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(including
other healthcare professional practice sales too)
Many physicians, CPAs and consultants do not realize that consulting
on medical practice valuation and sales and practice-equity-transfer
(like buy-in, pay-out and merger) is a licensed activity generally
limited to attorneys and licensed brokers in many states (click
here for a letter from the state of California) . Keith Borglum
at PMM has been licensed for medical practice valuation and sales
and consulting for over 25 years, and accepted into the American
Medical Association's consultant-panel for practice valuation and
sale from 1993 until closure of the AMA program in 2005. Keith is
still on the consultant panels of AAFP, CAFP, and AAOE, and on faculty
for other medical association programs. He is also the only licensed
broker (to our knowledge) who also possesses the Certified Healthcare
Business Consultant ("CHBC") credential in addition to
the above qualifications. Click
here for his CV.
Services are offered nation-wide. In those few states where we
are not licensed to broker practices, we can still perform valuations
and refer you to–and provide support to– local brokers
in those states, though those brokers will usually not be medical
specialists.
Here's how we typically approach assisting physicians with practice
sales or purchase:
STEP ONE: PRACTICE VALUATION
The first step is to generate an independent valuation of the practice.
I will provide you with a list of questions, plus a list of data
needed to value the practice; typically including 5 years tax-returns
and Financial Statements. After receipt of the data, I will schedule
an appointment for a visit or phone conference. I may or may not
have to visit the practice to inventory and appraise assets, depending
on the specialty, size of practice, and reason for appraisal. Reports
are typically delivered within 30 days of receipt of all the data,
often much sooner. The amount of time required to do the valuation
report depends to a large extent on the quality of data and financial
information provided to us. Data or financial statements that are
unclear or not to specialty standards may require more research,
and therefore more time.
If you are planning ahead by more than one year to sell the practice,
we can provide guidance on "tuning-up" the practice profitability
and data prior to sale in order to maximize the value of the practice.
PMM is a member of the Institute of Business Appraisers and follows
their standards, and the Uniform Standards of Professional Appraisal
Practice (USPAP),
and the AMA's guidelines on practice valuation.
If a valuation report has already been performed by someone else,
and it is current and of acceptable quality, we can use that existing
appraisal in the sale of the practice. We unfortunately find that
most of the reports we see fail to meet the standards mentioned
above.
STEP TWO: PRACTICE SALE SUPPORT
To assist you in the sale of the practice, the following are typical,
but not required, actions taken by us on your behalf to maximize
chances of success:
-If you have a buyer in place (such as an associate), we can assist
in developing terms of sale
If you need to find a buyer, PMM can:
-Create a two-page practice-sale promotional offering
-Advise on the pricing and terms of the offering such as seller-financing,
all cash, etc.
-Provide introductions to specialty lenders for the buyer and pre-qualify
buyers
-Advise on the details of preparing your practice for sale, physical
appearance, paperwork required, and communication strategies with
candidates
-Assist in approaching local hospitals for financial recruitment
support and income guarantees if available and desirable
-Assist you with identifying potential buyers, approach those persons
on your behalf, and assist in negotiating a sale to them
-Act as a confidential intermediary with potential buyers, protecting
your identity until a Non-Disclosure
and Confidentiality Agreement is signed by the potential buyer
-Assist in preparing, placing and managing journal ads, web ads
and listings. We know –through years of experience–
where to place ads online and offline for best results.
-Create a web page dedicated to the opportunity (sample)
-Advise on direct mail solicitation of residencies and candidates
if desired
-Advise on practice sale issues as requested
-Advise on practice transfer issues, like schedule of seller phase-out,
letters to community physicians and patients, accounting-reporting
to the seller if the sale is owner-financed, marketing of the new
physician, staffing, practice system upgrade, etc.
-Notify other licensed brokers
To clarify the sale support process, we do the
work to list your practice opportunity in appropriate locations.
This includes commercial web sites and the medical society web site
if listings are available there (we pay a service to track the best
medical-sales web sites for us). We may also place the ad in appropriate
medical journals. We create a small webpage like that at sample
site that keeps the seller's identity confidential until the
appropriate time, including a printable Confidentiallity
Agreement. Journal ads and web listings refer interested parties
to the website, reducing the size and (often exorbitant) cost of
journal ads. The two-page promotional offering summarizes the opportunity
without disclosing the exact location or seller, similar to the
web page. An additional marketing elective is mailing notices to
residencies, if you are willing to commit–to and wait until
July for a candidate; or mailing to designated likely targets, like
physicians nearby, or in regional cities like L.A. or New York or
Seattle. Mailings costs are usually around $750 per thousand mailings.
