell their medical practice. There are plenty more, and preparation is critical to realizing the best return on investment.
Speaking of investment, an investment of time is truly needed for physicians to have a sense of the market, the value of their business, and to map out a solid strategy for selling. So with all of this studying, why not get a tutor?
Andrew Rogerson has years of experience working with healthcare professionals throughout the sales process. If you are thinking about selling your medical practice and looking forward to the next phase in your life, contact him today. Andrew can consult with you on the valuation of your practice and how to position it to receive the best price.