Finding an Appropriate Buyer

When contemplating the sale of your practice one of the biggest concerns for most owners is how to preserve your legacy. You may have spent many years establishing your practice, building up a large and loyal patient following and developing a reputation in your community for your high standard of care. You may have a happy and harmonious group of support staff and wish to protect their futures as well.

When deciding on who is appropriate to buy your surgery you will want to ensure that the new owners are a good cultural fit for your practice, will get on well with your existing staff and will protect the legacy that you have created. Of course, you will also need to know if they are capable of taking on and managing a surgery of your size.

So how do you identify the right buyer for your practice? Here are a few considerations.

Within negotiable range of your expectations
There is no point considering a prospective buyer if their offer is so far removed from your expectations that there is little hope of finding common ground. A buyer’s initial offer needs to be within 20% – 30% of the price you are willing to accept as there is quite a bit of negotiation that goes back and forth before an agreed price is locked in. Buyers must also be reasonably happy with any terms of sale that you have proposed, as they are also reflected in the asking price.

Cashed up or access to finance.
Before you spend too much time negotiating with a buyer you need to be satisfied that they can afford to buy your practice. Is you buyer able to pay cash or will they need finance? Is your buyer’s finance pre-approved or conditional on certain circumstances? How will your buyer’s level of leverage affect their ability to manage the practice and ensure its ongoing success? Sometimes this does not become evident until you’ve had your first meeting, discussion and practice inspection with your prospective buyer.

Demonstrated Industry experience
Does your buyer have sufficient industry experience to successfully manage your practice? What is their reputation in the industry? Are their other medical practices healthy and profitable? Is their management structure conducive to providing the level of support that your practice will need?

Buyer location
A buyer’s physical location can be very important as practice owners who are far removed from your location may have difficulties properly managing your surgery. Is your buyer located nearby? Do they manage other surgeries in the area? How does their location affect their ability to provide logistical support?

Future plans for the practice
Gaining a sense of your buyer’s future plans is critical to giving you the confidence to go ahead with the sale. Most buyers come into a new practice with the plan to largely let it continue to operate as is, at least until they get to know your practice and staff a little better. In time they may try to grow the practice as much as the premises will allow and to improve profitability where possible.
Is your buyer planning on allowing the practice to operate largely as it is, for the indefinite future or do they plan major changes? Does your buyer have any plans to relocate the practice in the foreseeable future? Does the buyer have another practice nearby and perhaps plan to dissolve your practice and merge it with their own? This is particularly important to you if you or an associated entity SMSF are going to be the landlord and depending on that rental income.

Protecting the interests of your staff
Whilst the new owner should be allowed to conduct some reasonable restructuring to improve efficiency and profitability, it is important to know if they plan on making any major changes that may threaten the livelihoods of your staff. Of equal importance is to satisfy yourself that the new owners will be able to garner the support and cooperation of your staff after you are gone. Does the new owner intend to retain your support staff and would your staff be willing to work with them? In this regard you can only do your best as what the new owner does with current staff is largely out of your hands.

Good Cultural Fit
Achieving a good cultural fit is essential if your doctors and staff are going to support the new owners and work together to drive the business forward. Does the buyer share your philosophy on patient care? Does the buyer share your philosophy on staff management? Is the buyer willing to be flexible and adopt your surgery’s culture or enforce their own? Again, this is something you’ll only find out in the context of your conversations with a potential buyer.

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Finding an appropriate buyer is essential to the future longevity of your medical practice. When you walk out the door for the last time you will want peace of mind of knowing that your patients will be well looked after, the wellbeing of your staff is assured as much as possible, and your legacy is intact and will continue to grow from strength to strength.

In conclusion it is worth remembering that most principals are expected to remain with their practice for at least 12 months after a new buyer has taken over, to ensure a smooth handover. In fact, most principals will remain at their practice for 3 – 5 years, which is a mighty long time if you are unhappy with the way things are going.

Reminds me of a saying “Making love for a minute feels like such a short time, but sitting, bare arsed, on a red-hot plate, for that same minute, will feel like an eternity”

What would you rather be doing?

When it comes to the sale of your practice, it’s not always the price, but the terms and conditions that may be the most important factor in making the final deal.