With all the upheaval in the insurance market, many smaller private physician groups are either selling or consolidating. Albeit a big decision, it doesn’t have to be a painful one – the goal is to maximize the dollars and ease the transition for your staff and patients.
Before you consider the sale, you’ll need to determine what you want your role to be – will you retire, stay on as a staff physician, take on management and/or leadership roles – or a combination there of? Of course this is just some high-level personal things to consider, there are others such as business real property, equipment and other tangible items and employee benefits and everything in between.
Here are some tips you can take to help streamline the sales process:
Upgrade the look and feel of your practice. If your practice looks like it’s stuck in the 70s it might be time to spend a little money to bring it up to date. New chairs, desks, phone system, and equipment are all items you can look into updating if your budget allows. You want your practice to be both attractive and comfortable for your patients as well as help you fetch you a higher price and provide you with several potential buyers. As with selling a home – staging is everything.
Help with marketing during the transition. You can negotiate a transition period after the sale where you help the new physician notify your patients of the change and help them acclimate to how your practice operates. It will also help ease the patients into trusting the new physician, since you will be there during the transition.
Streamline your operations. Clean up your books and cut back on costs that don’t affect your quality of care. Look at your billing and compare it to similar practices. If an increase in billing in necessary, now is the time to implement it. Adjusting outdated pricing will improve your bottom line and attract higher bids.
Go electronic. Practices that already use electronic health records are more likely to sell faster than those who use paper charts. Most buyers don’t want to deal with converting to an EHR system on top of buying a new practice.
Selling the space. If you currently rent your space, the buyer will take over your contract. However if you own the property your practice operates out of, you will need to determine if the new buyer wants to buy the space, rent it, or if they plan to move the practice elsewhere. Your buyer may not want to purchase the building as well, so you may need to find a separate buyer or renter for the office space or building.
Communicate with your staff. If you plan to sell, let your employees know. Nothing is worse than a secret getting out and now you face a mass exodus of employees that not only hurt the business you still own but affect the sale of the business as well. Let them know their options.
Share the news with your network. If you don’t have a buyer in mind already, let other local medical groups and practices know of your intentions. You may find that one of them is on the hunt to expand and may be interested in buying your practice.
Determine your practice’s value. Work with a business valuation firm and your financial planner or accountant for this step, however many practices determine the value by adding 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.
Set a realistic asking price and be willing to compromise. No matter how much you think your practice is worth, if your asking price exceeds its fair market value, it will be difficult if not impossible to find a buyer. In setting a price, take into consideration the availability and interest of buyers in your region as well as recent practice sales.
Find the right buyer. Money isn’t everything. Consider the reputation, practice philosophy, and business management skills of the buyer. Finding a competent successor will not only facilitate the business transition, but also will help you to meet your ethical responsibility to help your clients find appropriate care after you leave the practice.
Negotiate any employment contracts. If you plan to work under the new buyer, you’ll need to determine what your employment contact will look like. Is the sale of the practice contingent on you working for the new buyer?
Be mindful of legal, ethical and professional obligations. Contact the appropriate agencies and associations to ensure compliance with the legal, ethical and professional obligations associated with selling your practice. Your duties related to informing clients of your departure, ensuring continuity of their care, record storage, informed consent and other matters may vary according to state law.
In the end, put yourself in the buyer’s shoes. Would you buy your practice if you were on the market shopping? If not, be honest with yourself and fix the glaring problems!
Senior Vice President, Commercial Lender