TO SELL OR NOT TO SELL
Given the sometimes overwhelming challenges of the current Covid 19 crisis, I’m sure the thought of selling their medical practice has crossed the minds of many practice principals. Like most medical practices you would have been preoccupied carefully navigating your way through the current crisis and trying to keep your staff safe and business intact. While it may be a tempting proposition to sell your medical practice, it is a significant undertaking with long term ramifications for yourself and your staff, so it pays to be clear in your mind why you are selling.
So, what are the most common factors which trigger the sale of a medical practice?
You've had enough
Practice principals are frequently faced with practice admin related challenges that seem to consume all of their energy and significantly detract from their main focus of treating patients. Some typical examples would be the current Covid crisis, Accreditation, new local competition, significant staff changes etc. Whilst these challenges can often get on top of you, it pays to keep in mind that they are transitory and may very well forge a stronger, more robust business into the future. However, if you have genuinely had enough, perhaps it’s time to consider reducing this commercial stress.
Pending retirement is a very good reason to sell as time waits for no one and the more time you give yourself to organise a succession plan, the better the outcome will generally be. If you feel like it’s time to start reducing your work commitments, be sure to allow for a transition period of two to three years, to give the new owners time to settle in and find a suitable replacement for you. It is common now days for GPs to semi-retire in their 60s and work part time or as a locum for a more relaxed lifestyle, winding back their hours to a comfortable level and freeing themselves of the burden of a business to run.
Family commitments are a significant reason for many practice principals to relocate. Families grow with the arrival of children and eventually shrink again as they leave home to create their own lives. Many practice principals will relocate to pursue new opportunities, a better lifestyle for their family or schools for their children. The recent Covid crisis has seen large numbers of Sydney and Melbourne residents relocate interstate or to rural & regional areas. Whatever your reason for relocating, you can certainly retain ownership of your existing practice as an investment, provided you have a reliable business partner or practice manager to oversee its day-to-day operation. Sometimes however, this is not possible, and an outright sale may be your best option.
Family Run Practice
Family run medical practices often have the principal’s partner acting as the practice manager. Perhaps your spouse is growing tired of juggling their family commitments with the daily grind of practice management, keeping up to date with compliance requirements, managing the finances and dealing with the demands of your doctors and staff. There often comes a point where they feel it would be far more rewarding spending time with children or grandchildren.
After a few decades working in the same practice many practice principals get tired of looking at the same four walls and develop an urge to travel and see the country. Selling up and hitting the open road as a locum is certainly a well-established and rewarding pathway into retirement. Over the years we have looked after many locum doctors who have chosen this enviable lifestyle, travelling between clinics by air, road or even on water. There is no reason why you cannot take your spouse with you, on a locum working holiday, extending your stay in each location to relax and have a look around.
Changing Family Circumstances
Life changing events occur in every family and sometimes these can impact on your medical practice. Unfortunate circumstances such as death or divorce may require the valuation or even the sale of your medical practice. In Family Law resolution matters, the practice is often seen as a joint asset and a practice valuation may be required if there is a pivotal change in your circumstances. On the brighter side of things, you may have a new partner or other family members who are ready to share the responsibilities of running your business. A practice valuation and partnership agreement may be all that you need to formally bring them on board.
Dissolving Partnerships or Associateships
Practice partnerships (shareholder) or Associateships can change several times in the life of a practice as your key doctors come and go. You or one of your colleagues may wish to divest their share of the practice and move on. Alternatively, you may have a doctor wanting to buy into the practice or buy you out. A practice valuation and review of your Partnership or Associateship agreement may be all you require to dissolve an old agreement. To create a new partnership an independent practice valuation will probably be required, to determine a fair market value and redistribute share capital.
The large corporates continue to snap up medical practices throughout Australia and are building a significant share of the general practice market. While many GPs are philosophically opposed to the concept of corporatised medicine, many other GPs recognise the benefits that their centralised support structures can offer. If you have been approached by a corporate buyer there is much to consider. How will the organisation improve or detract from your standard of patient care? Is their corporate philosophy compatible with your own? Can they offer you support services that you desperately need? Is your patient following likely to grow or shrink? Do they plan to close you down and absorb you into a nearby surgery? What price, terms and conditions will they offer you and is there space for negotiation?
Free Up Capital
There are a host of reasons why you may need to sell your surgery to free up capital. It may be to pay down debt, settle a dispute, boost your superannuation, fund a new family project or reorganise your finances for your pending retirement. Perhaps you just wish to redirect your investment funds into a new endeavour. As with all other reasons for selling, the more advanced planning you have, the better the financial result you are likely to achieve for your sale. Remember, it’s much more rewarding to be proactive rather than wait and be reactive to the market and its forces.
Whatever your reasons for selling it is worth taking your time and weighing up the pros and cons before making any firm decisions. Once you have made the commitment to sell, you need to be resolute and determined to see it through as any vacillation during the sales process can significantly undermine a potentially good result. Perhaps the first step in your decision-making process might be to obtain a practice valuation to determine a realistic sales outcome.