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Webinar: Transitioning out of your practice

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Join our panel of experts for the final session in the Your Practice webinar series as we delve into the essential considerations, provide valuable insights into this important phase of your professional journey and a live Q&A session. Topics explored include:  

  • Regulatory considerations 
  • Winding down vs selling 
  • Live questions and answers 

About our speakers 

  • Dr David Williams is a neurologist and General Manager of Avant Practice Solutions (APS). His wealth of experience and dedication to his profession has allowed him to attain invaluable insights into the medical world, specifically its practices. This has contributed to APS helping start and grow hundreds of practices since it was founded. 
  • Michael Mobberley, is a Senior Associate in Avant Law's Estate Planning & Probate team and holds a Masters in Commercial, Corporate and Taxation Law. He is an Accredited Specialist in Wills & Estates regularly advising on succession law matters, helping both individuals and businesses safeguard their future through the use of Wills, Powers of Attorney and shareholder/unitholder agreements. 
  • Kate Farley, worked at a major Australian bank for close to two decades. During this time, she guided clients through home and investment loan applications and private banking, which included a holistic wealth offering and commercial banking. From there, Kate moved into medical finance, where she found a passion for helping medical practitioners with personal lending requirements and setting up, buying into, or expanding practices. 

Additional resources 

Webinar Q&A responses

That can be described in the sale agreement, but generally yes – one of the benefits of selling! You’ll need to consider the set-up of your practice software and ensure that records are accurate (i.e. avoid idiosyncratic system utilisation).

It will depend on what the terms of your agreement are with the corporate and whether you still have an ownership stake in the practice.

Subject to the terms of the contracts in the practice, the doctors may be deemed to be engaged under a 'relevant contract'. Accordingly, the fees paid to the doctors can be deemed 'wages' for payroll tax purposes. This could reduce the practice income and accordingly the value of the practice. 

Additionally, there may be an increase in sales of practices as certain owners look to exit due to the unrest caused by payroll tax. If any doctors are employed, then they would be dealt with in the same adjustments as other employees in the practice.

It will vary depending on type of practice and specialty. General practices typically sell from 4-5 times EBITDA these days and can sell for depending on the dynamics of the particular practice (location, history, number of doctors, unique advantages or risk factors involved, transition plan, quality of data/systems). 

Specialist practices, usually being referrer based, will require some other elements to attract the same multiples. For some specialist practices, if you manage to build a 'transferable' brand for the practice and good business/cash flow continuity tied to the practice, multiples can be even higher (e.g. radiology).

When selling the entire practice, rather than a share, buyers often establish their own entities to manage the business. They purchase the assets of the business rather than the vendor's trading entities. Consequently, new contracts are typically required, as the remaining staff legally transition to a new employer. However, if the buyer acquires a share in a trading practice with the intent to maintain its current operations, new contracts are not usually necessary, except in a few exceptional cases.

Optimising the value of a practice requires planning and consideration of what someone is willing to buy. Selling a solo practice, from a buyer’s standpoint, entails offering attractive elements such as referral base, patient pool, location, practice brand, efficient administration, and operational set-up. There are ways to leverage these components even for a highly specialised solo doctor. We suggest considering bringing on more junior colleagues who can realise the value of an existing senior, lead with a brand rather than a single doctor's name and spend time making the business operations gold-standard so that they are highly valued

This would require a structural review and discussion - recommend booking an appointment with our team.

Much of the value will rest in a sound transition and continuity plan, ideally bringing in a newer specialist and transitioning your referrer network. It can be done but will need some foresight and work at the front end in your planning for this event – see above.

Yes, we can assist with preparing the heads of agreement/offer, transaction documents and assist with the settlement process. We can assist in preparing a transition plan, project manage the sale and optimising the value. In addition, we can also support purchasers by provide industry leading approach to funding for a purchase.

Yes, this can be a great way of continuing to earn some revenue after you sell the business. You should consider adding a first right of refusal in the business sale that gives the buyers the ability to buy the property if you ever look to sell in the future.

