The Ultimate Guide To Help Sell a Medical Practice
Considering selling a lower middle-market medical practice in California can be overwhelming. Without a proper, well prepared, exit plan, and a medical business broker to facilitate the process, there is no way to guarantee that you made the right decision.
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Exit Strategies for Medical Practice
Deciding to exit a California medical practice you've spent years pouring your heart and soul into isn't easy. However, the lure of retirement eventually knocks at most physicians' doors.
Once you've decided that you're ready to exit your medical practice, you might be wondering—what's next?
In short, you'll need to develop a plan to exit your medical practice.
Exit strategies for medical practices are critical regardless of where your business falls—the lower middle market and mid-market medical practices for sale all require planning to ensure a smooth ownership transfer.
In this guide, we'll cover important factors to keep in mind as you're preparing to exit your California medical practice. We'll also show you why it's important to embrace the benefits of an M&A exit strategy versus trying to perform a medical practice exit strategy.
Top Reasons to Consider an Exit Strategy
Most medical practitioners in California’s lower middle market, typically only look to exit or sell their medical practice as they plan for retirement. This makes perfect sense, but what is important is to increase the chances of successfully selling the practice. To do this, it is important to not only understand the steps to exit and sell the practice but preparing as much in advance so if the right buyer comes along, you are ready to move through the many steps so you can move confidently to the next phase of your life.
From the sales decision-making process to financing, market valuation, and basic mistakes to avoid, the following information will assist you to be successful with the sale of your medical practice.
Accurate Valuations
One of the first steps in developing an exit strategy is for the medical practice owner to analyze its strengths and areas of improvement. That way, they'll be able to boast about where their medical clinic is excelling and have the opportunity to fix its downsides if it makes financial sense to do so.
Identifying Buyers
Medical Practice owners and Physicians without an exit strategy lose out on the potential for attracting buyers. Without an explicit account of finances, documents, and valuations, you could inadvertently deter the people who are best suited to purchase your medical clinic.
Managing Unexpected Offers
Sometimes, you might be taken off guard by an offer you weren't expecting. Such a situation is common when a medical practice seek mergers to improve their market share and buying power. If you already have an exit strategy in place, you'll be able to make decisions based on what's best for your situation.
Painless Transition
There's a lot that goes into transferring company ownership, especially if that transfer includes employees and staff. The exit strategy will mandate how the new medical practice owner will handle inherited—or lack thereof—people and assets to ensure a smooth transition.
Another benefit to a well thought out transition exit plan is that you'll be able to advise the new owner on your highest performing employees, keeping them happy and helping to ensure your Practice thrives after you hand it over.
Taxes
If you don't have an exit strategy, you might inadvertently transfer your tax implications to the person who buys your medical practice and clinic. An exit strategy will help you understand what kind of taxes you'll be required to pay upon selling your medical practice and see if there are any workarounds for reducing your taxes.

How to Get the Best Price When Selling your Medical Practice
Those who decide to put up their California medical practice for sale in exchange for embracing retirement life is a big—and intimidating—step. In analyzing M&A trends, the information below will help you understand the process of putting up your lower mid-market medical practice for sale.
While you might be eager to sell your medical practice and move to the next phase of your life, the focus needs to be getting the best Return On Investment or ROI for the considerable time, risk, and investment you have made in the creation, growth, and development of your practice.
With your business valuation in hand, you understand the value of your practice. You will also know the types of buyers that would have an interest in buying your practice.
But that is not all there is to finalizing the sale.
If you want the best price, you will benefit from the right M&A advisor to help you navigate what will be a complex business transaction. Just as importantly, the right M&A Advisor will build the marketing documents and correct disclosures, so your practice is presented in the best light possible and therefore increasing your chances of selling.
Is your Medical Practice Ready for Sale?
For a medical practice to be ready for sale, its business operations must be in good shape, show a profit, and very important to a buyer, potential long-term growth.
Are your books in order?
It is not always just about the financial statements and related paperwork, but it is certainly important. It is critical.
What do the financial statements and related paperwork say?
What has been the performance of the practice over the past three years?
As the owner of the practice and you look ahead to the next 12 months to three years, what do you see?
The above are basic questions a buyer will ask and decide whether they move forward with the purchase of your practice.
Having all the facts and stats and proving that your business is the right choice for a prospective buyer is the first step involved in certifying your business ready for sale.
Endeavor to have them ready and just as importantly, up to date.
Statement of Cashflow
You would not want to buy a business without a detailed analysis of its financial status; do not expect a buyer to be interested in your medical practice when your cash flow statement is not well detailed or corresponding with your tax returns.
Make sure business is strong
Many California-based medical practices with good market value are yet to attract the right buyer. And this is not because the viability of the medical practice is in question but because the sellers became less concerned about the business operations once the medical practice was listed for sale.
One of the keys to remember when owning and operating the practice is critical. This critical advice is: Always run your business as if it is for sale.