We then screen calls and emails from potential buyers and require
from qualified candidates a signed Confidentiallity Agreement prior
to releasing your identity, location, and financial details of the
practice, including the appraisal. We then provide them your contact
info to discuss clinical attributes of the practice, and arrange
a visit at the candidate's expense. Hospitals sometimes will provide
up to $30,000 recruitment support and $150,000+ in income guarantees,
which we can assist requesting on your behalf if desired. When an
acceptable price is negotiated, we assist in drafting the terms
of the agreement (at less cost than an attorney) between the parties
prior to submission to a medical practice specialist business attorney
to draw the final contract, compliant to current Federal and State
law.
We are also often involved in evaluating practices for purchasers.
Our opinions of value do not vary depending on the client. Sellers
and buyers get the same respect and opinion of value. In an appraisal,
we are an advocate for our opinion, not for a client.
FEES
We charge an hourly fee for all activity, plus actual costs like
ads and FedEx and mailings. We sometimes use a combination of hourly
fee and reduced commission, and will extend a portion of the commission
to other practice brokers. This saves most of our clients a very
large amount versus full-commission-based brokers, and allows us
to be more flexible to client desires. We also can perform valuations
on an hourly fee basis for use with other brokers, and we are referred-to
by other brokers for specialty valuations.
Appraisal time for sales or buy-in varies widely depending
on findings, but is typically 10-20 hours for a simple single-site
solo-practice transaction (occasionally less than 10 hours), plus
travel time if required such as for a court case. Second
opinions on valuations created by other appraisers can
take as little as 1 hour if everything is in order (we have a 1
hour minimum fee to review a document), or up to 5 hours or more
if a written challenge is required. Appraisals for IRS or
litigation purposes take longer since the report must be
prepared to a higher standard and for a reader who may not be familiar
with the business of medicine, or the specialty involved.
Sale Support Services, up to the point of having
all the ads and listings written and placed, a web site posted (sample)
and mailings sent, will likely take less than 6 hours. Online listings
and journal ads cost $200-$700 per month combined, depending on
the specialty. After the ads are placed, and/or mailings sent, our
time focuses on replying to candidate inquiries and managing listing
renewals, usually 1-2 hours per month.
Once a buyer is found, final negotiation assistance usually takes
less than 5 hours. We then refer you to a medical-practice-specialist
business attorney to write the final documents, for your protection.
We will assist in the preparation of a "Terms-Sheet" to
minimize attorney costs.
Time-spent and costs are always in your control.
You can cancel at any time with an obligation to pay only for the
time spent to that point, and any ads already in place.
Commissioned brokers usually require you to pay a full (9-12%)
commission if a buyer makes a full price offer, even if you
reject the buyer as unsuitable. For example, a client
recently rejected a full price offer because the buyer was not a
physician and the seller would have had to remain liable for the
remainder of the 6 year lease. With PMM you are not pressured to
accept unsuitable buyers or a lower price, and you typically will
pay far less than using a fully commissioned broker.
As medical practice business consultants, we can also assist you
with transistion issues and increasing the success of the buyer
through "best-practices" improvements to the acquired
practice. This can be especially desireable if the seller is financing
the sale and so is at risk for the buyer's success. 100% bank financing
is usually available to qualified buyers.
Please call us if you have any additional questions, or would like
to arrange for services. To receive a written proposal, please email
us the following:
Your name
Name of the practice
Practice address
Alternate confidential address for mailing if needed
Practice phone number
Alternate phone number if needed to avoid calls to the office
Reason for appraisal (sale, purchase, divorce, estate, litigation,
IRS, etc)
Sincerely,
Keith Borglum
Licensed Broker #00767129 , Appraiser, and Consultant
CREDENTIALS
click here for a full CV
Member or Prior Member:
Institute of Business Appraisers
AMA Doctors’ Advisory Network ConsultantLink™
ACP/ASIM Professional Advisory Network
AAD Residency Program Faculty on Practice Sale/Purchase
AAFP Practice Management Consultants FP-Assist™
AAFP Scientific Assembly Faculty on Practice Value/Sale
AOA Assembly Faculty on Practice Sale/Purchase
AAOphth Executives consultant panel
Medical Group Management Association
Contributor to the National Goodwill Registry
California Association of Business Brokers
Director & Faculty-National Association of Healthcare Consultants
Director -California Chapter of The IPA Association of America
Trustee - California Academy of Family Physicians Foundation
Industry Expert - Business Reference Guide (the national
"brokers' valuation bible" )
Author or Contributor:
Contributor - Strategic Use of Health Care Data by HCIA
Author-The Medical Practice Forms Book, published by McGraw-Hill;
1996, 2003 2nd Edition
Author-The Medical Practice Preemployment Tests Book published
in 1996 by McGraw-Hill
Contributor - Medical Office Handbook Second Edition, by
Miriam Webster
Contributor - Closing Your Practice , 1997 by the American
Medical Association
Contributor - Mastering The Reimbursement Process by the
AMA
Author-Multiple articles on medical practice appraisal, purchase,
sale, employment, associates, mergers, etc.
References
Samples
of current medical practices for sale:
Call us at 707-546-4433 to discuss your valuation, sale or purchase
needs.
Contact Us
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