Buying or Selling A Medical Practice

One way to jump start your own private practice is to buy one already operating. Many practicing physicians hope to sell their medical practice when they retire, either to their current partners or to a physician or group of physicians finishing their training. Buying or selling a medical practice is not like selling a car, or even a house or typical business. Usually only attorneys and licensed brokers can be used, not just for the sale, but even to determining a fair valuation for the practice.

The seller needs to determine the price tag, which is usually derived from data over the past five years of the practice, as well as comparable comparisons to similar practices that have been sold recently, and a host of other factors. The buyer will typically insist on an independent valuation of the practice and the process can be enlightening to the selling physician. In fact, if the seller begins the process far enough in advance, he or she can often make changes and additions in the last year or two before selling to greatly increase the practice’s value.

Practice Partners should have partner buy-out agreements already in place, typically agreed upon at the time a physician is made a partner. Because the pay-out to the departing partner usually depends on the practice’s current valuation, a current and accurate practice valuation is needed as noted above. Hopefully the valuation appraisal appears fair to everyone involved, and should be a transparent process.

If you are a seller without an identified buyer, then you need to advertise and promote the sale of your practice using a planned strategy. Do you want a lump-sum payment or are you willing to be paid over a number of years as your buyer gets established? Can you assist the buyer with financing? How are you going to advertise? Start with word of mouth at your local hospital and medical society? Journal or Web-based ads? Direct mail?

If you are a buyer looking for an established practice, can you get “pre-qualified” for financing? Just as the sellers may have an attorney or licensed broker assisting them, you too should strongly consider having professional advice in your search for your new practice. The terms and conditions for the sale of each practice you consider may vary considerably and you will need to decide what factors are most important and when you can be flexible. Are you willing to let the selling physician work part-time for you as an employed physician for instance? Will you need seller-financing to buy a practice? Will you guarantee employment of a practice’s current staff for some period after you take over?

Have you bought or sold a medical practice? If so, please share your experience, and any lessons learned here on PrivatePractice.MD for those following in your path.