Practices sell regularly, many for a good price with minimal fanfare. At least half of all practices offered for sale never sell, however. Not every practice has value, nor does every seller try to sell their practice properly. This low sales rate is not peculiar to medicine—it’s similar for most small businesses according to business broker industry reports.
The more profitable your practice, the easier it usually is to sell, and the more it is worth to a buyer.
Who buys practices?
Hospitals have been the top practice acquirers since Obamacare started, and often the easiest purchasers to sell to.
Unfortunately, hospitals usually will only pay the fair market value of your practice’s assets, and nothing for its intangible “goodwill” value. Hospitals do this to avoid government charges that they violated the law by “paying for referrals.” They likely will offer you good-paying employment and benefits; often more than you can earn on your own.
Venture capital and private equity groups pay top dollar for leading group practices in some specialties, but they are extremely selective and their terms may be onerous.
I find that graduating residents and fellows are rarely the buyers of practices. Many get 50 to 100 job offers prior to finishing their training, mostly from large and hospital-owned groups. These job offers are inundating them and not just more preferable, but easier than taking on a new practice.
Dissatisfied employed physicians re-entering private practice, and physicians relocating to be nearer to their or their spouse’s family are the primary candidates for buying a practice. They have a choice of joining another group, starting their own practice, or buying your practice. You therefore are not competing just with other practices for sale but also with employment in groups and start-ups.
Your most likely buyers are already practicing in your area, since they don’t have to move or re-license, and they have a strong reason to be there. In many cases, the most likely buyer might be your competition.
For a seller, putting a practice up for sale not only can result in financial reward, it can also dispose of the ongoing expense of custodianship of a career’s worth of patient records. This can easily run into the tens of thousands of dollars, so sometimes it’s even worth it to pay a buyer (like a colleague in your call group) a nominal amount to take over your practice.