“Start with the end in mind… “
Words of wisdom from Stephen R. Covey, from his book “The 7 Habits of Highly Effective People.”
But what does it mean to start with the end in mind? And how does it relate to selling your practice?
“Start with the End in Mind”
No matter what we do, it’s best to have a clear goal and outcome in mind at the onset, before we get started. This applies to anything we do.
For example, without deciding that you wanted to become an NP, it would have been highly unlikely to obtain an advanced nursing degree.
When we have clarity, we can formulate goals and choose how we want to proceed. However, if there is muddled thinking and we’re not clear about what we want, it’s hard to pick a direction.
Zig Ziglar, the motivational speaker, once said: “You can’t hit a target you can’t see, and you cannot see a target you do not have.”
How Does it Relate to Selling Your Practice?
Ideally, everyone would start with the end in mind at practice startup.
The business would have streamlined systems, relevant and up-to-date policies & procedures, effective billing procedures, and successful marketing systems.
And much more …
In other words, everything would run smoothly. Everything would be in great shape…
But most of us aren’t anywhere near that…
There are too many plates to juggle at startup, making it hard to think about anything else, let alone structuring your practice to sell it eventually.
So, the time to “start with the end in mind” is now.
When you’re thinking about selling your practice, you want to start structuring it in a way that positions it for a future sale.
Because there’s a big difference between wanting to sell and being ready to sell.
Selling your practice is one of the biggest decisions you’ll ever make as a business owner.
Whether you’re retiring, moving on to a new opportunity, or you’re simply ready for a change, preparing your practice for sale takes planning and strategy.
The more prepared you are, the smoother the process will be for you, the buyer, your staff, and your patients.
Here are the key steps to take to get your practice ready for sale.
#1 Clarify Your Goals and Timeline
Why do you want to sell your practice? It’s a question you’ll likely be asked.
Is it because of problems with the practice or issues in the local market? Are you retiring, or are you ready to do something else?
How soon do you want to sell? Getting a business ready for sale and selling it can be a lengthy process.
Before you take action, get clarity on why and when you want to sell. And allow yourself ample time to prepare the business for the sale and the sales process.
#2 Cleanup & Organize Records
Buyers want transparency; they don’t want surprises.
To that end, make sure your financials are clean and up to date. A buyer may want to see years of financial data, including:
- Profit and loss statements
- Balance sheets
- Tax returns
- Accounts receivable
- Equipment and asset lists
- Contracts, etc.
The cleaner your books, the more attractive your practice will be to a buyer.
#3 Ensure Legal and Regulatory Compliance
Make sure all your licenses, DEA registration, and business entity documents are current.
Review compliance policies (HIPAA, OSHA, employment law) and resolve any pending legal issues.
If applicable, review your lease agreement; buyers will want clarity on the terms of the lease if they are to assume it.
If you are selling the practice with real estate, make sure all necessary documents are up-to-date and available for review.
#4 Optimize Before the Sale
Think of selling your practice as you would stage your home for sale. A well-run, efficient, and clean practice will always attract better offers.
Focus on:
- Streamlining systems and workflows
- Training and stabilizing staff
- Improving patient communication and marketing
- Make sure the office itself is prepared for showing… no clutter, no broken equipment. Consider updating paint and outdated furnishings, etc.
#5 Get a Professional Valuation
You can’t sell your practice until you know what it’s worth.
Most service-based businesses are sold with limited tangible assets. Most of their value comes down to intangible assets such as patient base and retention rates, reputation, referral networks, and insurance contracts. This makes their value difficult to quantify.
Small healthcare practices often are valued using a blend of market multiples and income approaches. Buyers want to see consistent revenues, a stable payer mix, and patient retention before considering paying for goodwill/intangibles.
It’s best to work with a healthcare business broker, CPA, or valuation expert. They’ll look at your revenue, profits, patient volume, payer mix, and growth potential to determine the value of your practice.
Once you have a professional valuation, you’ll have a realistic asking price and can move forward with the sale.
#6 Prepare Documentation for Buyers
Having a complete “practice packet” ready for the buyer to review will help speed up negotiations.
At a minimum, the packet should include:
- Practice summary (services, demographics, specialties)
- Operations manual and staff responsibilities
- Vendor, payer, and referral contracts
- Patient volume and retention data
- Anything else a buyer might want to review
#7 Work with Professionals
Don’t do this alone. Get help from:
- Consider working with a practice broker for marketing and screening buyers
- Work with a CPA for all financials and tax planning
- Work with an attorney to structure/review contracts and help with negotiations
#8 Market the Practice & Negotiate the Sale
Decide whether to use a broker or to list the practice confidentially, on your own.
Potential buyers may be other NPs, physicians, or healthcare groups.
Work with the experts to screen potential buyers for financing and eligibility, because this is where details matter.
Determine what will be included in the sale. Work through terms such as purchase price, payment structure, non-compete clauses, and your role in the transition. Think about what terms are negotiable and where you draw the line in the sand.
At this point, it’s best to keep the process confidential to maintain staff and patient trust.
#9 Plan for Transition of Ownership
Once a sale agreement has been reached:
- Notify staff and patients
- Reassure patients about continuity of care
- Discuss transition plans with employees
- Introduce the buyer to EMR, billing, and scheduling systems
- Introduce the buyer to referral sources and payers
#10 Identify Post-Sale Matters
And don’t forget about:
- Planning for taxes on the sale
- Updating your retirement and financial plans
- Arranging for the proper storage or transfer of retained records
- And negotiating terms if you agreed to stay temporarily as an employee or consultant
In Summary…
For many, selling a practice is a one-time event with potentially enormous consequences.
It’s both a business transaction and a personal milestone. It’s a decision not to take lightly…
However, by preparing in advance, financially, legally, and operationally, you can maximize your practice’s value and ensure a smooth handoff to the new owner.
And please don’t go it alone.
Get help from experts who can advise and assist you every step of the way!
Have you sold a practice or business before? Please share your experience and any recommendations you have…
By Johanna Hofmann, MBA, MAc., EAMP; regular contributor to the NPBusiness blog.