How to sell a general practice

When selling, what you really want to do is extract the maximum amount of capital from your sale and ensure a smooth transition to the new ownership. You also want to minimise change and disruption to your patients.

Both of these are best achieved if you continue to work in the practice for a short period after you sell. Ideally, this should be for several years at least.

So if this is what you want to do, then think ahead. If you suddenly decide to sell and move on simultaneously, your return may not be as much as if you had planned ahead.

It is never too early to commence succession planning because there is a long lead time in developing a plan and bringing it to fruition.

Forward planning will minimise the risk of a poor outcome such as selling for a bargain-basement price, continuing to practice against your wishes, or decommissioning the practice with no legacy.

Unfortunately, these situations do happen, and depending on your lease provisions, the costs of this can be substantial. So, work out your long term goals and options first and set them to a timeframe so you can sell on your terms.

If you think ahead and prepare, your chances of avoiding adverse circumstances increase, which will help when you sell down the track.

There are all sorts of reasons which can mandate a sudden cessation of practice and these include sudden and severe illness of yourself or a significant family member, threats to the security of tenure related to your premises, loss of key staff (perhaps to a nearby competitor) and, indeed, a sudden establishment and appearance of newly created practices.

Normally when you sell a practice, you are selling something called goodwill.

This is a hard thing to define but it largely represents a combination of reputation, patient records and the local practice’s brand recognition. But it could also include things like rent from sub-tenants.

All of this needs to be defined, communicated and understood – especially if you have established a complex ownership structure. This will be especially so if you or a related entity owns your practice’s premises. This guarantees the security of tenure but may bind you to the practice longer than you may wish.

As already indicated, your presence will be a significant part of that goodwill, so the practice is likely worth more with you in it than not.

This is absolutely key.

In general terms, your profit will be the amount of income you (as an owner) earn over and above your income from personally seeing and treating patients.

Once identified, your practice will generally be worth a multiple of this figure. Unfortunately, many practice owners overestimate the worth of their practice for several reasons. These include failing to account for the time they, as owners devote to management activity.

No experienced and well-advised buyer will make that mistake. They will have obtained good financial advice and you should do the same.

If you, as a practice owner, need to continue in the practice after-sale as a contractor, then this becomes an important issue.

Giving a commitment to working with a new owner whom you subsequently discover to be objectionable constitutes a pretty poor outcome. So, if you sell to a colleague or fellow practitioner, then a doctor already working in the practice is the best option. Unfortunately, this opportunity has declined over recent years as the new generation of doctors have a lesser inclination to become practice owners.

As you will possibly know, corporate ownership of General Practice has escalated in the last two decades and represents a viable option for you if you are considering selling your medical practice.

Selling to an experienced corporate owner will guarantee clinical independence, a high level of management and good resourcing to continue the practice after the sale.

In addition, it can offer the opportunity for former owners to continue in a leadership role without the burdens of ownership.