You’ve read the post about the basics of a practice purchase, the pitfalls and how to determine a price. After reading them, your response is, “Looks great! Where can I get one of those?” And the answer is relatively simple, “Lots of places.”
Here, we’ll take you through a number of things we’ve seen and some of the pros and cons of each. In a number of cases, the principles of finding a practice to purchase are similar to those when purchasing a home. The best deals tend to be ones that are never publicized and the longer a practice remains on the market (especially in a retirement situation), the more wary you should be.
Just about every practice for sale will come with its own issues – some more severe than others. The question is whether or not those issues matter to you and your situation or if they are deal breakers.
Still, good deals can be found everywhere – especially because every potential purchaser has his own goals and intentions. If you are interested in a practice purchase, make sure to explore as many avenues as possible because gems are out there and what may not be appealing to others may be the perfect fit for you.
Check the classifieds
There are literally dozens of sites dedicated to listing practices for sale. Some are on a national level like Henry Schein, the Journal of Clinical Orthodontics, etc. A number of software developers have their own classified ad areas as well.
These sites can be very beneficial in that they simply give you the contact information and you can take things from there. There’s no middleman and no extra fees to pay. Get in touch with the seller, get your due diligence, assess and make an offer if you like the deal.
On the downside, the listings are frequently very limited and there may not be anything available in your area for months on end. So, if you try to hit a bunch of sites, you may be wasting your time as a doctor in Vermont seeing nothing but listings in Oregon. Second, you need to do all of the legwork yourself. You make the contact, you gather up the due diligence, etc. This can be time consuming and frustrating especially if you turn up a litter of dogs.
Use a broker
Every area has companies dedicated to listing practices for sale, providing information and walking both parties through the acquisition. These include firms like Lovelace and Associates (Louisiana and Mississippi) and Doctors Choice 1 (Florida).
On the good side, you’ll normally see a number of opportunities laid out for you and you can get access to a lot of data on practices all at once. Within minutes, you can get information on a number of opportunities that you can quickly evaluate and narrow down to a short list of candidates.
On the downside, you may have to deal with a third party sitting between you and the seller. They carry all offers back and forth and ensure the delivery of due diligence. In some cases (not with the firms listed above), I’ve asked for certain information and have been told “that’s all you are getting.” Naturally, after that statement, that ended my interest in the deal. Of course, there is a fee involved which may be based on the purchase price. If the fee is based on the purchase price, the broker has an incentive to get the price up as high as possible which may not be beneficial for you, the buyer.
Use a service
There are a number of companies that will go out and search for a particular purchase for you. They’ll take the criteria you provide, comb all the listings, visit with doctors in the area and compile a list of sellers for you. Our friends over at American Business Consulting represent one such company.
The benefits here are many. Someone goes out, does the homework for you and comes back to you with practices that meet your criteria. They’ll sift through practices that do not fit, acquire the due diligence and bring you options to consider that should fit your expectations. You simply need to review the options and direct the service to close the deal.
On the downside, this process may not turn up any candidates, especially if your criteria are very specific. This is especially true if the service doesn’t already have a listing of potential acquires out there. If, for example, you want a practice grossing between $200,000 and $400,000 per year, built within the last 4 years within 5 miles of a major shopping center, the service may not be able to identify anyone after months of looking. Then, you’ve just lost a bunch of time. And again, there’s probably a fee involved somewhere, but if the service is representing you initially, they have a strong incentive to ensure that you get a favorable purchase price.
Talk to consultants
When I use the term consultants here, I’m including the traditional consulting firms that exist along with DMOs, MSOs and other management companies. Frequently, these companies have clients that are contemplating practice sales or know of doctors who planned to sell to another of their clients, but had deals fall through. In my days at OCA, we always had several offices that needed buyers at all times.
On the good side, the consultant or MSO will frequently have those “private listing” practices that are like the highly desirable houses that never get to the market. A lot of them will not charge any fee for their service in making the practice deal since it is a relatively routine part of their business.
On the downside, a number of them are reluctant to allow practices to leave their “system.” If you want one of their affiliated practices, that company may want you to enter into a management, consulting or service contract. They may want all of your offices to be a part of that contract for you. And that may certainly be a good thing for you. You may want what they have to offer and feel that the fee is low relative to the service you receive. That discussion is for another time.
Here at My Practice Engine, we don’t know of any practices for sale out there, but we are willing to help you in whatever way we can throughout the process. Feel free to contact us.
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