The Essential Guide To Getting Organized Before You Sell Your Practice
In the process of preparing to sell a medical practice, the most important variable, and most valuable asset, is time.
The more time you have to prepare your practice for sale, the more attractive it will appear to a buyer, and the more options you will have for correct marketing to find the perfect buyer.
In preparing to sell a practice, your most important asset is time.
If you have ever bought something big, like a house or a car, you know how important it is that you check out every possible thing that could go wrong, to be sure you aren’t missing something that could come back to bite you later.
With the complexity of the purchase and sale of a medical practice, the same is true.
So let’s get specific:
If you are preparing to sell your medical practice, what are some of the specific issues you need to address?
First, if you haven’t already, I highly recommend you read our post on “3 things to consider before selling your practice."
Next, let’s consider what buyers want to see.
Consider the following list-- a “To-Do List” of things you need to address to make your practice as attractive as it can be for a buyer. If you're not sure why any one of these items is important, let me assure you that each one has led to the end of a potential sale, or at least a very big bump in the road.
For each item, decide whether or not it pertains to you, and if it does…ACT!
Legal
- Resolve any legal issues that are outstanding. May include malpractice, employee issues, or anything else that can be mediated or negotiated to resolution in advance of putting your practice up for sale.
- Prepare confidentiality/non-disclosure agreements to have potential buyers sign in advance of sharing information about the practice.
Accounting
- Prepare adjusted Profit & Loss (P & L) statements for the past three years, minimum (preferably last five years). Electronic copies are best.
- Get electronic copies of last three years (preferably five years) of tax returns. If you are a C-corp, this will be Form 1120; S-corp, Form 1120S; Partnership or LLP, Form 1065; Sole proprietor or single-member LLC, this will be Schedule C from your personal tax return
- Prepare explanation or highlighted spreadsheet of reasons for differences between tax returns and adjusted P & Ls.
- Prepare financial statements for past three (preferably five) years.
- Clean up accounts receivable. If you have many outstand accounts that have not been collected, either send them to collections or write them off.
As the seller, you want to be sure that you have made your practice looks as attractive and problem-free as possible, as you can be sure a shrewd buyer will be checking extensively under the hood.
Corporate
- Be sure your company is up-to-date on any and all legally-required forms that are annually due from your state.
- Make copies of all documents used to incorporate your corporation, such as Articles of Organization for an LLC, or Articles of Incorporation for an S- or C-corp. DBAs should also find and make copies of the original filings. If you don’t know where to find the originals, you can likely go back to the original state or local agency where they were filed (Secretary of State or county clerk).
- Records/minutes of corporate meetings (annual shareholder meetings, directors’ meetings, etc.).
- Any contractual agreements between the company and shareholders, employees, or anyone else.
- Copies of any real estate agreements, whether a lease or ownership.
- Licenses and permits, such as business licenses and/or state board licenses for practitioners.
- Proof of ownership of intangibles, such as domain names, or any intellectual property owned by the company or dba (such as trademarks, copyrights, inventions, etc.).
- If you plan to sell your company, try to resolve any outstanding debt owed by the company before putting your business up for sale.
Other Considerations
- Get copies of or otherwise document any kind of awards or recognition for you, your staff, or your organization.
- If you are leasing, talk to your landlord about the transferability of your lease, and/or check into the way your lease is written to see what the rules are. If you are restricted from assigning the lease or subleasing, you may want to renegotiate this piece with your landlord so a new owner can take over with a new lease. You may also wish to get an extended, transferable lease so that the new owners feel secure knowing they will have plenty of time left.
- Be sure all inventory and office equipment is current and in working order.
- Be sure your premises are clean and attractive. Clean up closets and other spots in the office that may not have gotten much attention or use in some time.
- Create an Executive Summary that you can share with potential buyers. This is an important 1- to 2-page document that shows the buyer all they need to know about your business. We can help with this and have blog posts about it here.
- Clearly document 3-5 ways that a potential new owner could create new efficiencies or otherwise grow the business beyond where it is now. Ideas could include hiring, using more currently-unused rooms, more Web presence, email marketing, etc.
- Have a good, concise, convincing story of why you are selling your practice.
Note the boring, puke-y colors I used to outline these items. Most people don't consider this stuff very fun. But for many people who are looking to sell their medical practices, this is the hardest part. Once you've addressed the items above, you'll have created the necessary momentum to get your practice sold.
How Do I Keep Track of All of This Stuff?
Great question! There is a heck of a lot to keep track of when preparing to sell your medical practice.
Our secret weapon? Project management software.
For those of you who are not familiar with project management software, its intention is to help teams of any size stay organized and on task. A good project management software package will be shared among several people, and will usually have one person who is more or less in charge of assigning tasks and checking them off as completed over time. When used correctly, most of the tasks remaining in your transition will be organized from within the software, down to texts, emails, and related documents that can all be shared. Think of it as an ongoing conversation between one another related to specific tasks.
We have a whole post on this subject. So, if you're interested in learning more about how to stay organized with project management software, click here.
In Summary...
There are undoubtedly more items that you could add to this list. However, these are the things that we most often see overlooked before a practice goes up for sale. Having most or all of the items above dealt with before you even look for a buyer will go a long way to not only finding a buyer, but easing your mind about what comes next.
Once you have these tasks under control, check out our posts on how to find a buyer, as well as the five steps to take before your first buyer call. You’ll find it all at https://www.sellingapractice.com.
If you’ve already got all your ducks in a row and are ready to look for a buyer, click here to learn how to do it.
And if you need any help with any of this, contact us (below). We're always happy to help!
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