Strategy Options for Successful Medical Practice Sales
The market for selling a medical practice looks very good right now. However, that doesn’t mean that it’s a slam dunk to find the perfect deal for your situation. It’s not a “one size fits all” when it comes to successful medical practice sales, and you should work with an experienced business consultant to avoid critical mistakes when engaging in this process.
There are several options that a physician can use when entering the medical practice marketplace. One concern is that if you’re a practice with fewer than five doctors, you should aim to be part of a larger group. That’s because with the costs associated with providing services, it’s essential to have a larger base to share that type of expense.
With that said, let’s examine some other strategy options.
The first option is to grow your practice…that is to expand it organically by adding more people or merging with similarly sized groups. Another option is to join or affiliate with a larger multi-specialty groups in your community, or you could affiliate with a different type of group.
Finally, you may have the option of selling to a hospital. This may not be in the best interests of the physician group from a long-term strategic approach. Hospitals generally won’t enter into long-term agreements with medical practices. Their contracts usually are set at just three or four years in duration.
This can be an issue with the administrative turnover that happens at the executive level in the organization. The strategic plan of those who signed you up may not be the same down the road if/when they leave. An option that sounds great today may wind up as less desirable in several years. In addition, there are some hospitals that have difficulty managing physician practices. Hospital leadership may excel at operating hospitals, but these executives may struggle at running a medical practice efficiently and effectively.
Whether you want to admit it or not, emotions always come in play when selling a medical practice. It’s quite normal and understandable. With this force at work, you need an objective advisor to help you set realistic expectations for the sales process, so your emotions don’t overtake the strategy that you’ve mapped out for the sale of your practice.
Goals and objectives will vary from physician to physician when selling a medical practice. For instance, a hospital transaction scenario is vastly different than the physician-to-physician selling environment. Hospitals must comply with many more regulations and must acquire a fair-market
assessment as to the value of the medical practice. The physician-to-physician environment has fewer restrictions, and a selling physician will want to sell his or her practice for the highest multiple possible.
Preparation is Critical
If you’re thinking about selling your medical practice, it’s vital that you prepare for the negotiation. That means partnering with a business advisor like Sacramento’s Andrew Rogerson and conducting a thorough review of your situation.
Andrew will review your financials and look at how your practice performed in the past several years. If the trend is not upward, then the two of you should explore why and incorporate that explanation into your sales narrative.
Contact a Medical Practice Sales Expert
These ideas should help you and your business valuation consultant prepare for an effective sale of your practice. We suggest that you speak with an experienced professional like Andrew Rogerson. To contact Andrew, please send him email or call our office at (916) 570-2674.
For general information on selling your medical practice in California, please visit our website section for a selling medical practice.