Are you looking to pursue other ventures or retire?
When reality sets in that you are your practice, you’ll have to decide when you want to pack it in and leave. Who will pay for a medical practice when the chief revenue producer is leaving? Not many.
What is your exit strategy? How do you maximize your retirement position?
There are alternatives for you to reap the spoils of your life’s work and investment. You can sell your single-shingle practice. Or build a formidable going concern through merger/acquisition to attract attention from private equity or special interest buyers. Or expand into developing a medical facility to leverage a real estate investment.
It would be best if you built the practice so that it runs without you using revenue producers (physicians and mid-level providers) after you leave. This means growing the practice into a bankable, scalable, sustainable business before you sell. While small practices are sold, they usually get attention from clinical buyers, hospitals, or larger medical practices at a low price point, because the value is in the patient base.
The real money is in selling a going concern — a company that delivers professional medical services for fees and achieves profit and cash flows — at a higher price point. Your focus then shifts from making a living to creating a return on investment for investors.
You have built the practice by delivering what patients want and need. Now it is time to shape that practice to emulate what buyers and investors want. It is vital that you have well-documented policies and procedures for each business process.
Buyers and Investors look for medical practices that create value, have a high probability of future cash flows, possess a market-orientated management team at a fair entry valuation. These qualities are demonstrated by consistency, market position, performance history, and patient base growth and realistic return on investment potential.
One strategy that can produce an excellent payday in exchange for your equity ownership position is a combine-to-grow methodology. Pursue combining several practices through merger or acquisition, then sell the larger entity for top dollar. The private equity community is very active in this space, where there is a strategic presence in a geographic area, central back-office, and reporting systems. But it must be of substance.
Consolidation and roll-up are driven by the complexity, turmoil, and risk of practicing medicine today. The new combined practice provides management, compliance, facility, human resources, and financial infrastructure so that their doctors can practice medicine.
Partnerships often can be merged in no-cash transactions, where there is a combination of equity interests. The new entity then defines which partners [you] will move on when a selling event occurs, and which new doctors will run operations and move up within the organization. You can take advantage of multiple locations to grow the geographic footprint. The more transactions assimilated, the more that value grows.