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Understanding the process of selling a healthcare practice

Posted by practicesales on February 13, 2015
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There are many reasons practice owners make the choice to sell their practice. Increasingly, practice owners are making the choice to sell their practice to a large group or entering into employment agreements with the new owner, perhaps seeking a change in their quality of life and the peace of mind of a stable salary. Other practice owners wish to relieve themselves of the burden of dealing with the “business” of healthcare resulting in more time to focus on the actual treatment of patients. Yet other practice owners simply choose to sell their practice upon retirement instead of closing it outright.

Whatever the reason may be, in preparing for the sale, it is advisable to begin planning years in advance. Planning well in advance will both ensure an accurate valuation of the practice and allow you to avoid being “forced” to sell the practice at an unfavourable price due to current market trends. It is therefore best to retain a healthcare practice sales consultant who specialises in transactions of this kind. It is their specific expertise in health care practice sales, as opposed to a general knowledge, that will help in obtaining maximum value for the sale of the practice.

The value of a healthcare practice is determined by three distinct categories of assets.

  1. The first are the tangible assets of a practice. These tangible assets consist of the furniture, fixtures and equipment owned by the practice including but not limited to, examination tables, desks, chairs and practice equipment.
  2. The second category of assets is the practice’s accounts receivable. The accounts receivable includes the revenue due the practice prior to the sale.
  3. The last category of assets is known as “goodwill”. The goodwill of a healthcare practice includes its reputation, the trained support staff, established client base and accompanying practice records, practice history and practice location.

Of the three categories of assets, goodwill typically comprises the greatest value, however is the most difficult to assess a value. Again, as there are specialized methods in determining the value of a healthcare practice specifically and tax implications in the way assets are categorized upon sale, it is imperative that you discuss the asset allocation carefully with a healthcare practice sales consultant.

During the time leading up to the actual sale, it is imperative that you avoid any action that would result in the reduction of the value of the practice. Although it may be tempting to slow down the operation of the practice in anticipation of the sale, this may result in the loss of patients or staff – effectively a reduction in the goodwill of the practice. This reduction in goodwill can also be avoided by notifying the staff and patients of the practice of the imminent sale at the right time so as to avoid their loss by attrition.

In selling a healthcare practice, you should take great care in preparing it for sale to both maximise the value obtained from such a sale and the protection of its patients.

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