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Steps of Preparing a Medical Centre For Sale

Published : 16 November 2020 Comments :

Start early. It usually takes a few years to prepare a business for sale and find the right buyer.

  • Prepare financials documents.  Past three years (ideally four years) of profit and loss statements for the business. Plus any explanatory notes.  Your accountant should easily have these at hand.  If you or your spouse work in the business, it is important to provide your personal tax returns also.
  • Prepare a register of the businesses assets. Be thorough.  Try to include everything. This register should include the age of equipment
  • If you have a depreciation schedule this helps a lot. Depreciation has implications for tax. Are there loans or lease arrangements against some of the equipment?  If so, what.
  • Identify income sources (Pathology rents, sessional rooms, consumables, practitioners)   
  • Analyse individual providers contributions to practice running costs. Do you have contracts with doctors?  Are they likely to stay after the sale?  Are they potential buyers?
  • Consider the non-tangible assets of your business.  Does the clinic have special character?  Is it situated in great suburb?  Is it next to the beach?  
  • Get a valuation. The importance of accurately valuing assets While everyone may have an opinion (facebook doctors groups, colleagues, family members), not all opinions are equal.  And definitely not so, in the eyes of banks lending money or legal disputes. It is important that valuations are prepared to a professional standard and are true representations of the worth of the business.  If your accountant can't properly value a used ECG machine, sterilizer, or diathermy.  They aren't equipped with the skills to value an entire clinic.  You need someone who has an accurate understanding of practice equipment, its working life, replacement value and value to the operations of your clinic.  This needs to be independent, take consideration of the current market and reflective of the true state of the business. Be honest with documentation.  Remember, any undisclosed information may make the seller open to future litigation from the buyer. Being upfront is in your best interest. This is especially true with financial documentation., “Creative accounting practices” to redirect funds are not only illegal but may dramatically cost you when it comes to selling. Remember, the practice can only be valued on the balance sheet of the business.
  • Review your contracts, operations manuals and lease agreements. 
  • Start tax planning.  What will you do with the money?  What are the tax implications? Will you pay off debt? Or top up your superannuation?
  • Prepare a plan and stick to it? Know your reason to sell!  What are you expecting to get out of the sale? It is great to have a dream price but what are you willing to accept? What price are you willing to walk away from (and not regret down the line!). It is normal to get somewhat apprehensive when a contract is in front of you and it becomes time to sign. It is a big decision and EVERYONE thinks, “maybe I could get a better deal”. Having thought through scenarios in advance lets you maintain control of the situation.  This is especially true in medical clinic sales. It usually takes years for the process to occur and seller fatigue often sets in.  Try to stick to your motivation for selling and what you want to get out of it for you to progress in life.  Don’t lose sight of the bigger picture, in an effort to “win” during a negotiation. 
  • What are your reasons for selling?  And what will you do with your time after the business is sold?