The most common reason for any doctor thinking of selling their practice is for retirement. If you have come to that conclusion, you probably have an idea of what you want to do after retirement, but do you know how to get there? This article will touch upon some of the most important factors that you should be aware of as you consider selling your practice.
Planning is everything:
When you are looking to sell your practice, you might think that it’s a quick and easy process of tossing someone else the keys. In reality, the transition process can be a long and complex one that involves many months or even years of planning and negotiations before the sale closes. Having said that, when you are looking into retirement, you will have to plan your retirement years in advance and consider many internal and external factors, including your net worth, health, family, the economics, as well as the demographics of your clinic’s clientele and the performance of your clinic.
Maximizing your valuation:
When it comes to how your practice is going to be valued, buyers use a variety of approaches, including asset-based valuations based on the practice’s net assets, or income-based valuations using the practice’s income and discounted cashflow. As you will most likely be in competition against other practices within your area that may also be looking to sell, you will need an effective transition plan to maximize your valuation and come out as the winner. As you may have guessed, in order to maximize the valuation of your practice, it has to be thriving. Some of the most effective ways of improving your key performance indicators include lowering overhead expenses, upgrading equipment and technology, increasing social media presence, and even remodeling the office.
Finding the right buyer:
In the past, we’ve worked with several practices who were reluctant to sell to a larger group and instead opted to sell their practices to one of their associates. These doctors are often emotionally attached to their practice that they have worked long and hard for and believe that selling to one of their associates will ensure that the practice will continue to thrive in good hands.
This is a common misconception that many doctors have today. In a recent interview, past practice owners explained why selling their practice to an associate was a mistake, and how it led them to financial loss, as well as loss in professional respect. Their main reasons fall into three big categories:
- First, poor communication of true intentions. Young doctors’ main priorities when joining a practice tend to be paying off their student debt and gaining experience before moving somewhere else to start their own practice. For this reason, many young associates lack a clear vision of their professional future, which results in associate buy-ins to fail.
- Secondly, price is subjective. When trying to come to an agreement on how much the practice is worth, both parties tend to have different views. Owners want full value for their business, while associates tend to believe they are entitled to a discount. Without an objective valuation provided by an expert, it is difficult to reach a consensus on a fair price.
- Third, timing is everything. The owner and the associate tend to have opposing views on when they want to make the transition. The owner might want to continue practicing for the next few years, while the associate wants to take ownership. This may lead to one party pressuring the other to take action more quickly, which ends up damaging their professional relationship.
When considering retirement, your main priority should be what you gain from the transaction. At Dwek Capital, we make it a priority to get to know you and your practice inside and out to give you the best valuation possible. Our team of experts speak with hundreds of doctors across dentistry, dermatology, optometry, physiotherapy, and veterinary every year, giving us a unique vantage point of these industries. If you would like to learn about some of the opportunities currently available, please contact us at firstname.lastname@example.org and our partners or associates would be happy to give you a free consultation.