When is the Right Time to Sell YOUR Clinic?

At Healthcare Practice Sales many clinic owners are selling their practices for retirement, change of career, illness, lifestyle, or another reason but not for financial reasons. So, the motivation for the clinic sale is based on lifestyle considerations, rather than financial. In many clinic sales of a successful clinic, the return on the sale proceeds, after associated costs of the sale price & after tax, will be equal to or less than the owner was earning out of the clinic.

In some clinic sales, the practice owner may not have a choice on the timing. But, in some others, particularly retirement, there is a choice in timing. Some factors that come into play may be when the clinic owner will be able to use superannuation as a significant source of income. Most likely there is some flexibility in that date. The sale price of the clinic will make a difference in selecting that retirement date and the sale price can vary a lot. A higher sale price of the practice may allow an owner to retire earlier.

The fact that the clinic sale price of the practice can vary quite a bit is something a clinic owner needs to consider. Although you may not be ready to retire, missing out on a high price for your clinic could mean that you must work many more years in your practice seeing patients & managing the clinic. The money you have is going to have to last through your retirement. If you have less money to carry you through, you either need to lower your cost of living or reduce the number of years in retirement.

A clinic will sell for its earnings, or owner’s cash flow (after factoring in a wage for a treating clinic owner), and the market multiple. The best time to sell a clinic is when the earnings for the past 3 years are at their best. If the economy goes into a recession or if something dramatic hits the economy like COVID-19 then the earnings will most likely go down. When the earnings drop for a time this can result in a much lower sale price for the clinic than what you would have gotten before the recession or COVID-19 hit.

If the earnings go down in a recession, for example, the clinic’s performance needs to return to a higher level for about a year before a generally a clinic buyer will see the higher results and take those into account in presenting an offer. Market multiples may also drop because of a recession & these also don’t immediately jump back to the higher, pre-recession, levels.

Also, please keep in mind. It takes time to sell a practice. It typically takes 3 to 6 to even 9 months to sell a clinic, but for planning purposes, at Healthcare Practice Sales we recommend you plan for a year. If the economy goes into a recession while your clinic is on the market, it’s going to affect your clinic sale price. Buyers don’t just look at historical figures of the past 3 financial years, they will look at how the clinic is doing today. If the patient numbers, turnover and profits start to go down, a buyer may pull out of a clinic sale or offer a lower price. During a recession, the market multiples may also go down as the number of buyers goes down. The last recession we had in Australia was 28 years ago. Looking at it from this angle suggests that we are overdue for a recession. COVID-19 may just be the trigger for the next recession. “Yes, unfortunately, coronavirus will likely cause a recession in Australia, and across the world, according to Harald Finger, IMF mission chief for Australia.”

If your circumstances dictate that you need to sell your Physiotherapy, Chiropractic, GP, Podiatry, Psychology, Occupational Therapy or Speech Pathology clinic ASAP please get in contact with us at Healthcare Practice Sales & we can answer any questions that you may have & take you through what it takes for us to be able to get your clinic on the market.