Four Options to Sell Your Medical Practice
There comes a time in every doctor’s life when he or she decides to hang up the lab coat and enter a new phase of their life.
This can be a very exciting time, even though there will be some major adjustments you’ll be making away from the office.
Selling a medical practice can be challenging. It’s a very specific business type, and as a result, your potential buyers may be limited.
If you’re searching for ways to sell your medical practice, you’ll most likely come across four main options for doing so. Here are those options, as well as some positives and negatives to each.
1. Hospital Systems
Hospital systems are one of the leading purchasers of local medical practices today. The hospital system will wrap your practice into their already well-established system. This provides your practice and patients a lot of benefits.
From a sales standpoint, selling to a hospital system often makes for a smooth transition because they are experienced in these sales. Many hospital systems will also keep you on as an employee, paying you a good salary and solid benefits as well.
One downside to selling to a hospital system is they will only pay fair market value for your practice’s assets. They won’t pay anything for “goodwill.” Hospital systems do this so they don’t violate the law, which restricts them from paying for a referral.
2. Private Sale/Venture Capital
One way you can get top value for your practice is by selling to private equity or a venture capital firm. They will value your practice both the tangible equipment you have plus the intangible “goodwill.” They can do this since they aren’t already in the medical field.
Perhaps the biggest downside to this type of sale is private entities or venture capitalists are often very selective about which practices they will buy. They do their due diligence and focus a lot on the numbers.
In addition, they may have onerous sales terms that might not work for you.
3. Sell to Colleagues or Employees
Another viable option would be to sell to one of your employees, other doctors in your practice of some of your colleagues in the field.
Familiarity is a big positive for this type of sale. These people will know your practice, your region, your patients and — most importantly — you.
The downside to selling to colleagues or employees could be they lack upfront capital. As a result, they may ask you to settle for a structure payout rather a full upfront payout. This could reduce the amount of money you get at the time of the sale, which could limit your options.
Colleagues or employees who purchase your practice may also want you to stay on board longer than you might like. They may need your extra guidance to help them through the transition since they may have never run a practice before.
This is extra added attention is something you’ll have to weigh as to whether this is a viable option for you.
Another option would be to merge with another practice rather than selling your practice outright.
This would expand your practice, but would also expand the number of doctors who can help serve your patients. In this way, it would be a nice way for you to take a step back without stepping away altogether at once.
A merger could have many benefits to you now and in the future. By reducing overhead costs, a merger could potentially increase your profits. This, in turn, could increase the value of your practice when you do finally leave the practice.
While this solution won’t see you exit your practice right away, you could structure the deal so it’s a gradual exit. The merger contract could even detail the exact date of your exit, so you could plan for your retirement — or whatever is next for you life.