Selling a Medical Practice

By:  Brian MacMillan – Managing Director M&A

The majority of medical practice owners do not know how to sell their practices, and many are not aware that selling to a third party is even an option. Since many doctors are not aware of their options, they frequently roll their practices into a hospital system and begin receiving a salary as an employee, sell their practices for less than they should, or simply close their doors when they are ready to retire. But with some guidance, physicians who are selling their practices can achieve better results for both themselves and their patients.

Timing is Everything!

The medical practice sales climate is currently excellent in the Baltimore-Washington metropolitan area. Physicians who own their practices and are considering retirement in the near future might want to think about selling their medical practices while conditions are favorable.

This is a great place to live, and many doctors across the country recognize this and are interested in owning a medical practice in our region. We have encountered numerous doctors who went to one of the many great medical schools in this area (Johns Hopkins University, University of Maryland, etc.), left the area to practice medicine, and are now interested in returning to the Baltimore-Washington area. Regardless of where they studied medicine, most doctors want to live and practice in an economically affluent area, and Maryland, DC, and Northern Virginia are home to many such areas. In addition, our region already has one of the highest physician-to-patient ratios, so there are already many local physicians who might be in the market to purchase their own practices.

Physicians who are thinking about selling their practices should start the sales process a few years before they plan to retire and before they begin to scale back their hours.

The process of selling a practice can take six to nine months, on average, and the buyer will want the seller or sellers to stay on for some time so there is a smooth transition for the patients. This transition period could be anywhere from six months to several years.

If a physician is interested in cutting back his or her hours, selling the practice before doing so may be the best option. Once the physician cuts office hours, the sale price for the practice will generally drop because the corresponding revenue generated by the practice decreases. If the physician maintains normal hours until the sale, he or she can obtain a higher sale price and then establish a flexible work schedule (i.e., work fewer hours) as an employee or contractor for the new owner.

In any case, by starting the sale process earlier (while they have more flexibility) rather than later, physicians who own medical practices can avoid an emergency or “fire” sale, which usually means a reduced sale price and less favorable terms. There are specialty financing options currently available to physicians looking to buy medical practices, making it easier for them to complete the purchase. Lenders can finance up to 100 percent of the sale price and can provide terms up to 15 years, giving buyers more flexibility.

Work with a Mergers & Acquisitions Advisor for the Best Results

The sales process can be complicated. Many physicians attempt to sell their practices on their own, and doing so ultimately takes away from the service they provide to their clients. Another pitfall physicians face is hiring a younger physician as an employee in hopes that the physician will buy the practice in a few years. More often than not, the younger physician does not end up buying the practice or is not willing to pay the owner a reasonable amount for it. This can lead to years wasted. In the end, the owner would need to start the sale from scratch.

Our Mergers & Acquisitions advisors will sit down with medical practice owners to understand their goals related to the sale of their practices. We will guide the owners through the entire process, allowing them to continue to focus on running and growing their practices. We will develop confidential marketing material to position the practice properly in the market, obtain multiple offers for the practice through our proprietary sales process, and ultimately help complete the sale.

At BWFA, our Mergers & Acquisitions team has helped numerous medical practice owners sell their businesses and maximize the net proceeds from the sales. We help medical practice owners obtain the value they have created through their years of service.

If you know a physician who owns a medical practice, we would be happy to speak with him or her about how to maximize the net proceeds from the sale of the practice.