Too many times a business owner is tired and burnt out from running the business. Do not try to time the market. Do not try to take shortcuts you normally would not take. Regardless of whether you are finding buyers with an interest to buy your practice, continue to pay attention to those important details as it may make a difference whether you can sell the business; or not.
Ask a Medical M&A Advisor to join your team
Selling a business in California comes with complications at the best of times. From the day-to-day decision-making process to assisting the buyer with finance to negotiating with landlords, to protecting confidentiality, to understand health insurance and Electronic Health Records, and more, you need expert advice to help you successfully sell your practice. Having a M&A Broker enables you to focus on keeping the business operating smoothly while they handle the marketing and sales process.
To successfully obtain a good deal for your medical practice, you need to invest your time and to increase the chances of the sale process being successful. You need an M&A Advisor, Business Transaction attorney, Accountant, and other team members sharing the same goals and values as you.
Medical Practice Valuation
What is it? Why do I need one if I'm planning to exit a medical practice? What is the practice worth?
Top Reasons to Sell a Medical Practice
Are you a doctor, physician, or medical administrator thinking about selling a division of your medical practice, a subsidiary, or the entire medical division?
There are basics of structuring the sale of medical practice, valuation techniques, California state laws, Medicare, MediCal, Medicaid, disclosures, confidentialities, licenses, and more that require careful navigation.
Before we step into explaining the details of selling your medical practice in more concrete terms, we need to be certain you are ready to sell.
So why sell your medical practice?
Why allow all the energy, enthusiasm, and determination that went into building your medical practice to come to an end? Why have you decided that it is time to sell your medical practice?
It can be because of finance, family, or career. You might also be wanting to sell your medical practice based on retirement, burnout, or the need to move to a new challenge with new opportunities.
Regardless of what is making you reconsider what you are currently doing, you need to be sure about one thing; do you firmly believe selling your medical practice supports your next big goal? Until you are comfortable that selling your medical practice is the right decision for you, your patients, employees, and the practice and lifestyle you nurtured for years, hold off from finalizing your decision.
Before listing your medical practice for sale
Once you have a business valuation, you can make better decisions about whether the time is now to sell or whether you need to work and grow your medical practice before selling.
Note: Listing your medical practice for sale in California without an accurate valuation dampens your ability to attract the right buyer.
This is for two primary reasons:
The first reason is that the buyer wants to know how much they would earn if they own and operate the practice. As the owner, you will have made decisions to minimize your taxes and other discretionary items. The buyer wants to understand those decisions so they can decide if they will do the same thing or do it differently.
The second reason is that the buyer will most likely need to get finance to purchase the business. The lender will want this information as part of its underwriting process or will be unwilling to approve a loan.
When seeking a valuation, you need a team that understands the medical industry, the business world, and a keen understanding of broader economic concepts and considerations.
However, if you are confident you can create an accurate valuation of your medical practice yourself, below are some well-known medical practice valuation methods and formulas you might want to consider.
Medical Practice Valuation
Venturing into selling your medical practice without an accurate valuation can affect your ability to establish an accurate price, market the practice for sale, find qualified buyers, or even negotiate lease and finances.
The first step in selling any medical practice is to know the value of your business.
You need an accurate practice valuation from an M&A advisor who understands your industry and has a good finger on the marketplace's pulse. A market valuation helps you set the selling price for your medical practice and helps your buyer get financing if they need it.
To start a business valuation, you need to gather your financial information from the last three years. This includes your tax returns, Profit and Loss Statements, and Balance Sheet. You then hire an M&A advisor to help you recast your books - a way for you to show the maximum income you have instead of showing the least tax liability as most medical practice owners do.
Recasting your financial statements
The recasting of your financial statements is an important concept to understand. You may be familiar with the concept of EBITDA or Earnings Before Interest Tax and Depreciation.
EBITDA Definition
The recast income statement spreadsheet typically shows
“Earnings Before Tax, Interest, Depreciation, and Amortization (EBITDA.)
This is the benchmark for earnings of owner/operator businesses used by M&A Brokers, appraisers, lenders, buyers, and sellers.
Definition: The definition of EBITDA is pretax net profit plus non-cash income and expenses, discretionary income and expenses, costs of financing, one-time expenses, and all compensation paid to a General Manager at Fair Market Value, less employee equivalent compensation to replace additional working owners and any known increases in fixed expenses.
Procedure: The process to arrive at the EBITDA of the business is called ‘normalizing’ the financial statements and includes the following steps.
- Non-cash items are added back to pretax net profit because this cash is available for the owner to spend.
- Discretionary items are usually profit or financial benefits to the owner. They could include, for example, a leased luxury car the owner mainly uses for personal purposes, or items a buyer could eliminate without affecting the business otherwise, such as contributions to a charity.
- Financing costs are added back because the earning power of the business is independent of the method an owner chooses to finance the business. That is, the seller’s debt payments are irrelevant to the buyer and the earning power of the business. Of course, a buyer should make a capitalization plan to see what his pretax, post-debt service cash flow will be. If a buyer contemplates taking over some of the seller’s debts in acquiring the business, this does not affect the earning power or valuation of the business. Instead, this is just one of the forms of payment the buyer is using to pay for the acquisition of the business, much as in the purchase of a real property where the buyer assumes the mortgage and gives the difference to the seller in cash.
