To Sell or Not To Sell? – That is The Question!

Given the sometimes overwhelming challenges of the current Covid 19 crisis, I’m sure the thought of selling their medical practice would be crossing the minds of many practice principals. At the moment every waking hour is probably consumed with carefully navigating your way through the current crisis and keeping your staff safe and business intact. Selling your medical practice is a significant undertaking with long term ramifications for yourself and your staff, so it pays to be clear in your mind why you are selling.

So, what are the most common factors which trigger the sale of a medical practice:

You’ve had enough!

Practice principals are frequently faced with practice related challenges that seem to consume all of their energy and significantly detract from their main focus of treating patients. Some typical examples would be the current Covid crisis, Accreditation, new competition, significant staff changes etc. Whilst these challenges can often get on top of you, it pays to keep in mind that they are transitory and may very well forge a stronger, more robust business into the future. Nevertheless, if you’ve had enough, it may be time to consider reducing this commercial stress!

Pending Retirement

Pending retirement is a very good reason to sell as time waits for no one and the more time you give yourself to organise a succession plan, the better the outcome will generally be. Be sure to allow for a transition period of   two to three years, to give the new owners time to settle in and find a suitable replacement for you. Now days many GPs chose to retire in their 60s and work part time or as a locum for a more relaxed lifestyle, winding back their hours to a comfortable level and freeing themselves of the burden of a business to run.

Relocating

Family commitments are a significant reason for many practice principals to relocate. Families grow with the arrival of children and eventually shrink again as they leave home to create their own lives. Many practice principals will relocate to pursue better schools for their children or job opportunities for their family. Whatever your reason for relocating, there is no reason why you cannot retain your ownership of your existing practice as an investment, provided you have a reliable business partner or practice manager to oversee its day to day operation.

In some circumstances, however, this can be fraught with additional challenges so an outright sale may remain your best option.

Family run practice

Family run medical practices often have the principal’s partner acting as the practice manager. Perhaps your spouse is growing tired of juggling their family commitments with the daily grind of practice management, keeping up to date with compliance requirements, managing the finances and dealing with the demands of your doctors, allied health and staff. There often comes a point where they may feel it would be much nicer and more rewarding to spend more of their time with children or grandchildren.

Itchy feet

After a few decades working in the same practice many practice principals get tired of looking at the same four walls and develop an urge to travel and see the country. Selling up and hitting the open road as a locum is certainly a well-established and rewarding pathway into retirement. We have many locum doctors who have chosen this enviable lifestyle, travelling between clinics by air, road or even on water. There is no reason why you cannot take your spouse with you, on a working holiday, extending your stay in each location to relax and have a look around.

Family circumstances

Life changing events occur in every family and sometimes these can impact on your medical practice. Unfortunate circumstances such as death or divorce may require the valuation or even the sale of your medical practice. In Family Law resolution matters, the practice is often seen as a joint asset and a practice valuation may be essential, if there is a pivotal change in your circumstances. On the brighter side of things, you may have a new partner or other family members who are ready to share the responsibilities of running your business. A practice valuation and partnership agreement may be all that you need to formally bring them on board.

Dissolving Partnerships or Associateships

Practice partnerships (shareholder) or Associateships can change several times in the life of a practice. You or one of your colleagues may wish to divest their share of the practice and move on. Once again, a practice valuation and review of your Partnership or Associateship agreement may be all you require to dissolve an old agreement or create a new one. You may have a doctor wanting to buy into your practice or buy you out. An independent practice valuation may also be required under these circumstances, to determine a fair market value.

Corporate Buyout

The large corporates continue to snap up medical practices throughout Australia and are building a significant share of the general practice market. While many GPs are philosophically opposed to the concept of corporatised medicine, many other GPs recognise the benefits that their centralised support structures can offer. If you have been approached by a corporate buyer there is much to consider. How will the organisation improve or detract from your standard of patient care? Is their corporate philosophy compatible with your own? Can they offer you support services that you desperately need? Is your patient following likely to grow or shrink? Do they plan to close you down and absorb you into a nearby surgery? What price, terms and conditions will they offer you and is there space for negotiation?

Free up Capital

There are a host of reasons why you may need to sell your surgery to free up capital. It may be to pay down debt, settle a dispute, boost your superannuation, fund a new family project or reorganise your finances for your pending retirement. Perhaps you just wish to redirect your investment funds into a new endeavour. As with all other reasons for selling, the more advanced planning you have, the better the financial result you are likely to achieve for your sale. Remember, it’s much more rewarding to be proactive rather than wait and be reactive to the market and its forces.

In my 38 years of managing medical practice sales and acquisitions I have guided practice principals through all of the above circumstances. While GPs take great satisfaction in looking after their patients throughout the course of their life, I have done the same for many GPs throughout the course of their careers. From helping new graduates find their first GP job, to assisting with their first practice purchase, handled its eventual sale many years later and eventually easing their passage into retirement with ongoing locum engagements in some of the most beautiful parts of Australia.

As recognised court appointed medical practice valuation experts, we can provide independent formal practice valuations for a variety of purposes such as private acquisitions or sales, legal and dispute resolution and Family Law requirements. We have the expertise to advise you on the best partnership or associateship agreements, if required, and can also negotiate and handle all aspects of practice sales, regardless of size.

Whatever your reasons for selling, you need to take your time and carefully weigh up the pros and cons of selling and make a decisive call. Once you have made the commitment to sell, you need to be resolute and determined to see it through, as any vacillation during the course of your sale can undermine a potentially good result.

Perhaps the first step in your decision-making process might be a practice valuation to determine a realistic sales outcome. If you would like assistance with this, feel free to contact me.

The impact of Covid 19

Covid 19 does not appear to have significantly affected either practice valuations or the practice sales market at this stage. Buyers are still active and would see this as a temporary issue that should not affect long term practice values. The value of your practice should be safe provided you have strong fundamentals, a good team of doctors and sound management. Whilst buyers will undoubtedly be actively looking for bargains in the current climate, if you hold firm on price it shouldn’t be an issue. With any luck the Covid 19 crisis will be relegated to the history books by the end of the year.