There are some important considerations when planning the sale of your medical practice which can significantly affect the sales outcome and your contractual obligations years into the future.
Plan 12 months ahead
Selling any business takes time and it’s important to allow up to a year to complete the sale of your medical practice in order to achieve the best outcome. Putting time pressure on yourself can place you at a distinct disadvantage when negotiating the price and conditions of your sale, particularly if the buyer gets the impression that you are in a hurry to sell.
The speed at which your surgery will sell depends largely on how well you meet market expectations in terms of your location, practice size, overall setup and price expectations. While medical practice sales can often be achieved within a very short space of time the timeline for a typical sale would be as follows.
Pre-sale preparation (1 - 2 months)
Sales marketing & practice inspections (3 - 6 months)
Negotiation of price and terms of sale (2 - 4 weeks)
Due diligence, finance approval & final settlement (6 weeks)
Factors influencing price
Factors influencing the price you can achieve include: how long you have been established; your reputation in the community; your patient numbers; total practice revenue & profitability; general location; proximity to major shopping/business precinct; ease of patient access; age & condition of your premises; security of tenure over your premises; number of doctors & other health professionals; scope for expansion of the business.
What are buyers looking for?
Buyers are generally looking for evidence of a healthy, profitable business, with good growth prospects for the future. Whilst there are buyers for every type of practice, the majority would be looking for an average sized practice, broadly fitting the description below. The extent to which your practice deviates from this will not hinder your sale but may determine the time it takes to find a suitable buyer.
The ideal practice would be centrally located in a metropolitan suburb, capital city or large regional town. It would be conveniently and prominently positioned in the neighbourhood with plenty of passing foot traffic and easy patient access in the form of parking & public transport options.
The practice itself would be at least a 5 doctor, mixed billing practice which has been established for 5 years and can demonstrate consistent high patient demand. The practice should ideally contain a good range of allied health professionals, as well as onsite pharmacy & pathology, and be in close proximity to a wide range of specialist services. The premises should be clean, modern, bright & spacious with plenty of room for expansion. The premises would ideally be owned by the practice or have a long lease in place.
Most buyers will expect the principal doctor to remain at the surgery for a period of time to help to maintain the stability of the patient base, loyalty of the staff and general health of the business. It also gives the patients & staff time to get to know the new owners and allows for an effective handover of the admin functions. The handover period can vary from just a few months up to three years and is generally negotiated at the time of sale. Any principal who is required to stay on would do so under a contractual arrangement with a competitive salary package being offered for the duration. It is rare for surgeries to be sold on a walk-in, walk-out basis.
Protect your investment
While you are undergoing the sales process it is important to preserve the value in your practice as it will directly affect the price you can achieve. We recommend you do everything possible to ensure you maintain a stable patient base, retain all your admin & nursing staff and especially your doctors. Keep your accreditation up to date. Ensure ongoing maintenance of your medical equipment. Ensure a high level of maintenance of your practice premises and do what you can to improve its overall appearance. This may include repainting parts of your practice and pressure cleaning tired looking exterior surfaces. It is also important to ensure your security of tenure over the premises by renewing your lease and securing options 5-10 years into the future.
We take confidentiality in all aspects of the sales process very seriously and it is in your interest to do likewise. Confidentiality will help to maintain stability in your practice and retain the confidence of your doctors, staff and patients. Any marketing of your medical practice for sale should be done with the identity and location of your practice carefully concealed. As agents all prospective buyers who express an interest in your medical practice will be required to sign a non-disclosure agreement before being provided with the name of your surgery or any other details. All discussions relating to the sale will only be conducted with the principal/owner or their appointed solicitor and accountant.