A complete guide to selling your business
Our selling your business guide provides practical insights to help you understand the sale process, prepare your business, and make informed decisions before going to market.
At a glance
- Key factors that influence healthcare practice valuation and sale readiness.
- How market trends and demand are shaping opportunities for practice owners.
- What buyers look for when evaluating healthcare practices for acquisition.
- Steps owners can take to strengthen value before selling.
Offering
This is fundamentally a review of supply/demand factors facing the practice. How many other clinics do what the target clinic does? How many products or services does the target clinic offer compared to other clinics? What is the market size for both? A specific reason to visit the target clinic will increase its value, and it doesn't have to be clinical. It could be because foot massages are offered in the waiting room. If it adds value for patients, it will add value to the sale price.
Technology
A clinic with modern, well-integrated technology—spanning both clinical equipment and administrative or data systems—will typically be worth more than one that requires significant upgrades, because it's almost always a sizeable investment. Failing to upgrade almost always results in customer attrition.
Location
A potential buyer will probably already know a target clinic's address and enough about the neighbourhood to make it worth finding out more. Your lease situation will be one of the first things they will review; a longer term is always worth more because the risk of a rent hike or the need to relocate is less likely.
Team
In a service business, the people come with the company. A potential buyer will look at factors like experience, service time in their current job and in previous jobs, any disciplinary actions initiated and/or received, and patient reviews. An experienced, loyal, and well-regarded team is worth more.
Referral network
This is the lifeblood of any clinic, and even more so if it's a specialist clinic that relies exclusively on referrals from primary care physicians. A potential buyer will value a robust referral tree as well as anything the practitioner is doing to nurture that, like a well-read blog, newsletter, or social media channel.
Practitioner goodwill
This is where a number of deals drop off, mostly because the practitioner is quite literally irreplaceable: either no one can do what they can do or (more commonly) the patients have affinity to the person over the business. If too much of the business is dependent on the practitioner/owner, a precipitous revenue drop will occur if they leave. This will require an immediate investment in marketing to correct, not to mention a position to fill. Both will lower the value, and can destroy the deal.
The investor perspective
To understand and communicate the value of your healthcare practice, it's important to know the mindset of an investor or private equity firm. They will consider a number of questions, including:
- How easy will it be to seamlessly transition ownership?
- How critical is the person exiting to the health of the business?
- To what extent is the practice’s infrastructure digitized? How clean and accessible is the clinical data?
- Do I like the team, and can I work with them?
- Is the right labour model and staffing mix in place to operate the company?
- What are the regulatory risks that need to be considered?
- Is the revenue model single or multiple payor?
- How much have operational costs increased over the past few years?
What should practice owners do next?
Think of a valuation or pricing as a pre-emptive or preventative checkup on the health of your practice.
Develop a comprehensive understanding of your value today, what it could be tomorrow, what it's going to take to get there, and how long until the business is worth enough to take a deal.
Consider taking the following steps:
Regardless of how much longer you think you want to work, getting a proper valuation now will give you time to correct aspects of the business potential buyers would devalue, help you create a divesting timeline, and keep you from accepting a premature or unfavourable deal.
Who's working there? What do patients and other practitioners say about it? What are you doing with your time? How you want things to be will inform your plans.
Even it's something small, it all helps. Pay particular attention to technologies that can do what you do, so the business relies on you less.
As changes to government policies impact what's covered and what isn't, you may be able to find service gaps to fill. Filling them correctly could raise your value substantially.
An experienced advisor can provide a realistic roadmap for your clinic's value. Like you were trained to evaluate human health, they're trained to evaluate business health.
Advance your perspective on valuing a healthcare business
Continue deepening your knowledge on how to sell a healthcare business with our resources. If you’re considering a transaction and need more tailored support, our team can work with you to assess your healthcare business and identify opportunities aligned to your objectives.