Exit Planning for Retiring Doctors
You have worked for decades seeing patients day in and day out. Perhaps you plan to sell your practice someday. But now what? When should you assemble your advisors and contact a practice broker?
Doctors considering retirement often wonder about how and when the transition begins. We believe the perfect window of time for implementing your exit strategy is 1-2 years. It usually takes a year or more to secure a buyer and negotiate a deal. In addition, the selling doctor assists the buyer for several months (or longer) to insure a smooth transition. Some sellers, as part of their agreement, remain with the practice as a part-time associate—in some cases, indefinitely. Others walk away knowing their patients will continue to be served. Either way two years is enough time for the practice transition itself. Yes, you will need to move quickly, but this can be viewed as a benefit rather than a downside.
A shorter transition period offers many advantages: First, it keeps the buyer’s motivation level high. Buyer interest is sustained since concrete steps are taken in a timely manner. Long transition periods may allow a change of heart and cause interest to wane. Secondly, you may be more prepared to leave. Many doctors have an emotional attachment to the practice they built. Often they make the mistake of listing before they are ready to part with it. In those cases, their indecisiveness or reluctance may cause likely deals to unravel. Comparatively, doctors who prefer a 2-year timeframe are more committed to the sale of their practice. Thirdly, the practice will (in theory) remain most similar to its current state. This is especially critical for declining practices, as practice value is based on current performance. Shorter transition periods, therefore, restrict the probability of adverse conditions. Although it also limits positive change, a dedicated 6-month period is often sufficient for stabilizing revenues.
Further advantages concern national demographics, the economy and healthcare reform. As the population ages, many doctors are approaching retirement age. In fact, there may soon be a shortage of physicians due to the exodus from the workforce. Additionally, a number of doctors had postponed retirement because of the recession. This contingent will be ready to transition out in the near future. Therefore, we project a substantial rise in medical practices for sale on the market. If you plan to retire and sell your practice in 1-2 years, you will be ahead of the game. Your practice will be more marketable and may even fetch a higher sales price. Of course, retirement is more of a lifestyle decision than a business one. But for doctors who are contemplating to sell their practice now is the perfect time. Finally, it is not as critical for retiring doctors to undertake reform-driven changes, such as investing in an EMR system.
So if you plan to retire in a couple years, what should you do? The first step is to contact a healthcare practice sales expert. Transition Consultants will be your advocate in formulating a sales strategy and implementing your exit plan. For over 20 years retiring doctors have trusted our team with their practice sales and appraisal needs. We will streamline the process for you, coordinating with your accountants and attorneys to deliver timely results. Call us at 800-416-2055 to begin the next chapter of your life.