- One-time expenses are usually added back because the earning power of the business does not reduce by these one-time items going forward. A good example of a one-time expense is the expense of moving a business to a new location.
- One General Manager or FTE: The standard for measuring business earning power assumes a General Manager at Fair Market Value or salary including normal market benefits. If other owners or family members are working in the business, their compensation must be “normalized” by adding back all their compensation then subtracting the cost for an unrelated employee to be paid at the market rate for the job they will perform.
- Non-recurring items of income
- Non-operational items
Known increases in fixed expenses: Since the theory behind the EBITDA analysis is to estimate the earning power of the business going forward with the above assumptions, showing non-cash, discretionary, and one-time expenses as earnings, it may be fair to reduce the EBITDA by known increases in fixed expenses going forward. A good example is a scheduled cost of living adjustment (COLA) in the rent of the premises.
SDE or Sellers Discretionary Earnings
There is a similar concept to EBITDA called SDE or Sellers Discretionary Earnings.
This definition applies when the business does not have a General Manager in place but the owner/operator to make all the decisions to run the business.
Medical Practice Valuation Multiples
To estimate the value of your medical practice, you can use several valuation multiples. Derived from recent sales of similar practices, the multiples relate the actual selling prices to the practice financial performance measures.
The typical valuation methods that are part of a valuation include:
- Selling price to net annual sales
- Price to gross profit
- Price to net income
- Price to EBIT and EBITDA
- Price to total practice assets
- Price to owners’ equity
It is a good idea to use several such valuation multiples for accurate business valuation. Each estimate may differ depending on how well your practice does in comparison to its peers. The result is a range of values or some weighted average of all the practice value estimates.
Can we help you with the value of your medical practice?
One of the services at
Rogerson Business Services in the lower middle market M&A segment
is providing a medical practice valuation.
The valuation service we would offer you depends on the purpose of the valuation.
If you are looking to sell your medical practice, we would provide a Confidential Practice Review or CPR. A CPR is an estimate of the value of the practice and looks at many aspects of your practice and compares them to similar practices that have sold.
The CPR is a detailed analysis of the practice and its purpose is to provide an estimate of the value of the practice. If the CPR is to be used in a legal dispute such as a partnership disagreement or a divorce of the practice owner, a different valuation would be necessary. If you have questions about the difference, please
schedule a 10 minute discovery call by grabbing a suitable time and date on my calendar.
Perhaps you would like to see a sample Confidential Practice Review or CPR. If that is the case, please click this link
California Medical Confidential Practice Review
Learn how to plan an exit for your medical practice
Sell-Side M&A
Four step process to market your California lower middle market business for sale
01 Exit Plan - business valuation
Your potential buyers can come from many areas. Employees, individual and group investors, Private Equity Groups, and even competitors who may have an interest in purchasing your business. If a competitor is interested, you don't want to reveal too much information about your business, especially anything that could hurt your business if the deal falls through.
Once you decide to sell, get your business ready, and get help from a trusted and accredited California M&A Advisor.
An M&A Advisor will vet potential buyers to make sure they are qualified and are serious about purchasing your business.
A California Licensed M&A Advisor knows the ins and outs of selling a California business and can help you get your business in shape to get you the best deal.
02 Buyer Analysis
One of the first things your M&A Advisor will do, is help you to create an exit plan. An M&A Advisor knows exactly how to plan an M&A exit strategy. In fact, you might get a M&A Advisor to help you with an exit plan long before you're ready to sell your California company.
An M&A Advisor is knowledgeable about how to calculate the value of a business to sell and will aim to get the highest value for your business. Once everything is ready to go, they'll list your business for sale. An M&A Advisor will be an expert at listing a California businesses for sale.
After your business is listed, the M&A Advisor will handle all the marketing of your business to promote deal origination and get you in front of potential buyers. They'll also set a buyer list and work with you to figure out who to go after for the best value.
03 Deal Origination - marketing
An M&A Advisor will then work to get you as many qualified and motivated buyers of your business as possible.
They will market your business through the proper channels, including social selling and targeting and generating interest. They'll vet and follow up with interested buyers whether off-market or publicly listed.
Once the offers come in, your M&A Advisor will evaluate all offers and conduct market offer analysis to make sure you're getting the best deal.
04 Negotiation & Closing
Buyer Due Diligence
Once a buyer is performing their own due diligence, the M&A Advisor will help you navigate the process to make sure everything is running smoothly. They'll negotiate a Letter Of Intent between you and the buyer to lay out the proposed aspects of the deal. Your M&A Advisor will also help you gather all of the necessary paperwork discussed above. If the buyer asks for additional documentation, your M&A Advisor can help guide you.
