Tips on Selling Your Practice

Written by on November 29, 2013 in Features - No comments
Zebulon2WEB

When you are ready to sell your practice or starting to review your options, here are some key points you need to address before talking to a potential buyer:

1.  Stage Your Practice to Sell:  Before you start gathering your data, both financial and patient demographics, you must stage your practice for success.  De-clutter your practice, organize every desk, the patient waiting room, exam rooms and keep your entire practice VERY clean.  Having an orchid displayed at your check-in window is an inexpensive way to up-sale your practice.  Make sure your staff is well groomed and always greats every patient with a friendly smile.  Suggesting or requiring your staff to wear lab coats or uniform tops will create a professional atmosphere.   Create a positive atmosphere with the buying doctor and allow him to buy the practice instead of you selling it to him.  The first impression is important, but rest assured when you are selling your practice that every visit by the potential buyer is extremely important.  Your professional broker should orchestrate the practice visits while directing times and dates for every visit and, of course, the exchange of data.

Zebulon2WEB2.  Financial Data:  Have your financials in order.  You should have at least the past three years of tax returns and current profit and loss statements with balance sheets both in cash and accrual format.  Make sure your statements are prepared in a good accounting format; Quick Books or statements from a reputable accounting or CPA firm.

You should identify your expense “add backs”.  As you are determining the value of your practice there are certain logical add backs you are entitled to claim including personal expenses such as club memberships, car payments, health and life insurance as well as entertainment and travel expenses, to name a few.  Adding back expenses also applies for one-time non-recurring cost such as EMR roll-out invoices or one time legal fees.

Your practice may be your most valuable asset, but do you know what yours is worth?  Having a professional Valuation on your practice can also be a big help.  There are a few specialized attorneys and CPAs that prepare valuations.  We recommend BizScore Valuation because they have three sections: the Performance review, the Valuation Reports and the Projections section that provide 5 years of detailed estimates.  You can view their corporate capabilities at www.bizscorevaluation.com

3.  Patient Demographics:  You must provide data regarding your patient demographics.  Every buyer will be interested in your patient flow and how you track your patients on a daily and monthly basis.  Have a detailed list of your CPT codes with charges for each procedure with any modifiers.  You should be able to print this report from your electronic medical software.  Make sure you are able to detail your routine charges like 99212 through 99215, special procedures that may be specific to your practice and have your CPT codes with charges formatted for print and viewing.  You may be able to separate pages by age, insurance payee, sex and type of medical issues they experience.  (An example is the total number of Medicare patients or pediatric patients).

4.  Contracts and Agreements:  Organize all of your vendor contracts and have the details, account numbers, payment data, due dates and rents or mortgages that are due monthly, quarterly or annually.  Include phone bills, utilities, pest control, copier payment or maintenance, insurance, payroll services, billing or accounting services, etc.  Always review your contracts like telephone plans for the best short term and long term plans and cut out waste whenever possible.

5.  Solve Problems:  Make sure you identify any problems or potential problems before closing.  Most issues can be resolved as most sellers and buyers are working toward a common goal, transferring ownership.  If there are any pending law suits or employee issues, make the situation known and understand what your options are in finding resolutions.  No one likes surprises and an unresolved issue can spoil your closing.

6.  Identify Your Liabilities:  In an asset sale, most buyers will not assume major liabilities of the practice.  Such liabilities may include bank loans, credit lines, and equipment leases.  When estimating your net proceeds from the closing, you should consider carefully all of your outstanding liabilities and how much it will cost to satisfy this debt at or before closing.  Your outstanding liabilities will determine what you will net from the sale.

7.  Work with a Professional Broker:  It is very hard to sell your home on your own and it is much harder selling your practice without professional guidance.  I strongly suggest using an experienced practice broker in lieu of a business broker.  An experienced medical practice broker knows how to write medical contracts, keep the respected medical boards informed and protect the interest of the selling doctor or practice owner depending on the state the practice is located in.  Also, CONFIDENTIALITY is a very important issue.  You must not place a sign in the yard of the practice saying “For Sale”.  This would be very damaging and your employees as well as your patients will be concerned and may leave your practice.  Business and Real Estate brokers are accustomed to putting their sign on the building or business for sale.  When working with a practice broker you will eliminate the problems inexperience may bring.  If your practice broker has an attorney on staff, you will come out ahead.  The staff attorney will be informed in the proper documentation needed and eliminate errors and missteps along the way.  If your broker doesn’t have a staff attorney, we strongly recommend you have your own attorney involved.  Selling your practice is not easy and requires experienced and legal hands working on your behalf to make sure the ownership transition is smooth and legal.

8.  Practice Financing:  We recommend the buyer pay for the practice in full at closing. A cash transaction handled by an attorney, bank transfer of funds using an Escrow account is ideal.  If the seller has to finance part of the sales price for the buyer, make sure you are dealing with a credit worthy buyer and we suggest you have collateral backing up your promissory note.

9. Your practice Image:  The very best way to create an image for your practice is with a professional web site.  Practices with really sharp informative web sites will fetch 20% more in price.  Also your colleagues will be more comfortable referring patients to you if they and their patients can see you on-line.

10.  Plan your sale:  If you don’t have a plan for success, you automatically have a plan for failure.  I have heard it said that every practice does one of two things – sells or closes from lack of preparation.  Don’t wait until the last minute.  When you start thinking about your practice options, talk to a medical practice broker.  Discuss time lines and how long you may be on the market before a sale.  You need to think about the time you may be required to spend at the practice to help with a smooth ownership transition.  Selling your practice is not hard, but you must have your numbers, both income and patient, available for the prospective buyer.  Make the new owner comfortable with their findings. Then you can step back and take a deep breath.

By Philip Driver
CEO, Physician Solutions, Inc.

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