Selling your practice

Thinking of selling your practice sometime soon? Say, within the next few years? To maximize your negotiating position and smooth the process, I recommend you hire an accounting firm with medical practice experience. (By that I mean... experience with medical practices besides yours.) Perhaps you haven’t given much thought to your accounting until now. If the bills have been paid and taxes filed, that's probably just fine. As a small business owner, it’s up to you how much you want to spend on accounting services. (Assuming, of course, that you invest the minimum to keep track of your money and satisfy tax requirements.) Once you decide to sell, though, your accounting will be thrust into the spotlight. Your financial records will function almost like marketing documents. Clean, understandable, detailed documentation of your business's expenses and revenues will help you stay in the driver's seat when negotiating the best price for your business. Before you go to market, a CPA with medical practice experience can also help your practice administrator categorize revenues and expenses so that you can easily spot trends and make profit improvements. This can be very important in the year (or two or three) before you get serious about selling. You can also work with your CPT to identify practices (like use of personal credit cards) that might be pesky to untangle as you present your practice to buyers. The right healthcare-literate CPA will organize your financial statements in a manner that puts your practice's operations in the clearest and best light. The right accountant can help you track things like your loans/lines of credits and government payments so that they’re easily explained to a potential buyer. This can ease the due diligence process, too, once you reach that stage. Hiring a CPA with clear medical experience may also avoid some pricing pitfalls. A generalist CPA may consider your practice more similar to other small businesses than it is. That can lead to valuation assumptions that differ from typical medical practice sale prices. Bottom line: even if a CPA with demonstrable medical practice experience costs a bit more,

In recent years, private equity (PE) purchases and roll-ups of physician practices have gotten a lot of attention in the media and in physician circles, mainly because of the opportunity they represent for physician owners to sell their businesses for attractive prices. In fact, if you're in a market where PE buyers are on the hunt for practice acquisitions, some of the selling prices you've heard might seem almost unbelievable. At least, they might if you're familiar with the prices sellers can expect when selling to another practice owner, larger group, or, perhaps especially, a hospital. A sale to private equity can definitely be financially rewarding. As I write this, I have just finished helping a client through the entire process of evaluating PE buyers, presenting his practice, negotiating a solid deal with his preferred buyer, and navigating the complexities and details of due diligence. The entire process took the better part of a year, but I'm happy to say that my client was rewarded for all the hard work of building his practice over many years—and not just with an impressive financial return. He also secured a promising future for his practice and his employees. It can be done! But if you're contemplating selling and wondering if those big numbers you've heard mean you should only focus on PE buyers, there are a few distinct features of PE deals that can help explain, at least partly, why the prices are higher than offered by other buyers. These differences are important to understand and consider as you contemplate an exit strategy for yourself and your practice. Comparing PE offers you're hearing about to transactions involving other types of buyers, price alone might not yield an accurate, apples-to-apples comparison. A PE sale might offer more potential upside, but there will be conditions to the deal that differ from a more typical business sale—conditions that affect how much a seller can actually expect to net. You'll want to factor these into your analysis of your options. Here are three common features of PE deals that drive their offers higher than other types