Start With What a Buyer Will Actually Assess
One common issue in sale preparation is focusing on total revenue without separating the owner's personal contribution, while a buyer looks at how much of that revenue survives the owner leaving. Before anything is marketed, work out what proportion of billings the owner generates personally, how the other practitioners are engaged, and what cover would be required after settlement.
That calculation can influence the price range, the structure of the offer, the transition period a buyer will ask for, and whether a lender will fund the purchase.
Prepare the Financial Information Properly
Buyers and their accountants work from maintainable earnings, not from the profit shown in the tax return. That means normalising the accounts: a market wage for the owner's clinical and management hours, removal of genuinely one-off items, correction of related-party rent to market, and consistent treatment of practitioner payments.
Every adjustment needs to be explainable with a document behind it. An adjustment the seller cannot evidence is usually removed during due diligence, which reduces the price at the worst possible moment.
- Three years of financial statements and the most recent interim figures
- Billings by practitioner and by billing type, month by month
- Practitioner engagement terms, percentages and length of service
- Staff roles, hours, award classifications and leave balances
- Lease, options, rent reviews and assignment provisions
- Equipment schedule with finance balances
- Accreditation and registration status
Address Owner Dependence Before Marketing
Reducing owner dependence is the change that most reliably improves the outcome, and it takes time rather than money. Moving administrative decisions to a practice manager, documenting rosters and procedures, and shifting some patient load to other practitioners all make the earnings more transferable.
If a sale is twelve to twenty-four months away, this is where the preparation effort belongs. If a sale is immediate, the position still needs to be documented honestly, because a buyer will discover it either way.
Establish an Indicative Value and a Price Expectation
An indicative appraisal sets the expectation the rest of the process is built on. It is based on maintainable earnings, owner dependence, practitioner arrangements, patient demand evidence and the premises position, and it should come with the reasoning attached rather than a single number.
A formal valuation prepared for tax, legal, financing, partnership or other specialist purposes is a different exercise, and may require an appropriately qualified professional and a method suited to that purpose. The two are often confused, and using the wrong one for the wrong purpose can cause problems later.
Marketing the Practice Without Identifying It
A medical practice can usually be described in enough detail for a buyer to assess fit without naming it: practitioner numbers, catchment type, billing model, room capacity, owner involvement and an indicative earnings level.
Identifying information may be released later in the process, subject to the seller's instructions and any transaction-specific confidentiality requirements. Buyer background and acquisition requirements may form part of a qualification process beforehand, and sensitive material is best provided in stages rather than all at once.
Qualify Buyers Before Releasing Detail
Enquiries come from practitioners buying their first practice, existing owners expanding, and corporate or practitioner groups. They have different funding positions, timeframes and expectations about the seller's continuing role.
Establishing acquisition requirements, clinical background and funding position early avoids releasing confidential information to buyers who cannot complete, and avoids wasting the seller's time.
Comparing Offers on More Than Price
The highest number is not always the best outcome. Compare the deposit and payment structure, whether any part of the price is deferred or conditional, the conditions attached, the transition period expected from the seller, restraint terms, and the treatment of stock, equipment finance and leave entitlements.
A slightly lower offer with fewer conditions and a funded buyer frequently settles sooner and with less disruption to the practice.
Due Diligence and the Lease
Due diligence goes faster when the information set was prepared before marketing, because the buyer's advisers work from one documented source rather than a series of requests to the owner.
The lease is the most common source of delay. Remaining term, options, rent review mechanism, assignment consent requirements and the landlord's responsiveness all need to be confirmed early rather than assumed.
Settlement and Transition
The transition plan should be agreed before contracts are signed: how and when staff are told, what patients are told, how long the seller continues clinically, and how practitioner and referrer relationships are handed over.
A clear, well-communicated transition plan generally causes less disruption for patients and staff than an open-ended one, although the appropriate length depends on the practice and what the buyer needs.
Limitations of This Guide
This article describes the commercial process only. It is general information, not legal, accounting, tax, finance or clinical advice, and the right approach for a specific practice depends on its structure and circumstances. Healthcare Business Brokers coordinates the transaction process and does not replace your accountant, solicitor or finance adviser.