Don't make rigid assumptions when looking to sell your practice.
Every successful physician eventually desires to obtain top dollar for the value of his/her medical practice. They’ve spent the time working it and slaving over it. And many physicians have a good idea, or at least think they do, of the tangible and intangible assets which are housed in their practice. Because of this, many physician owners make assumptions about what their private practice is worth and what type of sale price they should obtain when it comes time to sell it.
Sometimes physicians under-predict the value and sometimes the value is grossly over-predicted (which is more often the case than the former). In addition, Type-A personality physician practice owners can often have a hard time being flexible on a number of aspects during the sales process. The key to being flexible is coming into the transaction with the right expectations. The following will give an idea of how this can be done effectively.
Being flexible on medical practice valuations
When it comes to the worth of your practice, no one—and I mean no one—can question your dedication. That may be one of the primary reasons you went into medicine for yourself in the first place. However, many physician owners may not rightly know the proper valuation of their practice and all of the tangible and intangible assets associated therewith. Whether a physician has a skewed view in a favorable or unfavorable way, it does not matter. What is important is that the physician owner be flexible when going into preparation for the medical practice valuation. Once a proper valuation has taken place, both seller and advisor should be in agreement and see eye-to-eye. Proper preparation in the planning and valuation stage is essential. Make sure you are at least somewhat flexible on price.
Hopefully, you have the luxury of finding that right buyer who is willing to pay more than the book value for your practice. If you find this to be the case, count yourself lucky. However, if fate does not smile upon you that handsomely, then you may have to wait. Downgrading below what your advisor has stated however, may not be wise either, especially if you have the time and are not in a rush to sell.
A word of caution on selecting advisors
Some advisors may suggest downgrading the value of your medical practice in order to sell it quickly. As a physician selling your practice, you should beware of such a tactic. Make sure this advisor is not too hasty when it comes to the preparation, valuation and sale of your practice. While you need to be flexible, make sure the advisor you decide on is thorough and fair when it comes time to value and put your practice up for sale. Don’t allow an advisor to leave any money on the table because they simply want to go through with the deal. This type of behavior is simply uncalled for and unethical. Additionally, ensure your advisor has experience with medical practices; while a medical practice is a small business there are very unique attributes of a medical practice that are quite different from other small businesses in different industries.
Flexibility with deal terms
Certainly you would like an “all cash” deal; that is ideal. Everyone who sells their practice will want to get a premium for the business and have it paid in cash. Unfortunately, that is not the reality for every sale. In some instances, there can be a combination of arrangements which will need to take place when the transaction itself takes place. If the parties are too rigid here, they can miss out on a good deal which could be helpful, but which may not be cash.
Be flexible on a buyer
When it comes to selling your medical practice, it is like letting your daughter get married to the right suitor. It can be a very emotional experience. Handing over the keys to the Bentley to the next owner can cause some private practice physicians a great deal of frustration and even some rigidity. For instance, some physician owners want to find the right buyer who has the very best fit for the practice itself, its patients, and its referring physicians. While I do not advise taking all emotion out of the process, I do advise to set out to be less picky when it comes to a buyer. For the most part, however, emotion should be moderated and the decision should be based on the numbers as well as who the buyer is.Admittedly, I have found this generally not to be a problem because many physician owners are, in the end, fine with just getting top dollar for their medical practice.There are, however, some instances where selling physicians tend to become quite picky on the buyer.
Be flexible on time!
Valuations take time. Finding and courting buyers takes time. Finalizing the deal takes time. If you are able to be flexible and patient throughout the entire sales process, all will work out just fine. If the deal is right for you and your practice it will take at minimum of six months from start to finish. So, don’t get nervous about selling. If you truly own a medical practice that has real economic value, there is a buyer out there who will certainly want to snatch it up. Having the right network of people in place to find a buyer is extremely important.
While you may not be ready to sell your practice today or even this year, it is best to start courting a transactional consultant early in preparation for your timely exit from the practice. Begin now, prepare early and discuss options with an advisor today.
Oftentimes busy and driven physician owners are afraid of what the next step will hold. Some hold out simply because they want to keep working in the practice because that is where they experience the most fulfilment and purpose. Fear of the unknown next step can be a huge driver for physicians who’ve worked in and on the practice for decades.