Your specialist network is a great place to start. Be prepared to stand-out from the crowd and be certain what it is that you are offering. A carefully considered transition plan and internal review of value (including what steps you can take to optimise that value prior to triggering conversations) will help. With a clear view of the value, you can structure stepped investment or other incentives for the 'right person’. 

You should be cautious not to ‘guarantee’ that they will have an ability to buy into the business if they come join the practice

At first instance, it is always worth having a discussion and seeing if there is any ability to sell or transfer the business to another practitioner. If this isn't an option, then there are strict requirements around how you can close down the practice (e.g. dealing with the patient records) that will need to be considered, prior to closure. 

Ease of sale depends on the type of practice you are selling. The key fundamentals are: have everything in place so that any lending required to fund the purchase is as seamless as possible; financials in order for at least two years and set up in a way to enable the sale to take place seamlessly; and also being willing to stay on in the practice to enable a transition period. Particularly, if selling to a third party who hasn’t worked in the practice, staying on could be a requirement for the loan approval.

The funder will refer to the financials as a first point of call to determine if the goodwill price correlates with the net profit. Next relate to the lease (e.g. is there one already established that can be used for the cash flow forecast) and if the contract of sale denotes a value for the equipment as well as the goodwill. If the loan is relying on improvements to the practice to cover the loan repayments, then the purchaser will need to have a detailed (preferably accountant prepared) cash flow forecast and business plan.

Incomplete or indecipherable financials has come up quite a bit. Please be sure to engage a practice management consultant to review the practice operations and help optimise efficiency so that the business is sold in its most valuable state. Seek advice from an accountant prior to promoting the practice for sale to ensure any amendments are made in advance. 

Presentation and a decent online presence are also important as this will attract buyers of all backgrounds and make it easier for the finance provider to review the practice in relation to the lending.

No - in fact most practitioners who own both, decide to keep the premises to have a passive cash flow and sell the day-to-day obligations that come with running a practice. In most occasions, the lease will need to have first right of refusal for the tenant, should you decide to sell at a future date.

Patients have the right to expect to be notified that your practice circumstances are changing, whether that is in retirement or changing hands. This can be done though usual channels of patient communication and should include reference to what alternative arrangements can be made. Ideally, this would be done with notice and contact details for patients and referrers who have questions.

Disclaimers

Legal services are provided by Avant Law. Liability limited by a scheme approved under Professional Standards Legislation. Legal practitioners employed by Avant Law Pty Limited are members of the scheme.  

Financial services are provided by Avant Finance © 2024 Avant Doctors’ Finance Pty Ltd. Avant Finance is a registered business name of Avant Doctors’ Finance Pty Ltd (ACN 637 769 361) licensed to Avant Doctors’ Finance Brokers Pty Ltd (ABN 75 640 406 784), Credit Representative Number 523242. Avant Doctors’ Finance Brokers Pty Ltd is authorised Credit Representative for LMG Broker Services Pty Ltd ACN 632 405 504 Australian Credit Licence 517192. Credit services or assistance to which the National Credit Code applies are provided by Avant Doctors’ Finance Brokers (a wholly owned subsidiary of Avant Doctors’ Finance Pty Ltd). 

Persons implementing any recommendations contained in the presentation must exercise their own independent skill or judgment or seek appropriate legal and professional advice relevant to their own particular practice and circumstances. Compliance with any recommendations will not in any way guarantee discharge of the duty of care owed to patients and others coming into contact with the health professional or practice. The information in this presentation does not constitute legal or other professional advice and should not be relied upon as such. It is intended only to provide a summary and general overview of matters of interest and is not intended to be comprehensive.  Avant Mutual Group Ltd and its subsidiaries (including Avant Practice Solutions, Avant Financial Services and Avant Law) are not responsible to you or anyone else for any loss suffered in connection with the use of this information. Information is only current at the date initially published. © Avant Mutual Group Limited 2024 in connection with the use of this information. Information is only current at the date initially published. © Avant Mutual Group Limited 2023

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