When buying a medical or healthcare practice, make sure you go ahead equipped with information that could guide your choice. Here are some of the factors you should consider before putting your signature on the dotted line.
- How much are you willing to pay? Medical practices are often sold like houses, with a deposit payment and the remainder paid over time. Do you have access to capital for a deposit? Do you have good enough credit to qualify for a loan? Even if the seller is holding the loan, they will always check your credit first.
- Why is this practice for sale? Medical professionals mostly sell their practice because they are retiring. The next most common reason for selling is disability. A further reason is that the practice owner has passed away. Other reasons that can prompt a sale include increased office rental, an upsurge of crime or if a community is experiencing economic decline. Understanding the reason behind the sale will help you identify upfront some of the challenges you’ll face if you become the new owner.
- Medical professional to patient ratio. Look at the number of patients the practice sees and determine if it is attractive. For example, a good ratio is one dentist to 1 500 patients. If the ratio seems low, find out how many other similar medical professionals in the area could be competing with you for business. Similarly, if the ratio is high, consider if the economy in the area can sustain a profitable practice.
- Tangible assets. Consider the facilities. Is the size appropriate and is the building in good shape? Are the staff trained, efficient and good at customer service? Is there a good practice management system in place that automates the practice? Does it utilise quality software? If this is not in place, it would be prudent to get a professional assessment on upgrading the practice to run more efficiently.
- Speciality. Ask if the practice has a specialty. Do the patients get certain treatments or techniques that you know or can learn quickly?
- Potential for growth. Does the practice have room to grow? Can it open on weekends, if that is what you wish to do? Ask the seller to identify a few areas where they see potential for the practice to develop further.
- Does the seller have a timeline for leaving? How long would they be willing to stay on to do a quality handover? You would need to draft a transition plan to inform patients of the change and introduce you. Attrition is a big fear for buyers, and the seller needs to address it.
- Is the space rented or does the seller own it? If it is leased, check if the landlord is willing to transfer the lease to you without any significant changes.
If you are thinking of buying a medical practice, contact us to assist with the due diligence. We can assess the systems and software, as well as other factors essential to the efficient running of a practice.