Every doctor that owns a practice should eventually plan to sell. With proper planning and assistance many will get paid well for their life's work. Others will miss opportunities because of fear or misinformation, and net only a fraction of the worth of the practice. Don't count on the sale of your practice to fund your retirement plan, but don't walk away from a valuable asset.
As doctors grow older, their needs and circumstances will change. Their capabilities and stamina also change as their biological clocks wind down. Change can be stimulated by disability, divorce or IRS judgments, or just being burned out. You should try to set the sale of your practice as a carefully planned event. If a personal crisis dictates the sale, the sale becomes more difficult with greater risk of lost revenue. For best results, plan early so that you can control the outcome. The longer you wait, the opportunity to plan and direct the course of the sale diminishes.
- Has your practice gross flattened out or started to decline?
- Is your body in the office, but your mind is on the golf course or traveling?
- Do you want to cut back due to stress or fatigue?
- Is your body starting to feel the effects of practicing?
- Are you tired of managing and motivating your staff?
- Do you want to take quality time off without worrying about overhead?
- Do you want to broaden your interests outside of medicine or dentistry?
- Do you want to convert the equity in your practice to an interest bearing investment, and still maintain control of the practice and your future?
- Are you tired of uncommitted associates that take advantage of you?
Selling 100% of a practice is usually easier and less complicated than selling part of one. Some doctors are very busy and not yet at retirement age, so selling part of their practice now and the rest later when they are closer to retirement makes more sense. Some feel that bringing in an equity partner is preferable to the revolving door associateships that often occur. May doctors would rather sell and stay as an associate themselves. This allows them to work the days they want on the patients they want without the hassle of office and staff management. It gets the value of their practice into their hands to invest for future while they are still earning an income. Each of these options have advantages and disadvantages, and Professional Transition Strategies can assist you in deciding which works best for you and your family.
If I do, I will make as much as my practice is worth, and it won't matter what I get for it. None of us can be sure we have a few more years to practice at our current level. If during that time, you are forced to cut back for whatever reason, the value of your practice will drop dramatically. Selling out of necessity takes you out of the driver's seat. The best time to sell is when things are going well. No one wants to buy a practice that is on the decline.
We know from experience that in the medical and dental world, the odds against an associate ever buying into a practice are overwhelming. Over 90% of associateships fail. If you hire an associate without requiring an immediate equity investment, plan on him or her leaving eventually. Associates are not equally committed doctors and that is why they leave.
For a practice in a major metro area it will normally take from 6-12 months. It may take as long as 3 years in smaller rural communities. Specialty practices may take longer or shorter depending on the practice and location.
It is better in the early stages of the process to not get staff and patients nervous about the potential transaction. Once appraisals and potential buyers are identified, will be soon enough to inform them.
Some purchasers will not want to add the cost of purchasing a building and this could increase the sales time. When real estate and professional practices are combined in a single transaction, the values of both are usually compromised. Many doctors will retain their ownership in the building, set a long term lease and enjoy the additional income from the rent.
Many finance companies specialize in medical and dental practice transactions, and therefore more doctors in the last 10-15 years are receiving cash at closing. This eliminates risk to the seller in regards to late payments or defaults. The downside comes when the seller does not manage his money properly and takes unwise risks. Your accountants and attorneys should be consulted.
Have a comprehensive Practice Appraisal conducted to determine ways to make your practice more profitable and valuable. Take the time to get your practice and facility in the best financial and operational shape possible. Since it is a buyer's market, only the best practices will sell, and the great ones will sell at a premium.