The Sale of Your Practice - Preparation Pointers

Kenai Fjords National Park – 2012

Kenai Peninsula, AK

The Benefits of Proactive Preparation

The preparation of your practice for succession involves undertaking a series of measures that improve the performance of your practice, its profitability and value beyond its present condition. These enhancements will benefit you now and at the time of a sale by increasing its value.

Practices and Preparations 

As there are a variety of practice settings, the nature of corresponding preparations may vary. This article addresses the example of a solo, private practice as it is the most applicable to other types of practices. By customizing preparations, specific needs can be met.

The two major considerations can be broadly stated as preparing yourself first and then preparing your practice

Preparing Yourself

This involves preparing yourself personally and professionally. It is probably the critical necessity that is most under-appreciated because it may be unrecognized and overlooked. 

It is not just about what you want to do after you transition from practice. Your preparation should be much deeper than that. It begins by making personal and professional decisions that will clear the way to planning and preparing your practice. Failure to do so will inevitable lead to hesitation, indecision and delays that will limit your options and ability to respond to opportunities.

Here are some questions to ask yourself:

• Am I really clear on the difference between my internal identity and my persona(s)? (See previous article for more detail on this topic.)
• Do I really want to stop practicing or do I want to continue to work full or part time?
• Do I want to recruit and mentor a younger associate or sell to a financial institution, e.g., a family office?
• Or do I want to close my practice via an asset sale?
• Have I completed my future lifestyle plan? (See previous article about this topic.)
• Have I developed a financial assessment of whether my lifestyle plan can be supported by my current assets?
• Does that evaluation conclude that I am financially prepared to transition from practice? If not, what adjustments of my plans can I make?

If you are financially prepared and want to stop practicing, you can proceed to develop and execute a plan to do so (see previous article about your End of Career Transition Plan).

Preparing Your Practice for a Sale

It is common for physicians to equate the status of their well-functioning practice to readiness for acquisition by a prospective buyer. In some instances this may be an associate that you have recruited or an acquisition of the practice by a financial institution such as a family office.

A practice that functions well and is profitable is certainly the basis for offering it for sale. However, that does not necessarily mean that it is ready to present to a prospective buyer. Preparation for a sale requires much more than that.

A critical element of preparing your practice for acquisition is to optimize your present practice functions and profitability. To the degree that you can present a greater, legitimate value to a prospective buyer, so will be the ability of that buyer to justify paying you an amount commensurate to that value. This will benefit you and the buyer.

These are some items to consider as you seek to optimize the function and profitability of your practice in order to enhance its present value:

• Is your patient case mix, sources and inflow conducive to supporting a return on investment for a buyer?
• What is the nature and degree of recurring professional services? Non-physician services?
• What other services or product sales provide additional revenue?
• Are your financial documents necessary for conducting due diligence ready for presentation?
• What is the nature of your competition?
• Do you perform procedures in an office facility?
• Is that facility truly a profit center? Or is its cost supported by professional fees?
• Do you know the true cost of providing those services?
• Do various costs such as mortgage, lease, personnel, insurance, etc. reflect excellent management?
• What is your history and business plan for practice development and growth?

Your Role as Leader and Manager

As you enter this phase of your career, it is important to note that your role will necessarily evolve. You will have to take on new responsibilities. In particular, they are your role as the leader and manager of your career transition.

As leader, you will create the vision that is the framework of the process. It is up to you to convey it clearly to your staff and earn their emotional support and practical assistance.

While you probably have a capable office manager or administrator, this process is best served by your exercising a certain degree of management in addition to that already provided. Specifically, that it is to ensure that the policies and procedures that guide your transition are executed and documented with efficiency and efficacy. That enhanced attention to patient care becomes the new standard, particularly in matters of safety and continuity of care in the context of your transition. 

These are my suggestions as I encourage you to: 

Plan. Prepare. Prosper. _TM 

Updated: August 9, 2024

PS: Would you like to learn more about how to transition from your practice? I would like to assist you. I provide practice transaction services that are tailored to your specific needs. Click here to request an introductory conversation.

If you would like to learn about another way that I can guide you, check out this brief video that describes my unique online course: 

 The Practice Transition Course for Physicians. _TM 

Baird Peak & Portage Lake – 2012

Kenai Peninsula, AK