Selling your practice is an important life decision that can often feel overwhelming–financially, emotionally and legally. Having a clear plan in place leading up to the sale is the first step toward a smooth transition. Here are some of the key things you need to know as you consider selling your practice:
1. Organize Your Practice Financials
Buyers and their lenders need a clear picture of the practice’s value. Work with your accountant to make sure you have, at least, the following documents readily available:
- At least 3 years of profit and loss/financial statements
- At least 3 years of prior tax returns
- Current accounts receivable aging report
- Documentation of any loans/liabilities (outstanding balances are typically paid out of your sale proceeds)
Having your financials organized before listing your practice for sale allows prospective buyers to easily confirm the practice’s value.
2. Assemble Your Sales Team
For the smoothest transition, you should assemble your sales team prior to listing your practice for sale and introduce the members of your team to each other so that they can coordinate directly and work together seamlessly. Your team should include:
- Legal counsel who specializes in the sale of medical practices
- Broker or appraiser who specializes in medical practice valuations/sales, if using one. We can make introductions if you’d like.
- An accountant who has worked on similar transactions before. We can make introductions if you’d like.
A sales team with medical sales experience is crucial to understanding the legal and financial intricacies of a medical practice sale.
3. Maintain Confidentiality
It may feel unnatural, but it is important to keep the pending sale confidential from your staff and patients. When contracts have been signed and the sale is near final or final, you can notify staff and patients. By keeping the sale confidential, you:
- Avoid patient and staff confusion
- Ensure continuity of care
- Allow for continued goodwill with staff and patients
In the event a pending sale does not go through, patients and staff who were notified prematurely may be left worried and confused. While you may be eager and tempted to inform patients and staff, the smoothest transitions occur once the sale is ready to close or has already closed.
4. Consider Your Exit Strategy
Think deeply about what you want for your next chapter, post-sale. Options include:
- Immediate retirement
- Staying on to work for the buyer as a short-term or long-term employee
- Providing post-sale consultant services to the buyer
- Working for a different practice or providing pro bono services elsewhere
- Working as an advisor or consultant for multiple clients
It is never to early to think about your future post-sale and craft a vision for your post-sale life and career.
5. Real Estate Plan
Options for handling the real estate where the practice is located depend on who currently owns the real estate. General options include:
- If you own the real estate, enter into a lease with the buyer at the time of the practice sale. You will need to consider the lease terms (e.g., lease structure, rent, etc.).
- If you own the real estate, sell it to the buyer separately but simultaneously with the practice. You will need to determine the fair market value of the real estate and enter into a purchase and sale agreement with the buyer.
- If you lease the practice space from a third-party landlord, then the landlord will either enter into a lease assignment with you and the buyer, or the landlord and buyer will enter into a new lease at the closing of the transaction.
Plans for the real estate should be discussed at the offer stage so that both parties are on the same page with how the real estate will be handled after closing the deal.
Final Thoughts
Selling a medical practice is more than a financial transaction–it’s the culmination of your professional journey. With careful planning, the right team, and a clear strategy, you can exit with confidence while knowing your legacy, your trusted staff and your patients are in good hands.
Thinking of selling your practice? With our expertise in the sale of medical practices, we’re here to assist. Reach out today to schedule a consultation.