Physician Lifestyle, Retirement

Key steps to a successful medical practice exit strategy

April 01, 2014


Transitioning out of your medical practice can be as challenging as starting it once was. To ensure the smoothest possible transition, consider starting your exit planning three to five years in advance. Here are three suggested pre-exit steps for you to consider.

1. Assemble a transition team

Your practice transition team will help you define and develop your strategy, keeping you focused on long-term goals and disciplined choices that support your plan. The ideal team includes:

  • A Certified Public Accountant: To help you determine whether you have a healthy practice to sell – or what you have to do to get it there – while advising on tax and accounting implications of various options.
  • A Financial Planner: To help ensure that your retirement goals, investment plan and exit strategy are well aligned.
  • An Attorney: To negotiate and draft contracts and sale documents, and provide estate planning and will preparation.
  • You might also want to hire a professional Practice Appraiser, as described in step 3.

2. Choose your transition model

  • An outright sale entails selling your practice and all related assets, including patient files, equipment, inventory, building and land. This approach allows you to immediately eliminate investment risk associated with the practice, instead redirecting all business assets to retirement funding.
  • A partial sale means selling the practice assets only, while retaining ownership of hard assets such as the building, land and leasehold. This model positions you to generate ongoing income from the hard assets.
  • The associate buy-in allows a practice associate or co-owner to buy your interest in the practice. This approach can facilitate a smooth transition for the practice, patients and staff, but must be documented by a written legal agreement to avoid misunderstandings and non-compliance.

3. Position your practice for optimal sale

To command the highest sale price, your practice must be well-managed and efficient. You will need to show that you have a proven track record of stable revenue, are well equipped with current technology and have a staff that understands the importance of patient management. Your office should also be well-located, well-maintained and attractive.

Keep in mind that many buyers look for practices that allow them to immediately step in and generate cash flow. Practices that do not meet this standard may receive a lower valuation and sale price or find it more difficult to attract a buyer. Consider hiring a professional Practice Appraiser well in advance to give yourself time to bring your practice up to par.

Adapted with permission from an article by Laurie Houghton, Practice Management Advisor, Wells Fargo 
Practice Financing

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