9 Things you need to consider to maximise the sale of your medical practice

01 February 2019 | Clinic Owners and Practice Managers | 6 minutes read

9 Things you need to consider to maximise the sale of your medical practice

Well established private medical practices are often in high demand. Typically, the acquisition of private medical practices is one of the preferred methods of investors and larger medical groups to expand their network of practices and to gain nationwide market share.

Many practices sell fast and for a good price, however not every practice sells. The sale of a medical practice largely depends on its current profitability, future potential and whether it’s in a condition to sell.

Since you only get to leave your business once, it pays to get it right.

So here are 10 of the most important things to consider when selling your medical practice:

#1 Plan your sale in advance

There are a lot of things to consider when selling a medical practice. Many businesses owners rush to get out without having a strategic exit plan and as a result the profit from selling the practice is not maximised, the sale falls through or you run the risk of being at loss.

Sometimes private circumstances or a life-event demands an unexpected business exit. If you have the luxury of time, it’s advisable to plan your business exit in advance.

Your goal before the business sale should be to improve business performance and to maximise the profitability of your medical practice.

Even if your medical practice achieves non-stop growth year after year, buyers also pay attention to many other factors in their due diligence.

To get the house in order it takes time.

#2 Do more leading and less managing

Many practice owners are too involved in the management and daily operations of their practice, sometimes to the point where they don’t have time to take care of strategic planning and leading the business.

A practice or any business for that matter is much more attractive to a potential buyer if it doesn’t depend on the owner too much. So, in preparing for your exit, it’s advisable to arrange your business in a way so that you can take step a back from daily operations in order to deal with strategic planning and decision making.

#3 Get your house in order

Many if not most buyers of medical practices get advice from experienced buyer agents. While profitability is the main concern on the due diligence check-list, other factors are at play:

  • Have you got the right business structure?
  • Are your internal processes optimised; and are they well documented?
  • Do you have a well-maintained company culture?
  • Are your employees loyal or is staff turnover too high?
  • Is your infrastructure modern and up to date?
  • Do you have contracts with suppliers and other stakeholders?
  • Are facilities modern or outdated?
  • Have all legacy IT systems been replaced?

These and many more questions are important to look at. In addition, it’s in your favour if you have a well-documented business and marketing plan.

#4 Get an accurate business valuation

A pinch of greed lies in human nature, but when it comes to the sale of your medical practice, your expectations should be in line with a realistic price.

Even though, business valuations don’t come cheap, it pays to engage a professional. Often a business broker will be able to assist with that.

#5 Don’t cook your books

Your Profit & Loss statement, your cash flow statement and your balance sheet are your biggest asset. These documents will be given most attention during the buyer’s due diligence. Rest assured your figures will be dissected to the decimal and numbers will be crunched by restless accountants.

If your buyer knows what they’re doing, they will also ask you for the statements of previous years. Yet another reason to plan your sale in advance.

By law you are required to represent your business truthfully. Providing false or misleading information is illegal and if it can be proven in court by an unsatisfied buyer, a sale can be reversed. In the worst case you could also face legal penalties.

#6 Minimise tax

The sale of your medical practice incurs capital gains tax. Considering the top marginal tax rate is 49%, the tax implications associated with the sale are very important to understand.

Unfortunately, many business owners fall victim to poor advice, or lack of advice about tax implications.

It’s advisable to seek assistance from a registered tax advisor to put strategies in place early in order to reduce tax at the time of the sale.

#7 Secure the lease for your practice

A medical practice can lose a substantial number of patients if it must relocate. For this reason and other financial outlays, a buyer wants to have the security of a long-lease.
Even if your lease is not due for renewal before the sale, you should try renegotiating the terms and conditions of your lease to make it favourable for the new owner.

#8 What’s your handover process?

While not every buyer is interested in having you stay on for a specified time after the sale, it will be beneficial if you can offer ongoing support for at least the first three months.
In addition, you should consider a proper handover process including initial training of the new management. It also helps if you have all your processes well documented.

#9 Get professional help with the sale

Engaging a good business broker is not cheap, however the costs are most definitely accounted for in the higher sale price you can achieve with professional help.

The best brokers are always the ones that are specialised in a particular niche market.

Alecto Australia offers leading medical consulting advice and being in touch with doctors and practice managers every day allowed us to gain insider knowledge and build a vast network of industry contacts.

We know the larger players that seek to expand and so we have the medical practice buyers at hand for you.

Alecto Australia helps medical practices with their exit planning and facilitates introductions with potential buyers.

Find out more

Are you ready to plan your exit strategy?

Please contact our experienced consultants for advice.

Call us on 1800 604 332 or email us on info@alecto.com.au

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