A guide to selling a General Medical Practice
There is plenty to consider when you are seeking a buyer to maximise your Return On Investment.
In a complex business such as this, realistically you need years, not months, to prepare this kind of business for sale.
So the main focus is to maximise the value of your asset. Comprehending how to appeal to potential buyers while keeping abreast of the tax characteristics of selling medical practices is vital.
If you are looking to retire or focus on a smaller practice and see a return on your investment, we seek to give you the necessary guidelines to provide you with a foundation to move on with the processes of selling a medical practice.
Acquire a professional
This is just a starting point. Medical practices are renowned as being one of the more complex business to sell, especially in western countries, so retaining the services of a professional is advisable. An accountant, lawyer and a business broker (who has a history of dealing with this asset class) are prudent.
An advisory with a solid understanding of the healthcare sector will be invaluable as we are in a buyers’ market right now. The baby boomers era is heading into retirement age, and the west is looking at over 160,000 general practice divestments in less than ten years.
Selling Can Take Time
It's highly unlikely that you'll find a buyer and get a conclusion in the short-term and there are many reasons why you should give yourself plenty of time for an exit strategy.
If you put your business for sale on the market without proper preparation, you will struggle to find a buyer.
In our experience, four to five years has been what it has taken to achieve a sale price. But look on the bright side, this provides you ample time to produce impressive, head-turning trading figures, time to market the practice and during this process find the right buyer and time to offer to work in practice post-sale potentially - This often being what closes the deal with a potential suitor.
In practices, the doctor-patient relationship is so strong that a buyer would find it very difficult, and in reality, non-sensical to turn the offer down of the owner staying in business for some time to ensure the transition goes smoothly.
However, during this process, it is vital to scale back the general practitioner duties and focus more on ownership, so the patients gradually get used to the new ownership.
How to make the business an attractive, saleable asset
Concentrate first on paperwork, make sure it is in order so your team can deliver to the buyer full relevant documentation during the process.
Here are some pointers:
• Look to use your competitors financial performances against yours and give solutions to comparative shortcomings
• Deliver quarterly financial performance results for review
• Look to provide the buyer with all previous marketing related work and a new marketing plan to take the business forward
• Any existing agreements with other GP's within the same practice should be renewed and formalised
Here are some tips to put your practice ahead of the competition:
1. Robust governance
2. Modern facilities with safety being paramount
3. A renowned service reputation
4. Quality business performance
5. A responsive culture within the business
Here we focus on one of the cornerstones above
For example, a ‘responsive culture within the business would comprise of:
• Customer-focused culture
• Staff recognition or reward programme
• Website and social media interaction
• Service benchmarking
Diversification
This will result in your practice being less reliant on you, the owner. In turn, this helps to spread revenue among more doctors and services while also linking revenues more to the practice and less to its practitioners – these are all extremely interesting to a buyer(s).
Profiling buyers while marketing your business
After taking steps to make your business sellable and attractive to potential buyers come onboard with Global Business Brokers and have access to our extensive database of business buyers.
With this type of business, it is essential to profile typical buyers within the sector. Given the fact that the 'baby boomers' generation is all at retirement age, the demographic for the buyers are 'Gen Y' doctors, mostly born after 1976.
This generation is going to be more in-tuned with technologies and look to leverage from online bookings and appointments to a significant interest in data and analytics, coupled with the latest medical treatments. Assisting with expertise in these areas would, without doubt, reap dividends in the sales process.
'Gen Y' and Medical buy-outs - statistics and trends
A seen trend of Gen Y doctors is that they prioritise work-life balance more than the baby boomers generation.
Over the years we have seen that a buyer can often come from within, so it is worth discretely approaching some of the GPs within your practice or that you know of with the financial capability to give it due consideration. Management buyouts usually involve considerable vendor finance.
It is important to remember that major healthcare firms, and individuals, are always looking out for attractive assets. Selling to a strategic buyer usually means a change of culture with considerable earn-out (both on the freehold and the business).
High-net-worth investors and private equity tend to look for strong EBITA (earnings before interest, tax depreciation and amortisation) assets, that rely less on the current owner(s). EBITA is the preferred method of valuation in this area.
Once you have applied to register as a seller, we furnish you will the relevant documents to complete. A list of documentation we require is included to begin a full audit and valuation. Once we have conducted the initial phase, we start to profile our buyer database to find buyers that fit this category. Once the valuation is complete, we will make our approaches. Upon finding interest, the third-party will sign a non-disclosure agreement to overview the financials, and we work closely together with you to make the sale.