As a buyer is going through the due diligence process, they will be on the lookout for red flags about your business. An experienced M&A Advisor is knowledgeable about these warning signs and can help you prevent them. Red flags may include refusing to disclose why you're selling, not allowing time to conduct due diligence, refusal to introduce the buyer to employees, suppliers, landlords, and more.
Definitive Purchase Agreement
The M&A Advisor will oversee the Definitive Purchase Agreement with the help of the transaction attorneys to make sure both parties are happy with the terms. A Definitive Purchase Agreement protects both you and the buyer as it will clearly state exactly what is and is not being sold. It can also protect the buyer from certain liabilities. A Definitive Purchase Agreement will also help you deal with the legal complexities of selling a California lower middle market business.
Once the Definitive Purchase Agreement is finalized, the M&A Advisor will help with any final items that need to be done as part of the closing process including working with a California Licensed Escrow company.
Closing - Finalize the Transaction and Close the Deal
Finally, your M&A Advisor will help prepare the close of your transaction. Once the closing is complete, they'll assist with overseeing the transition of the business change of ownership.

How to Build a Medical Practice to sell
At the moment, running a medical practice in California is quite expensive. The COVID-19 pandemic has had a massive effect on the healthcare industry, raising multiple questions about many California-based medical practices' growth and profitability status.
However, if you are looking to sell your medical practice at a reasonable price, your practice must be performing well financially. That is, buyers must be able to see that their investment can yield short term returns as well as long term profit.
Below are some of the steps you can take to increase the profit for your medical practice while keeping it in the right condition to sell if the right buyer comes along.
Clean Financial Statements
Now is not the time for perks and other discretionary expenses. You may have to suspend some items until your medical practice becomes a more profitable venture. Try to offer other lower costs perks in the meantime or have a make-up plan for when things are thriving again.
New technology
Every business in every industry is being touched by new technology.
In the medical field, it is very challenging to sell a medical practice without an EHR or Electronic Health Records system.
Older doctors struggle with this technology as they are used to writing notes during quieter moments or at the end of their day.
Teleconferencing or remote video or audio sessions are now standard with COVID-19 hurrying in this new form of communication.
The right hardware must be in place to maximize the performance of this technology with patients now expecting it as the normal way of talking to a medical professional.
Medical billing system
Many medical professionals are moving away from taking Medicare, MediCal, and Health Insurance patients to a cash concierge business model due to the high costs of billing and processing for services and just as importantly, either waiting for payments to be received or frustratingly, payment delayed due to an incorrect code or something less obvious.
Insurance and Business Interruption Coverage
A simple way to protect a medical practice with insurance including business interruption coverage from a natural event and more.
It is a good thing to use it to plan for the future. While this might not help you in this crisis, it can help you “recession-proof” your business.
Keep the communication open
Most creditors, vendors, and even landlords understand the difficulties businesses are having currently. The key is communication. Reach out, negotiate with them, and try to keep obligations flexible. Negotiate later due dates for rent and other items, suspend recurring fees and auto-ship agreements, and keep only essential subscriptions.
Create financial reserves
One of the primary reasons medical practices fail is due to the lack of understanding when it comes to cash flow. This is never clearer than during a crisis. Every business should have a reserve capital base, essentially an emergency fund to replace income, as necessary.
This is one of the fundamental principles of cashflow.
Free Medical Practice Valuation Guide
Learn more about Business Valuation and why it matters the most while planning an exit strategy.
How a Medical Practice Broker Can Add Value
You would not want to hand your practice over to just anyone to help you value and sell your practice. You have spent years creating it, and while you may no longer wish to run it yourself, you would like to think of it thriving and continuing to help people after you move on.
An M&A advisor can help find the ideal buyer for your practice—from vetting for a personalized fit to determining the potential buyer's financial means. M&A advisors also motivate the buyer to act on this opportunity by showcasing the benefits of your practice, facilitate the negotiations, and guide you both through every step of the sale to ensure the best possible outcome.
With an M&A advisor, you obtain valuation methods elaborate enough to include strategic potential targets, analysis of required investments, intellectual asset valuation, and future potential growth of your medical practice.
Why selling a Medical Practice in California is Different?
Running and selling a medical practice in California is different than in other states. People are drawn to California for the climate, the lifestyle, and the multitude of opportunities. If it were its own country, California would be the sixth-largest economy in the world.
It is no wonder that we have many medical practices in the state, from general and family practices to specialties of nearly any type.
Let us look at what is different about running and selling a medical practice in California.
Professional Licensing & Requirements
First, it is essential to understand that medical licensing in California is different than in other states. If you already run a medical practice in California, you know this, but it is important to remember that you need to find a qualified buyer when you are ready to sell.
This means a buyer who has or can quickly obtain certification through the Medical Board of California. For most physicians or those seeking to purchase a medical practice in California, this is a simple thing.
But the buyer must apply early to ensure their practice is complying before closing the deal. As a seller, you may have to keep working in the practice for a limited time to ensure a smooth transition.
