5 common deal breakers for healthcare professionals

February 10, 2021

Selling your practice can take anywhere from six months to a year. But once you start the selling process, there may be a number of obstacles ahead.

You should be aware of the stumbling blocks that can occur if you’re considering selling your healthcare practice. Here are five potential deal breakers:

1. Unrealistic value expectations

Healthcare professionals, like many other business owners, can have unrealistic value expectations and believe their business is worth more than it truly is. The high-value expectations are driven by the significant amount of recent M&A activity in healthcare services. In particular, there has been a tremendous amount of consolidation in pharmacy, dental, veterinary, physiotherapy, and other healthcare practices.

Furthermore, some healthcare practice owners are looking to sell and retire. However, given healthcare services are relationship-driven, retiring immediately doesn’t allow for an appropriate amount of transition—which can lead to price deterioration and owners’ value expectations not being met.

2. Business performance

Selling your business can be quite time consuming and can distract business owners from focusing on their practice. Business owners who become distracted by a sale process spend less time focused on production and generating revenue. A decline in financial performance during a sale process can significantly impact your ability to successfully set yourself up for selling. This makes it imperative to have an advisor helping you with the sale process so you can keep your business running smoothly at the same time.

The effect of the COVID-19 pandemic on the sale of healthcare practices remains to be seen, but it’s likely that values for most practices continue to be consistent with pre-COVID levels.

3. Shareholder alignment

While some healthcare professionals work on their own, a number of them work together in a group setting. This can be a problem if you want to sell and the other practitioners plan to stay. In an ideal situation, it’s important to have a succession plan in place with all stakeholders aligned before exploring a sale.

4. Owner and management succession

People are creatures of habit. When it comes to their health, they value having the same doctor, dentist, therapist, etc. Given this is a people and relationship-driven business, a common deal breaker is not having the appropriate succession or transition plan in place; buyers view practices without a proper transition plan to be quite risky. It’s best to ensure you have a transitionary plan in place. Key personnel will stay on once you leave, which will help reassure a buyer that the same team will continue to serve patients. The right time to sell is when you still have the bandwidth to do so. Leaving quickly with no succession plan can lead to value deterioration. Having an associate practitioner in place to work by your side years in advance of a sale will give a buyer peace of mind.

5. Regulatory changes/risk

The Canadian healthcare market is largely publicly funded. As government regulations change, so will a practitioner’s revenue model. The impact can be significant—either negative or positive, depending on what changes. For doctors, this is a larger risk than it is for other healthcare professions who get paid by patients directly or through their private insurance.

How we can help

Our Transaction Advisory Services and Tax teams give healthcare professionals guidance when they want to sell. We provide you with the strategic advice you need before, during, and after the transaction process. Think of us as a one-stop shop. Contact us to find out how we can help you sell your healthcare practice.

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