Things to Do and Some to Avoid as You Prepare to Sell Your Medical Practice

Tundra in Autumn - 2011

Denali National Park, AK

Planning and Opportunities

The sale of your medical practice is a major undertaking that requires careful consideration and strategic planning. The necessary planning and preparations is a lengthy and time-consuming process that is marked by opportunities as well as potential pitfalls. The opportunities are often facilitated as a result of early preparations that are necessary much earlier that you may think.

When to Begin

It is important to recognize that your upcoming career transition is a process,  not an event. Your transition really begins with personal considerations that will often preoccupy you over a prolonged period of time. Thoughts will recur about what you will miss and you will feel joy from thinking about what you are looking forward to. Some concerns may affect you deeply and it is important to come to terms with them. This will allow you to develop lasting convictions that will serve you well as the years go by.

A Focus for Clarity

A prominent matter is that you may find yourself wondering what your identity will be. Some physicians have become accustomed to thinking that their internal identity is described by their title. Consequently, even before your practice comes to an end, you may find that the feeling of loss is proportionate to that degree of self-identification. It is beneficial to consider that your internal identity is actually described by your character. 

I encourage you to consider that while your persona as a practicing physician may end, your character will endure. You may wish to refer to a more in-depth previous discussion of this topic.

These matters take time to bring into a focus that will serve as an important part of your foundation for decisions you will make now and in years to come.

As a practical matter, personal questions such as this can delay important decisions you must make. As a result, you may lose opportunities that you can take advantage of when you use time as your tool by virtue of timely preparation.

Preliminary Considerations

Preparing your practice for a sale or succession is a tedious, lengthy process. The time and effort required is superimposed on your staff’s workload as well as your own. It is important to evaluate everyone’s responsibilities and the time available to fulfill them. You may find that changes are needed in order to properly prepare. Please refer to a recent article on this topic.

Top Things to Do

1. Prepare Your Practice for Sale

Timely Preparation: Start preparing your practice for sale several years before you plan to offer it for succession or a possible sale to a private equity firm. This allows you to optimize its financial performance, streamline operations, and enhance its overall appeal to potential buyers. Think about the buyer’s perspective.

Financial Documentation: Keep meticulous financial records, including profit and loss statements, balance sheets, tax returns, and accounts receivable. Well organized, clearly descriptive file names of financial documentation is important to facilitate due diligence by serious buyers. This will also reflect favorably upon your practice.

2. Seek Professional Guidance

Legal and Financial Advisors: Consult with experienced professionals, such as healthcare attorneys, accountants, and transition consultants, who specialize in medical practice transactions.

Valuation Expertise: Obtain a professional valuation of your practice to determine its value. An accurate valuation is essential for setting an asking price that you can support.

3. Establish Acceptable Buyer Criteria 

Alignment: Consider and prepare written criteria that will describe ideal as well as acceptable candidates for succession or a private equity buyer. Determine your personal, professional and practice needs.

Confidentiality: Maintain confidentiality throughout the sales process to protect patient and employee relationships. Have a plan for disclosing your plans  at the right time on a need to know basis. Balance that with consideration for your staff who are also experiencing a transition. Non-disclosure agreements with potential buyers and possibly others, are essential to safeguard sensitive information.

4. Negotiate Favorable Terms

Structured Agreements: Work with your advisors, such as a health care attorney, accountant, financial planner and a practice transition consultant to advice you on preparing and negotiating a succession or sales agreement that includes favorable terms for both parties.

Due Diligence: Conduct thorough due diligence on potential buyers whether a younger associate in a succession scenario or a sale to a private equity firm. Prepare thoroughly the data necessary for a prospective buyer to conduct due diligence about your practice. Present it in a way that is secure as well as readily and easily accessible.

5. Plan for a Smooth Transition

Patient Communication: Communicate the transition to your patients with care and clarity. Assure them that their medical needs will continue to be met by the new physician(s) or by referral as needed. This includes providing continuity of care within your practice or to an outside, similarly trained physician. Information should be provided as to how to access a copy of their medical records.

Employee Retention: Develop an internal transition team that consists of key employees. Consider workload, skills and available time necessary to accomplish tasks related to the transition process. Keep your staff informed as is appropriate. This is not only considerate but will also favor the retention of staff members to ensure a smooth transition and maintain continuity of care.

Top Things to Avoid

1. Rushing the Sale

 Impulsive Decisions: Avoid making impulsive decisions to sell your practice without proper planning. Rushing the process can result in lower offers and unfavorable terms. Use time as your tool with timely, proactive preparation.

2. Neglecting Legal and Financial Due Diligence

Legal and Other Pitfalls: Engage legal, financial and practice transition consultants that can help you avoid legal disputes, financial and other complications.

3. Ignoring Patient and Staff Concerns

Poor Communication: Neglecting to communicate with your patients and staff about the transition can lead to anxiety, confusion, and the loss of trust. These problems can adversely affect your providing ongoing quality of patient care.

4. Overvaluing Your Practice

Unrealistic Expectations: Overvaluing your practice can discourage potential buyers and prolong the sales process. Rely on professional valuations for an accurate assessment.

5. Your Role as Leader of the Transition

Leading: You must undertake the role of leader of your transition. This involves having a clear vision and purpose that you communicate effectively to your staff. Consider that staff restructuring may be necessary as the transition workload is significant. Keep in mind that all this is occurring simultaneously with ongoing patient care. 

Prepare to Prosper

Your career transition is a major phase of your life that will affect you and others in profound ways. The key element to a successful transition and life beyond is timely planning and its execution in a proactive manner.

Plan. Prepare. Prosper. _TM

PS: By the way, do you want to learn more from me about how to create a successful practice transition? I would like to help you. I provide consulting and practice transaction services that are tailored to your specific needs. Click here to request an introductory conversation.