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5 Things to Know Before Listing Your Practice

By: Brandon Finazzo

By the time you feel ready to sell your practice, it may be tempting to simply call your broker, hang a "For Sale" sign, and let the market do the rest. But without careful advance planning and a strategy for transitioning your practice, you may find its value is considerably less than expected - potentially impacting your ability to retire as planned.

Try to sell your practice while you are still enthusiastic about doing the work. If you wait until you are mentally ready to walk out the door before placing your practice on the market, you may negatively impact your revenue trends. Some of us may become somewhat complacent about our work situation once we've decided to move on -- it's human nature. But should your revenue trends begin to decline and the practice start to experience patient attrition, the result could be a much lower practice value. In extreme cases, a buyer may find the level of patient attrition from a lingering practice is too heavy to mitigate, and acquisition financing may be more difficult to obtain. Instead, work as if you are just starting up your business and even strive to slightly increase revenues. This may lead to better positioning of your practice and potentially higher sales price.

Here are the five things to consider to help you protect your practice value before listing it with a broker.

Maintain a professional environment

You probably wouldn't put your home on the market with holes in the wall and a torn carpet. So you can use the same approach with your practice. You may not need to make a major investment to ensure the office looks clean and professional:

·    Freshen the office. A small "facelift" that includes a fresh paint job and new carpeting might be all that's needed to create an impactful visual effect. Equipment may not need to be replaced, but keep it clean and fully functional.

·    Update your website. Remember, your online presence may be the first impression potential buyers receive of your practice. Keep your website current and contemporary with impressive photos of your practice and well-written content. If your website needs updating, hire a professional to have it done properly. This can help ensure that your website not only looks sharp, but has a smooth user interface as well.

·    Incorporate current technology. Upgrading office technology today can be a relatively easy conversion as there are numerous software programs available. To help increase your appeal to potential buyers, consider replacing your physical patient records with one of today's patient software and office management programs.

Keep your transition private

When thinking about selling your practice, you may not want to share this information with your staff, patients, or referring doctors until it is time to actually list your practice. The reason is that this information may scare away your staff and patients - they may start looking for an alternate doctor if they have concerns about someone new taking over. Referring doctors may seek a different practice to refer their patients to while you are in transition. Announcing your pending sale prematurely might thus negatively impact your revenues as a percentage of employees, clientele and colleagues may seek to replace the professional relationship.

Obtain an appraisal

Spending a few thousand dollars on a practice valuation may be one of the best investments you can make, as it generates a realistic market price for your practice.  This could potentially result in a quicker, smoother transaction. Many doctors have in mind what they think their practice is worth, but sometimes, their valuation may be overly optimistic due to personal attachment to the business. Over-pricing can drag out the sales process as sellers and buyers haggle over the perceived versus actual practice value. An appraisal can help to establish an objective base selling price that is realistic within today's market. Consider using an independent certified business appraiser to complete your practice valuation.

Market to new patients

A good strategy to help increase your practice value as you prepare for transition is to market to new patients during your last few years in practice. A modest investment in an ongoing marketing program -- for example, $1,000 per month or $12,000 per year - can potentially be offset by the revenues generated through services provided to new patients retained by the practice. At the same time, your practice value may increase as you are able to demonstrate both an increasing patient base and revenue trend.

Of course, there are numerous additional steps to preparing your practice for sale and completing a successful transaction. But by following these five suggested guidelines several years prior to sale, you can help maximize the appeal of your practice to potential buyers, and protect its value as you move towards retirement.

About the author

Brandon Finazzo is the Business Development Manager for Wells Fargo Practice Finance in South Texas and Louisiana. He has been in the banking and financial services industry for more than a decade. With a variety of financial products, Wells Fargo Practice Finance can help medical professionals start, build, grow, and transition their practices throughout their career. Brandon can be reached at 512-969-7390 or brandon.finazzo@wellsfargo.com

View all articles by Brandon Finazzo

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All financing is subject to credit approval.

All financing is subject to credit approval.

All financing is subject to credit approval.

All financing is subject to credit approval.

All financing is subject to credit approval.

All financing is subject to credit approval.

All financing is subject to credit approval.

All financing is subject to credit approval.

All financing is subject to credit approval.

All financing is subject to credit approval.