Selling Your Practice: What You Should Know
Getting a good selling price for your podiatry practice is a complex endeavor and can be particularly challenging in these unstable economic times. This author reviews seven elements that can help physicians attain maximum value for the practice and also offers insights on the valuation process.
Preparing your practice for a sale can be a very emotional and challenging exercise. I have spoken to many physicians around the country who are always asking me how much their practices are worth. That is like asking someone over the phone, “How much would you pay me for my house?”
There are a lot of factors that go into selling your practice. Accordingly, I would like to offer very realistic and practical advice on how to prepare your practice so you can maximize the sales price. The better shape your practice is in, the higher the price you will be able to receive upon a sale. I have been buying practices for the past 20 years and I have made my share of mistakes. However, you cannot succeed unless you make and learn from your mistakes. My knowledge in the trenches will hopefully provide very real life information to prevent you from making serious mistakes as you prepare for the sale of the podiatry practice.
Remember that a podiatry practice is purely an asset. I constantly hear the following: “I have put 30 years into this practice and I can’t just give it away.” Although you might feel this way, when you are selling the practice, you are giving someone else the opportunity to recognize the profits and revenue after paying you for the practice.
Selling a practice is no different than selling any other type of business and you need to view it this way or you might never survive the process that leads to the end result: getting the best value possible for the practice. Always be objective and realize that the best time to sell any asset is when you do not have to sell it. This works the same in reverse. The best time to buy any asset is when you do not have to buy it. A physician practice is just another asset that gives the investor a return on his or her investment and the price ultimately comes down to what the buyer is willing to pay, regardless of how much you think it is worth.
There are seven essential factors to understand when planning for the sale of your practice. These essential elements will provide a good base of knowledge to understand the valuation process.
1. Plan Practice Sales At Least Two To Three Years In Advance
One of the biggest problems that I have seen in the marketplace is that physicians do not plan far enough in advance to sell their practice. As a result, they take a steep discount or are even forced to sell it at a “fire sale” price if it sells at all. When I meet with physicians who are within three to five years from retirement age, I always ask them: “What are your plans for retirement?” The most common answer I get is, “I am never going to retire and will work until I cannot work anymore.”
This approach is music to a buyer’s ear since it is impossible to work forever and you will be setting yourself up for a fire sale. Is that response realistic? You need to be grounded in reality. It is impossible to work forever.
Retirement is a very sad time for many physicians not only because they have to stop doing something they have loved to do for the past 30 years, but also because many physicians did not properly plan for retirement and cannot afford to retire. There is a fundamental economic principle that “expenses rise to your level of income” and I have found this to be no truer than in the physician world. Most physicians have created a lifestyle in which they spend everything they make, cannot afford to retire and do not even want to think about the reality of not working. Unfortunately, this is not 100 percent the fault of physicians since physicians are not trained on money management and wealth creation was never part of our training.
As entrepreneur Doug Curling, one of my mentors, always says: “Being a doctor is what you do, (it is) not who you are.” Unfortunately, many of our egos drive our self-esteem and giving that up can lead to major depression for many of our colleagues.