Additionally, Private Equity Groups are looking to purchase medical practices and improve the financial and operational performance of the practice. They bring a different business model, and some can be a good buyer of your practice while some can simply be the wrong fit.
Escrow and selling a business
Another difference in California is that an escrow process is typically part of the process to finalize the sale of a business. This makes things a little more complicated but offers protection for both buyers and sellers.
This is an advantage, but your potential buyer must understand how this works. Typically, a M&A broker plays a huge role in making sure this part of the selling process goes smoothly.
In some other states, escrow is not required, and there are other closing differences as well. Even if your buyer has purchased practices or businesses in other states before, the process in California might feel odd or different to them, and even to you. This is where the guidance of your team will be helpful.
Lease and location
When looking to buy a medical practice, the first thing most buyers consider is the equipment and facilities available. Only after weighing the basic amenities does the focus shift to the physical space. A medical practice lease can facilitate or impede a practice's operation and can provide certain competitive advantages and disadvantages.
In California, the location of your medical practice determines accessibility and convenience for patients. If you own the building, selling the practice comes with extra perks; factors such as location and rental space comes into play, giving you a better bargaining chip to obtain a lucrative deal.
However, if the medical practice you want to sell operates on a lease, you must evaluate the terms and legal requirements in the practice lease and be prepared to undertake negotiations with the landlord to obtain the best deal possible.
Pros and Cons of Medical Practice Property Ownership
Many physicians believe owning the property their medical practice operates from is the best option.
Medical practice property ownership comes with numerous pros and cons.
Pros of Medical Practice Property Ownership
You Can Sell the Practice and Lease the Space
If you own the medical practice property, you do not have to sell it with the practice, that is, you can sell the practice but still enjoy the benefits of collecting rent for space.
Appreciation of Long Term Commercial Real Estate Investment
Owning a medical practice property grants you access to multiple streams of income. You do not only get to determine how big or how small you want your physical location to be but can also receive rental income by leasing out parts of the building, not in use.
Better Compensation
Selling your medical practice and selling the property are two different things. Selling the property, together with the facility, requires two sales. Hire an M&A advisor to help you obtain the best deal.
Greater Control Over the Sales Process
Running a medical practice on your property comes with many advantages. You get to choose from a handful of sales and negotiation options. You can either sell the practice and lease the space, sell the practice, and lease the space with an option to buy later, or sell the practice and sell the space.
Cons of Medical Practice Property Ownership
Extra Responsibility
The sales process may become difficult when selling a medical practice. However, where the medical practitioner also owns the property, this adds value and a different type of buyer.
This includes a buyer requiring finance for the practice and separate finance for the real estate.
It will also include inspections, possible repairs, and a separate escrow process for the practice, and a separate escrow process for the real estate.
Financing the Sale
California is one of the most regulated states in the country, and shutdowns and restrictions during 2020 have made running a profitable medical practice challenging, especially for some specialists and small practices without the financial stability offered by larger entities.
Some banks and other third-party lenders are reluctant to approve finance to a buyer of a medical practice as they see the loan coming with greater risk and scrutiny. However, there are lenders that specialize in lending for medical practices and so they need to be found.
As a step to help close the sale, Rogerson Business Services looks to get finance in place when the practice is advertised for sale, so this step is in place and makes it easier for the buyer to qualify…if in fact, they can qualify for a loan. If they cannot qualify for the loan, it takes them out of contention to buy the practice and saves wasting a lot of time and energy.
Need help with valuing & selling your medical practice?
Rogerson Business Services (RBS) is an M&A Advisory for lower middle market businesses that is built on trust and ethics. Andrew Rogerson, Certified M&A Advisor, can help you find answers to all your questions, introduce you to better opportunities, and manage the buying and selling a medical practice in California process's integrity while keeping every aspect of sales confidential.

Selling your Medical Practice to a Hospital
Hospitals and larger medical communities looking to expand their services often look to purchase medical practices in disciplines that are either receiving additional demand or service they currently do not offer their patients.
Whether you run a family practice, chiropractic, dental, dermatology, general surgery, gastroenterology, or pediatric practice, and you are looking to sell, hospitals may seem an attractive option but the price they are willing to pay is often far below the market rate as they are not willing to pay goodwill which is the bulk of the value of a practice.
Why Hospitals have an interest in buying Medical Practices?
Most hospitals lose money on the professional fees attached to outsourcing a medical practice. Hospitals, therefore, encourage physicians to sell their practice assets in exchange for a lump-sum purchase price, plus a salary that is 10% to more than 25% greater than what the physicians were previously earning, assuming their volume remains roughly the same.
This investment only yields profit for the hospital in the long run. To ensure that nothing hinders the expected profit's accountability, most hospitals include a restrictive covenant in their contract. Including a restrictive covenant in the acquisition documents prohibit physicians from selling to, or working for, a competing hospital for two or more years after the relationship's termination.
