Experts in practice transition say that faulty reasoning on the part of the potential buyer often scuttles a deal. For that reason, you can increase your chances of closing a deal with an interested party if you take it upon yourself to educate potential buyers.
As an increasing number of baby-boom physicians approach retirement over the next several years, we’ll likely see more solo physicians putting their practices up for sale. (Solo doctors still account for about one-third of practicing physicians in this country.) But finding a buyer will become more challenging than ever because medical graduates these days are much more likely to seek employment in established groups.
Therefore, if you have a “hot prospect” interested in your practice opportunity, use these five techniques to increase your chances of closing the deal successfully:
- Get the prospect (and his or her spouse) involved early in the process. When possible, have a potential buyer participate in the actual appraisal process. This helps the buyer understand and buy into the valuation process— and can help short-circuit later arguments about price.
- Prepare and explain cash-flow projections to the buyer. Work with your accountant to understand cash-flow projections. Sellers often focus on appraisals, but buyers are more concerned about cash flow. The real question for the buyer is whether he or she can enjoy adequate income while repaying the initial purchase loan. Reasonable cash-flow projections can provide the needed reassurance.
- Address psychological and emotional hurdles. No matter how great your deal looks on paper, recognize that your buyer is facing what might be the biggest purchase of that individual’s life. Consider a young graduate with a significant school-loan debt load. You can help him or her recognize that the fastest way out of debt is in owning one’s own, already established practice with a ready-to-go cash flow. You can further reduce the buyer’s anxiety by committing yourself to assisting in the transition—making introductions and recommending the new physician to current patients and referrers.
- Encourage the buyer to work with a qualified advisor. A buyer’s qualified representative isn’t your opponent. An experienced advisor who has helped with practice purchases in the past can help your buyer think more objectively. A disinterested third party expert who confirms that the deal is fair and sound will reassure a buyer far more than any promises made by a seller.
- Take steps to ensure the buyer’s success. Help the buyer understand that you truly want to see him or her succeed in taking over your practice. Perhaps you can offer to help finance the deal—thereby keeping a financial interest in the future success of the practice. Certainly you can help in the marketing of the new physician, introducing the buyer to the community, and assuring patients and colleagues that you’ve done a good job picking a quality successor.