This article covers how to sell a medical practice for orthopedic surgeons and provides tips from the start of the process until the sale itself.
Owning and operating a private medical practice is a deeply personal endeavor. Physicians and patients develop bonds and a sense of trust that often lasts for years, sometimes even a generation.
Orthopedic physicians and surgeons who own their own practice are no exception. They wear the hats of both a caring physician and a business owner. Over the years, they might perform a hip arthroplasty on a patient and treat the grandchild of that same patient for a broken ankle. So when a physician is considering selling their medical practice, it’s a decision that requires thoughtful consideration and thorough planning.
There are many reasons why physicians sell their practices, including cost savings, retirement, changes that stemmed from the pandemic, or joining a larger organization. In 2021 alone, nearly 400 physician practice transactions took place.
If you’re ready to sell your practice and move on to your next endeavor, following this set of best practices will help you ensure a smooth transition.
Get your ducks in a row
Before your practice goes up for sale, do your due diligence so you’ve got everything organized. Being well-prepared lays the groundwork for a successful sale and makes your practice more attractive to potential buyers.
You need to determine if you’re selling everything or just certain assets. According to the North Carolina Medical Society, there are three ways to sell a medical practice. These include selling your practice in its entirety, selling some or all of your practice’s assets (which means you’d own the “stripped-down” version of your practice), and lastly, merging your practice into the buyer’s practice (resulting in your practice disappearing).
You also need to figure out any issues that might potentially hinder or delay a sale. These could include the current state of the real estate market for medical practices, as well as the geographic area where your practice is located.
Make a to-do list of tasks and goals to stay on track while you’re getting your practice prepped to be listed for sale. You might not even be aware of everything that needs to be done — there’s a lot — and that’s where professional help can come in handy.
Assemble a team to assist with the sale
You’ll have plenty to do for the sale that falls within your scope as a physician — trust other experts in their respective fields to help with the rest.
Employing the expertise of an accountant, whether they’re from your own staff or an outside hire, is vital. In addition to preparing financial statements, an accountant can evaluate your assets and get your practice’s numbers in order for the impending sale. This includes preparing profit and loss statements for the past few years, gathering tax returns from the past several years, and cleaning up your accounts — all of which will make your private practice a more desirable asset for potential buyers.
A lawyer can help prepare the necessary documents, including a property disclosure statement and agreement of sale. They can also assist with any outstanding legal issues or liabilities.
There are different ways to sell your practice, one of which involves using a broker. A broker does take a percentage of the sale profits, but they have extensive knowledge of the local market. Finding a broker with specific experience in selling medical practices is obviously the preferred route.
Create an executive summary
An executive summary is a brief document (one to two pages) outlining the nuts and bolts of your practice and summarizing all you have to offer.
It should cover what makes your practice unique, what your practice could do for the buyer, and details about the market and the growth you’ve experienced. The executive summary should also cover what’s included in the sale, your revenue, and any projected financials.
An executive summary serves as a quick reference for any interested buyers. Whether they approach you or if you’re the one reaching out, an executive summary can be handed off, emailed, or mailed quickly and easily. Plus, it can be reused throughout the selling process.
Determine the valuation of your healthcare practice
Knowing what your practice is worth — and what buyers are willing to pay for it — ensures you sell for a fair price and don’t get tricked into selling too low. It also means you won’t list the practice way over market value, turning potential buyers off.
Practice valuation is determined by factors like revenue, the price point other practices have sold for, your assets, and more. It can also vary depending on your specialty area of practice. For example, an OB-GYN practice might sell for more than a primary care office. You also need to factor in fair market value when selling to determine the sale price. Fair market value refers to the price your practice would sell for in the open market.
Generally, a medical practice valuation comes from a fraction of its revenue. Years ago, there were basic equations used to get an idea of what the valuation would be, but they no longer apply. An appraiser can determine what your practice is worth, and a broker can factor in market trends that may affect the price.
Other assets, like medical equipment, furniture, and other tangible items in the office, play a huge role in your practice’s valuation. There are also intangible assets, which include goodwill. Goodwill refers to your brand’s reputation, a solid and loyal customer base, and other positive factors about your practice. If your goodwill value is strong, you could secure a higher purchase price from another company.
Give ample notice to staff and patients
Selling a medical practice affects a lot of people and can be an emotional process. Minimize the blow by communicating thoroughly and giving your employees and patients plenty of time to adjust.
Buyers want to know you’re doing everything in your power to secure staff and patient retention. A mass exodus could affect the new owner’s ability to find success in the deal. Reassure your patients and staff that operations will continue as they have and that they can feel confident in the new owner’s skills.
To assist patients with the transition, talk about the changes in person and supplement that with letters and emails with all the details they need to know. This includes important dates and information about the new owner. Be prepared to answer questions and address concerns — this process is emotional for patients, too, especially if your practice is small. Consider hosting an open house event to serve as a welcome to the new owner and a farewell to you on your way out.
It’s important to note that legally, you have to give your patients the option to transfer to a new physician. Medical records aren’t part of the sale, but the new owner (if the owner is another physician) can become the legal custodian of them. If a patient chooses to leave, their records are sent to the new practice. The medical board in your state can answer any questions about your patients’ medical records.
This timeline from the American Academy of Family Physicians is a good resource for keeping track of when you should be notifying invested parties, starting about three months out from the sale.
Find the right buyer
A successful sale needs a qualified buyer who’s interested and invested, but it takes effort on your part as the seller to attract that “just right” purchaser.
Early on in the process, develop a buyer persona. Imagine the type of person or company you’d like to see take over. What are their goals? Why did they start practicing medicine? What are their preferred methods for treatment? This helps ensure a smooth transition for the patients and staff who stay on, as well as your peace of mind when selling.
Potential buyers should have a strong financial standing, and the “team” we mentioned earlier can help determine if a buyer is a good fit, financially and otherwise.
Strong marketing can attract the right buyer. List the practice in local newspapers and in any relevant medical publications. If you enlist a broker with experience selling medical practices, they can ensure your practice is listed in all the right places. You can also target other physicians or groups in whatever region you’re located by sending them emails or letters notifying them of the sale. This could result in additional referrals if they pass the information on to other providers in their network.
Maintain an online presence even after the “For Sale” sign goes up
You might want to kick back and relax after all the hard work of getting your practice officially listed for sale. But in addition to continuing to care for your patients, you also need to continue to invest in marketing.
Prospective buyers want to see that the practice is active and engaged even while it’s for sale. So whatever you’ve done in the past for website updates and social media, keep it up.
If you want tips on kicking it up a notch for the sale of your practice, check out our piece on orthopedic marketing strategies.