Hospitals are acquiring practices to prevent their competitors from gaining market share, try negotiating the restrictive covenant out of a physician contract. You will fail. You might squeeze out higher compensation or a higher purchase price, but hospitals will protect the restrictive covenant provision intensely as if one physician is successful in a termination, others may and will try to follow.
Note that you need to be specific about the type of deal you would like to negotiate when selling your medical practice to a hospital. The restrictive covenant contract comes to play only when you want to sell your medical practice and still retain a position in that line of work with a valid agreement to work for the hospital. In scenarios where you are looking to sell your medical practice and venture into another profession, the restrictive covenant may not hold much ground, but this is a matter to discuss with your attorney.
M&A LOWER MIDDLE MARKET ADVISORY
Why Work With Rogerson Business Services?
Business Valuation
Many sellers neglect the business valuation and methodology early in the process, only to become frustrated after the deal has been finalized. Rogerson Business Services can help you understand the value of your business based on different methodologies.
Legal Due Diligence
When selling a business, the legal standing of the business determines the smoothness, efficiency, and speed at which the transaction is finalized. M&A Advisors offer a sell-side M&A process backed by the viability of a California Licensed business or transaction attorney. With a licensed California M&A Advisor, you can be certain the legal documents involved in the sell-side M&A process is detailed and accurate.
Business Analysis
To avoid wasting time with unqualified buyers, get help from a trusted, licensed, and accredited California M&A Advisor. An M&A Advisor will vet potential buyers to make sure they're legitimate and are serious about purchasing your business. An M&A Advisor knows the ins and outs of selling a lower middle market business and can also help you get your business in shape to get you the best deal.
Financial Due Diligence
Our service includes deal team professionals to assist you. From financial to legal documents to tax and procedures, we want to make sure you are covered.
If you have your own in-house team of advisors, Rogerson Business Services can help make the M&A sell-side process as easy as possible by offering insights that help the team understand and are in alignment with the same goals as yours.
Definitive Purchase Agreement
The Definitive Purchase Agreement is usually extremely complex. It is easy to overlook all the terms and legal jargon, but every paragraph is important and duly considered. It is therefore critical to ask questions and ensure you are comfortable with the final set of legal documents you need to sign.
M&A Sell-Side Targeting
Rogerson Business Services provide Mergers & Acquisition M&A Sell-Side Advisory. We zero target off-market, accretive, private equity and strategic buyers with an interest in lower to middle market companies or businesses to maximize incremental growth value.
How an M&A Advisor Can Contribute to the Exit Planning Process
Negotiating the restrictive covenant will be very challenging because, as discussed above, its purpose goes to the hospital's core motivation for entering the relationship. However, with an M&A advisor, the deal can be pared down to an extent where both parties obtain favorable outcomes.
M&A advisors also help you maintain confidentiality throughout the selling process. Our commitment to confidentiality is so strong, we put it in writing.
California Medical Practice Confidentiality
They regulate the type of hospitals that gets access to the confidential documents attached to the sales process, market your medical practice through an established network, help you obtain access to a proprietary database of active buyers, and sort through the noise to shortlist qualified and unqualified buyers.
In simple terms, an M&A advisor can help you accelerate the growth of your medical practice, boost revenue, improve cash flow, achieve economies of scale, and outmaneuver competitors.
Need an M&A advisor to help you navigate through these murky but exciting waters? Get in touch.
6 Steps to Successfully sell your Medical Practice in California
The best way to increase your chances of selling your medical practice is in a reputable marketplace that is attracting buyers with the right qualifications and motivation.
To help you scale through this process within the shortest possible time, we have outlined the six steps involved in listing your medical practice in California.
Gather Your documents
First, there are many documents you will need to get ready to sell your medical practice. You will not only need all your tax returns and financial statements from at least the previous three years, but you will also need things like your privacy policy and information on your current EMR systems, compliance with Federal and state standards, and more.
These things, especially your profit and loss statements, your practice's assets, and even your lease agreement and how it works, will inform the next step you must take, which is to get a business valuation.
Get a Medical Practice Valuation
There is no denying that you are aware of all the intricacies attached to running a medical practice, familiar with all the dos and don’ts, and can quickly tell if your business is growing or not. But these are only assumptions; there are no stats to back up your claim.
An accurate business valuation is the only way to determine how much your medical practice is worth. It helps tell what the competition in your geographic area is like and provides information to a lender should your potential buyer need to finance the purchase of your medical practice—a lender will use the information to determine the amount your buyer can borrow.
This can also help you with your decisions about how to handle the sale. As the medical practice owner, you can carry some of the finance and may even be required to do so to make the deal work. You also may need to work with the new owner during a transition period, and this valuation can help you determine your strategy for that timeframe.
Hire an M&A Advisor
You need an M&A Advisor to make the deal easy, smooth, and efficient. A M&A Broker can help structure sales around the laws, find qualified buyers, triage them to check they can buy your practice, and manage the overall sales transaction. As the owner of the practice, this leaves you to do what you do best, which is focus on running the practice.
