Selling a Professional Healthcare Practice - Frequently Asked Questions

Frequently asked questions about the sale of a practice...and answers, provided by yours truly.

When is the best time to sell my practice?
The decision to sell can be driven by a variety of factors: retirement, career change, lifestyle desires, or financial concerns. Addressing personal timing in conjunction with financial considerations is crucial when trying to obtain full value for the practice. From a financial perspective, the ideal time to sell a practice is during a period of solid earnings. The value of a practice is largely driven by recent performance. Buyers and financing sources will look for consistency over the prior 2-to-3 year period with additional emphasis placed on the last 6 months to 1 year. Growing and maintaining the practice in anticipation of pursuing an exit strategy is important to maximizing potential value.

How much is my practice worth?
A practice’s value depends on many factors. A professional appraisal, conducted by an expert in healthcare practice valuation, takes highly specific market factors and industry nuances into account. In choosing an appraiser for this purpose it is important to consider whether the appraiser uses sound principles and has a strong foundation in the realities of practice transactions occurring on the market. An appraisal is only as good as its ability to realistically reflect the value of the entity.

How long does it take to sell my practice?
The marketability of a practice and timetable for completing a transaction are dependant on various factors. The most common aspects that come into play are: practice earnings, practice valuation, specialty, buyer demand, geographic area, and seller motivation. In general, 6 months to 1 year is a fair timeframe to consider for the complete lifecycle of a transaction. A major determinant of success in this process involves the ability of a consultant to anticipate potential challenges and diligently prepare an approach prior to marketing.

Why not sell the practice myself?
Practice owners may discover that the time and expense involved in trying to sell the practice themselves does not usually result in savings or a successful outcome. The mere decision to sell a practice is one of many steps in a potentially complicated and emotional experience, coupled with the intricacies of a transaction process for which an owner may have limited prior experience in handling. Even well-seasoned individuals may find that supervising the process themselves draws focus away from the management the practice, thus risking a decline in the very asset they are trying to obtain optimal value for. Working with a qualified practice transition specialist can yield a much higher probability of obtaining maximum value for the practice. A specialist is able to expose the opportunity to a larger pool of potential buyers and can rigorously qualify candidates both professionally and financially. In addition, the expert guidance and assistance provided by an advisor can make for more effective negotiations and a streamlined and successful transaction. Sellers can also address the need for confidentiality more effectively when an intermediary is in place.

How do I choose a consultant?
It is vital to select a transition advisor who is knowledgeable about the nuances of selling healthcare practices and can gauge market realities when devising a selling strategy. A good advisor who can give an honest analysis upfront and provide reasonable expectations for selling the practice is much more likely to deliver actual results within your given timeframe. It is important to work with someone who is committed to providing full service guidance from start to finish.