One thing every clinician needs to consider when starting and growing their business is how to EXIT the business. Everyone needs to have some sort of exit strategy. Will you retire and sell the practice, bring in a partner who will eventually take over or perhaps you plan to have your daughter or son inherit the practice?
Regardless of how you choose to exit your practice, you’ll want to have it ready for the next owner. In other words, you need to prepare your business just as you would prepare your home. house. Here are just a few of the many considerations you’ll need to take into account when you’re selling your practice.
Finances: Your finances must be in good order. You’ll want to make sure you can show profit and loss statements for at least the past 3-5 years. Make sure your books are up to date because any serious prospective buyers will want to see them.
If you don’t have your books in order, get help from a bookkeeper and accountant to clean things up and prepare the needed documents. Being able to show increasing profits will make a business more appealing to a buyer.
Billing: Is your practice keeping up with the billing and are your accounts receivable under control? A high AR may be a red flag to a prospective buyer.
Are your accounts carrying items that might be considered more personal or family oriented? You’ll want to clean that up. Examples might be that you have a family member on the payroll with a car that is being used for business. While legitimate business expenses, you may want to talk with your accountant about the best way to expense them on your books.
In addition to finances, you’ll want to make sure the practice is cleaned up for showing. This is no different than if you were selling your house. Get rid of any clutter, outdated medications, supplies, samples and the like. If you’ve had the practice for a while, you may want to consider updating furnishings, equipment, paint, whatever.
Decide how you want to be compensated. All at once, over time? What about money that is expected in the practice – the accounts receivable? Will that go to the new owner, or you? And over what period of time?
While it’s pretty clear that “real” property (real estate, equipment, supplies) can be fairly priced it’s far more difficult to assess the value of the patients. Since revenue and worth of the practice are based on patient population and patient visits, it may be quite valuable to a new owner to have a period of transition with you endorsing the new owner to your patients.
These are only a few of the many factors you’ll want to take into consideration when you decide to sell your practice. Many health care professionals will enlist the assistance of a business broker and a lawyer skilled in selling practices and determining a fair market value for the practice.
Have you sold a practice? Feel free to share your experience below.