An M&A Advisor not only brings expertise but also handles many details in the selling process so that you can continue to operate your practice profitably and without distraction during that time.
When looking for an M&A Advisor, you want someone you can trust. This might be one of the most important financial transactions of your lifetime, and you do not want it falling into the wrong hands.
Market Your Medical Practice for Sale
When it comes to marketing your California medical practice, it is a lot different than listing your house for sale. For many reasons, you do not want your competition to know that your business is for sale, how much you are selling it for, and other details. So, you need to list it on private lists.
You will also never want to share details with a potential buyer until they have signed an NDA or a confidentiality agreement. Besides keeping things under wraps, you will also want to have a targeting strategy that your M&A Advisor can help you with, so you are only reaching qualified buyers.
This process will also include data about your business, good photos of your location, office space, and more.
Shortlist Qualified Buyers
This is probably the trickiest part of selling a medical practice in California, and one of the primary reasons for having a certified M&A Advisor on your side is so important. There are several unique things about selling any business in California, but mostly a medical practice.
First, just because a physician is licensed to practice medicine in another state, especially when it comes to specialization, does not mean they will be qualified in California. They will have to be certified by the
Medical Board of California, and while some state certifications do the transfer, this process may take time.
This might be fine if you, the seller, are comfortable with the process, as you may want to spend time working in the practice with the buyer during and after the sale to ease the transition process for both staff and patients.
Negotiating the Definitive Purchase Agreement
Offering middle-market businesses for sale involves several steps. The
M&A Advisor
works closely with you and your
legal advisor, especially while negotiating and finalizing the
Definitive Purchase Agreement. This Definitive Purchase Agreement helps both parties reach their goals for the transaction and allows no room for error as it completely represents the legal wishes of each party.
A good M&A
Definitive Agreement
is the lynchpin of a good transaction. Both seller and buyer exchange a large amount of information from different sources. This is often over many months of conversations. These exchanges are then condensed, with their individual interests, as best as possible into the Purchase Agreement.
Items a typical Definitive Purchase Agreement may include:
- Treatment of Shares, Options, and any other Securities; if appropriate to the transaction
- Representations and Warranties
- Covenants
- Solicitation (“No Shop” clause)
- Financing
- Termination Fee (or “Break-Up Fee”)
- Indemnification
- Material Adverse Change (MAC) and Material Adverse Effect (MAE) Clauses
- Closing Conditions
The Definitive Purchase Agreement can have potential pitfalls, so your M&A Advisor needs to keep the communication open with the Buyer and their Deal Team as well as the Seller and their Deal Team.
The M&A Definitive Purchase Agreement also needs to include details about tax obligations and consequences, especially if shareholders are involved.
Avoiding Pitfalls if you have a Buy-Sell Agreement
What if the seller is two or more individuals?
Many businesses have multiple owners or shareholders. Getting an agreement from a majority of the shareholders about selling the business and being willing to accept an offer can be challenging. One of the shareholders may not have any interest in selling the business at all or may want something specific most buyers will not be willing to agree. If this is the case, hopefully there is a Buy-Sell Agreement in place as this will outline what each shareholder needs to do. A few years previously I had a transaction with 9 shareholders. One shareholder with a minority interest initially refused to sell. Eventually they changed their mind but it was stressful while this played out.
If no Buy-Sell Agreement is in place and there is tension between the owners and shareholders, the pressure to decide the future direction of the business may be challenging. This article provides additional information for an owner or shareholder with
how to avoid buy-sell agreement pitfalls. To help their clients, M&A Advisors should understand the importance of assumption of liability, so their buyers and sellers know who is responsible for any lingering claims.
The agreement also needs to have information about indemnity clauses regarding operations. For Medical Practices, concerns about environmental liability, breaches of warranties, and other issues need to be factored into the indemnity clauses of a Definitive Purchase Agreement.
Buy-sell agreements can be confusing, so it is helpful to learn
how to understand buy-sell agreements
and
how a buy-sell agreement can save a business.
Close the Sale
Follow the six tips above, and before you know it, you will be at closing time. In California, selling a business involves a mandatory escrow process that can seem intimidating and a little complex at first. You and your buyer must understand this part of the process is simply for your protection.
Your M&A advisor will walk you through this process and make sure everything is in order so that the sale of your medical practice is successful.
If the steps listed above still seem too complicated, check this list of Steps to Sell Your Practice.
Selling a medical practice is much more complicated than selling a regular business because it often indicates the closing act of your career. Rogerson Business Services can assist you in selling medical practices such as:
- Allergy/Immunology
- Chiropractic
- Dental
- Dermatology
- Family Practice
- Gastroenterology
- General surgery
- Cosmetic surgery
- Internal medicine
- OB/GYN
- Optometry
- Orthopedic surgery
- Pediatric
- Physical therapy
- Plastic surgery
- Podiatry
- Psychiatric & Psychology
- Veterinary practice
Mistakes to Avoid When Selling Your Medical Practice
Selling a medical practice comes with complications and many steps that require careful planning. To increase your chance of success, here are some common mistakes we have seen that you may want to avoid.
