Whether you’re a dentist ready for retirement or a family physician looking for a change of scenery, deciding the next step to take in your career can be overwhelming. Selling or buying a practice has numerous advantages and when done properly, can provide a smooth transition for both the buyer and the seller. Keep reading for reasons to buy a practice, the steps you need to take, and a few considerations, whether you are buying or selling a practice.
Advantages of Buying An Existing Practice
If you’re ready for a change in your career, buying a practice is a great investment to make for your future. There are several advantages to buying a medical practice. Take the following benefits into consideration.
- Built-in Patient Base – When you buy a medical practice, you’re not just purchasing a space, you’re buying the right to keep existing patients. This gives you immediate cash flow and keeps you financed while you transition. There will be no struggle to get patients.
- New Patient Flow – According to this article by Henry Schein, approximately 80 percent of new patients in a dental practice are referrals from existing patients. While you will certainly need to do your own marketing, you will have new patients coming to your office even while you set up and execute your marketing strategies.
- Expert Staff – Not only do you get existing patients when you purchase a medical practice, but you also get to keep the existing staff, as long as they choose to stay. This is a perk for you for a couple of different reasons. First, the patients are familiar with the current staff and are more likely to stay if the staff supports you. Secondly, the staff can help you transition into your role and will be able to show you the ropes. The office won’t miss a beat during the process because the fully-trained staff will keep things running.
- Existing Business Model – Most doctors are not sufficiently trained in running a business. Medical school focuses the most on techniques and the science of your profession. When buying a practice, especially one that has been successful, there are already procedures in place, meaning you can jump right in without the stress of starting a business.
Steps to Take Before Your Buy
You’ve made the decision to purchase an existing medical practice. Now you need to take certain steps before buying a practice. These are a few things to consider:
- Location – Deciding where you want to practice is an important step. You need take into consideration the needs of your family, as well. What are the school systems like? Does your spouse work? If so, can he or she find a job in your desired location? Once the decision has been made, seek out professional sources to help you find the perfect practice.
- Advisors – When buying a practice, the people you look to for advice are crucial. You need trained, unbiased professionals in your corner during the process. A transition consultant, attorney, and accountant are a few of the people with whom you should work.
- Practice Analysis – An analysis of each practice you are considering should be conducted before any other steps are taken. This should include information about existing staff, methods of operation, financial information, and information regarding patient numbers. It is also recommended that you meet the selling doctor. It’s important to address how any differences in personality will be handled with patients.
Taking the Leap
Once you’ve taken the preliminary steps mentioned above, it’s time to put your plan into action. Much like buying a house, you’ll first make an offer. At this point, you’ll take into consideration the valuation of the practice as done by an objective third party. This will give you a starting point that is fair to both the buyer and the seller.
Once the offer is accepted, you will need to secure financing. Using a third-party lender is the best way to go, since the lender can provide a second opinion on whether or not purchasing the practice is a good business decision. He or she also has the ability to look for hidden liens on the practice, ensuring that no one will demand collateral once you’ve completed the sale.
Once the financing is secure, you’ll sign all the documents to complete the transaction. Because the buyer, seller, transition consultant, and lender are usually in different states, you can expect this process to take some time. Documents will need to be signed separately and then delivered overnight to the appropriate party. Additionally, funds will be wired from the lender to the closing agent and then to the seller.
Other Things for Buyers and Sellers to Consider
Professionals recommend keeping the possibility of a practice sale confidential until everything is complete. This means neither staff nor patients are aware of an impending change of hands. Confidentiality benefits the seller because it helps avoid an uproar from staff and the interruption of everyday business. The benefit of confidentiality to the buyer is that it increases the odds of patients and staff remaining with the practice if the information isn’t revealed until after the deal is done.
To help the transition along and provide peace of mind to patients, the selling doctor should mail a letter of referral to all patients, explaining the situation and assuring patients they will be in good hands. The seller should also provide transitional marketing services, during which the selling physician stays on staff for about 90 days and introduces the new physician to patients. The seller should also visit referring physicians and other important members of the medical community, to put in a good word for the buyer.
As long as both parties take the proper steps, buying a practice will be a smooth process. For more information on financing and business banking, check out Florida Capital Bank.