Practice Sales and Valuations

Deadly sins when buying a practice


  1. Not getting it in writing.  Verbal agreements don’t count for anything.  They allow for “fuzzy memory” and are not generally enforceable in court.  All of your purchase agreements, financing, non-compete agreements must be in writing to protect all parties.  Also, the process of putting it in writing helps to clarify and think through various issues.
  2. Make sure it’s really available.  Imagine spending several thousand dollars on legal and accounting fees to buy a practice that isn’t really for sale.  Half of advertised hospitals (for sale by owner) really aren’t for sale.  The reasons are varied.  Maybe they’re just trying to see “what it would sell for.”  Sometimes a doctor may advertise to appease family members that are pressuring a doctor to retire
  3. Not using professional legal, tax, and other counsel.   Every buyer should seek counsel from a professional practice broker, legal, tax, and other professionals.  Get an attorney to draft and review purchase agreements.  Get a CPA or tax attorney to advise on tax ramifications.  You want someone representing YOU.
  4. Not having good financial records.   Review the last 3 year’s financial history/records for the practice in question.  Have your accountant look at them.  Are there clear trends and patterns?  Look for discrepancies from year to year. How do income and expense figures compare to those from national medical profession organization studies?  Can you tell how much money you can expect to make?  Do the income statements match the tax returns? If not, be careful. 
  5. Paying too much for a practice.  Be especially careful when buying and the Seller provides owner financing.  Lenders/Banks act as an objective 3rd point of view when buying a practice.  You miss this viewpoint with total  Seller is financing.  A professional practice broker can also help with helping to assess value.
  6. Taking too much time to complete the deal.   There is a saying that “time is of the essence” in real estate.  You want to complete the deal as quickly as possible.  The more time you take the more chance of something going wrong or people changing their mind.
  7. Not being proactive.  Don’t wait on other people.  Make calls, follow up.
  8. Waiting for the mythical “perfect” practice.  The perfect practice doesn’t exist.  And what you consider perfect today, won’t be your ideal after 2-3 years more experience and change in medicine and technology.  Find a practice that meets 2-3 “must haves” (typically salary, type of practice, and location), and 5-6 “nice to haves” (typically things your can change, decorating, equipment, special accreditation, style of medicine, etc.). 
  9. Sweating the small stuff.  Every practice transaction has the inevitable “speed bumps” prior to closing.  Things take longer than expected.  Closing might be delayed a few days.  Interest rates change.  The owners decide they want to keep the fax machine after all.  An inspector discovers you need a new hot water heater. Etc.  And there is always some sticking point in negotiations-expect it.  Don’t let the small stuff derail you from the end goal—practice ownership.  Make adjustments and move on.  Expect emotional highs and lows during the process.  Every buyer will go through some sort of buyer’s remorse after making an offer.  This will pass.


David Greene is President and founder of Medical Practice Brokers, LLC., the Rocky Mountain region’s largest business brokerage firm specializing in sales of medical related professional practices.  Mr. Greene and the associates at Medical Practice Brokers, LLC. have assisted Sellers and Buyers in the successful transactions and valuations of numerous medical practices including: Medical primary care, Medical primary care and surgical subspecialty, Dental, Chiropractic, Veterinary, and others Mr. Greene is a seminar instructor on Buying and Selling Practices, and has been an invited speaker at universities and professional groups on the subject of practice sales and values.  He is a member of the International Business Brokers Association and holds their prestigious Certified Business Intermediary (CBI) certification.