Not Having Key Contracts in writing
A medical practice's value is highly reliant on the contracts it has in place. If your documents are not complete or missing much-needed information, you might have difficulty attracting the right deals.
Failing to Value Your Medical Practice Accurately
A credible medical practice valuation should be the first proactive step you take once you finalize your decision to sell your practice.
Without a business valuation, it is impossible to accurately determine how much your business is worth and what your selling price should be. Working with an inaccurate valuation keeps you on the losing end.
Neglecting Confidentiality
The fact that your medical practice is up for sale, does not mean the competition is non-existent. Neglecting confidentiality with potential buyers during the sales process jeopardizes your business valuation integrity, creates a breach of confidentiality obligations, and chase potential buyers away.
Not Having a Hand-Over Process on the Ready
Many medical practice owners feel a handover process should come into play only after a sales agreement has been met and the transaction closes. This is correct but its important for both the seller and buyer to have a clear understanding of the length of time, hour many hours per week and the amount of compensation will be paid. Otherwise an interested buyer might shy away if, during the negotiation phase, a structured handover process that allows him/her efficiently obtain control of the medical practice is not provided.
Relying on Inexperienced Advisors
The selling process is not typically something you may be familiar with as it is nuanced and varies with each transaction. To protect the value of your practice, work with an experienced M&A Advisor. A professional M&A Broker and their Deal Team can help you make all the right decisions to achieve your ultimate goal - the successful sale of your practice.
Failing to Analyze Your Practice Legal Standing
Many laws regulate California based medical practices. It is almost impossible to sell your practice without paying attention to the legal obligations it involves. A reputable M&A Advisory team can help you streamline the sales process and help you navigate your way around the sale of your medical practice including its legal standing and related issues.
Why Physicians and Medical Clinic Owners Need an M&A Advisor to Exit their Medical Practice in California?
Selling a medical practice successfully comes with many moving pieces. Sometimes these moving pieces can happen close to each other and at an inconvenient time.
You may have built the practice from scratch, have all the financial stats well detailed out, understand the legal standing involved in sales, and still not land a good deal.
An M&A Advisor provides all the resources needed for a smooth and efficient sales process via a single window. We help sort through the list and introduce only qualified buyers, coordinate, and obtain the necessary information needed to actualize the sales, maintain confidentiality, guarantee the integrity of the sales process, and help both the buyer and the seller save time.
Andrew Rogerson can help you evaluate your medical practice, gauge the impact of prospective transactions, and bring the best deals to your doorstep;
book a consultation today.
Are you ready to sell? Go to
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Need help with valuing & selling your medical practice?
Rogerson Business Services (RBS) is an M&A Advisory for lower middle market businesses that is built on trust and ethics. Andrew Rogerson, Certified M&A Advisor, can help you find answers to all your questions, introduce you to better opportunities, and manage the buying and selling a medical practice in California process's integrity while keeping every aspect of sales confidential.
FAQ's
Sell-Side M&A
Sell a Business
Business Valuation
Ten Reasons to Plan a Business Exit Strategy with
Rogerson Business Services
1. Ethics
Rogerson Business Services are members of the M&A Source, International Business Brokers Association (IBBA) and California Association of Business Brokers (CABB) and adhere to their code of ethics.
2. Confidentiality
Rogerson Business Services assists you professionally in a highly confidential manner to protect your personal and financial details.
3. Vetted businesses for sale
Rogerson Business Services have access to an inventory of businesses including unlisted businesses for sale in California.
4. Facilitator
Rogerson Business Services are specialists in business transitions and understand the need to respect all parties in the transaction. There are many steps to value, sell and buy a business. Rogerson Business Services have successfully navigated these steps many, many times.
5. Valuation
Rogerson Business Services can provide you an opinion of value of a business you wish to sell or buy.
6. Due diligence and escrow
Rogerson Business Services has the knowledge to work through leases, franchise agreements, finance requirements, licensing, California escrow requirement and many other items so the sale of a business is successful.
7. Negotiation
Rogerson Business Services practice win/win negotiation skills. Negotiations are rarely perfect and so a win/win approach is the best way forward.
8. Financing and funding
Rogerson Business Services has professional lenders that can assist with finance to successfully buy a business.
9. Resource
Rogerson Business Services is an active member in the associations of the M&A and Business Broker industry including M&A Source, the International Business Brokers Association (IBBA), California Association of Business Brokers (CABB), International Society of Business Appraisers (ISBA) as well as other professional organizations.
10. Closing and transfer
Rogerson Business Services works with you each step of the way. This includes managing the buying or selling of your business through initial negotiations, due diligence, escrow and the all-important closing.
We built this amazing step-by-step-guide to help "Exit a Medical Practice Company" - it is yours (free)
Rogerson Business Services provide Mergers & Acquisition M&A Sell-Side Advisory. We zero target off-market, accretive, private equity and strategic byers in lower middle market companies or businesses to maximize incremental growth value.