I am not ready to sell my practice, but I want to in the next 2-3 years. What should I do to get myself prepared?
—Almost Retired in Billings, Montana
Planning how you exit your practice is just as important as your plan to start it was. The goal is to maximize (and potentially increase) the value of your practice in order to get the highest return out of it; the time that it will take to do this is dependent upon the complex nature of the practice. Many times when people start to get in the mindset of exiting, they start to slow down and cut programs, see fewer patients and cut back on marketing. This is not the time to cut back; this is the time to beef up! There are many pieces of an exit strategy and, on average, the process can take two years in time, from the commencement of the plan to the date of sale.
It is difficult to make any decisions regarding your practice without knowing the market value of it, but this is the first and most important piece of the exit strategy. Chances are that you haven’t had your practice valued in the last several years. Based on recent surveys conducted by a leading CPA firm, 65% of owners of medical practices do not know what their practice is worth, over 35% of their net worth is tied up in their practice and 85% of the practice owners had no exit strategy.
There are different methods for evaluating a medical practice, depending upon the planning purpose. For purposes of a third party sale, you will likely use a transaction intermediary to determine value; the cost is low and most intermediaries will credit this fee against the commission they charge for a successful sale. One company that we work with in this industry is Healthcare Equity Partners based out of South Florida. Just keep in mind that a practice or a business is not a piece of real estate. Business value changes on almost a daily basis.
Based on this valuation of your practice, you can begin to properly plan your exit strategy and plan all of your steps and time each one of them appropriately. There are many other steps, in this long journey, some of which include asset protection, properly transitioning your patients and staff members, as well as the emotional side of leaving private practice as an owner.
Lisa Goldberg is the Executive Director of Physicians Choice Concierge (PCC), a company specializing in revenue enhancement. If you have a question you’d like to ask Lisa in an upcoming issue, email [email protected] or call 1-888-369-2224 for a personal consultation.