Selling a healthcare practice

10 key tips for selling your healthcare practice

If you’ve decided to sell your medical practice or dental practice due to retirement or another reason, make sure you’re taking these necessary steps to ease the sales process.

The healthcare industry is on the leading edge of a bigger wave of practice sales. It’s all being fueled by baby boomers, who are starting to look at exit strategies as they approach retirement.

Although medical practice sales can occur for a variety of reasons, retirement planning has moved to the forefront in a graying healthcare industry. According to the Association of American Medical Colleges (AAMC), a significant number of physicians will reach retirement age within the next decade. Those physicians who are already 65 or older represent 20% of the clinical physician workforce, and those between the age of 55 and 64 represent an additional 22%.

“A majority of the sales that we see at U.S. Bank, between 65% and 75%, are driven by retirement,” says Joe Persichetti, senior vice president and Head of Healthcare Business Banking at U.S. Bank. “Someone is selling their practice as a vehicle for their retirement, whether they're staying on at the practice as an associate or truly retiring and getting out of medicine or dentistry entirely.”

Learn how to avoid common financial mistakes that dentists make.

As the focus shifts from scaling a healthcare practice to selling a practice, here are 10 practical steps to help streamline the process and accomplish your goals.

1. Make a plan for selling your healthcare practice.

If you’re considering selling your medical practice or dental practice due to retirement, the ideal timeline is to start the planning process five years before your desired exit date.

Starting early allows you sufficient time to assess all aspects of the practice and correct any issues that may negatively affect the sale.

For a non-retirement sale, the timeframe needed to start advance planning is typically shorter, generally between 18 and 24 months.

It’s worth noting that U.S. Bank’s 2025 Small Business Survey found that the majority (78%) of small business owners have at least started thinking about a succession plan, but only half (54%) of owners currently have a plan in place. If you count yourself among that 54%, take this as your cue to start the process.

2. Consult your advisors.

Assemble and meet with your team of advisors – your accountant, financial advisor, attorney and banker – to understand the steps you need to take to prepare for a sale. Above all, make sure you are financially prepared to sell your medical practice or dental practice.

“The biggest issue that we see is people who sell a practice, only to realize two or three years later that they need to go back to work as an associate, because they couldn’t afford to sell their practice and retire,” says Persichetti, senior vice president, Head of Healthcare Business Banking at U.S. Bank.

3. Conduct an appraisal of your healthcare practice.

A baseline valuation will give you a better understanding of the amount of money you can generate from selling a practice. Choosing a business appraiser with expertise in your specific practice area is important for two key reasons.

• It will give you a more accurate picture of the potential sale price.
• An expert can provide guidance on ways to maximize the value of your practice.

“People often hear that you can get 100% of your last year's revenues for the sale of your practice, and people fixate on that,” says Persichetti.

However, that broad average is based on an average profitable practice that is running at a profit margin of 38% to 42%. For example, a practice that is generating $1 million in revenue but has a 20% profit margin is likely to generate a below-average sale price.

4. Align your and your buyer’s interests.

Clearly identifying your goals for a sale will allow you to select a buyer who will be a good fit. Some physicians want more than just the best price from the sale of a practice. Ask yourself:

• Are you selling to someone who is going to take as much pride in the quality of care as you have?
• Do you want to fully exit the healthcare practice at the time of sale?
• Do you want to continue practicing with new ownership during the transition period?

5. Market your healthcare practice.

Often, an owner’s exit plan may be to sell the practice to an associate. However, the associate may not want to be an owner or may not be capable of being an owner.

“We recommend that a doctor market a practice to generate multiple offers outside of the associate, so that they can make the best decision,” says Dan Van Eps, senior director of Henry Schein Dental Practice Transitions.

Learn more about strategies to promote your healthcare practice.

6. Manage your healthcare practice’s overhead expenses.

Both buyers and lenders are looking at the financials of a practice to make sure the overhead, or operating expenses, is in line with revenue. A healthy practice will typically have an overhead of no more than 35% to 40% of annual revenue, according to Van Eps. If the overhead is too high, it makes it difficult for a potential buyer to maintain a profitable practice.

7. Assess your healthcare practice’s payment system.

Take a deep dive into the banking products that you have today to make sure they’re the right fit at the right price point to appeal to potential buyers.

“All of those things are going to matter to a buyer coming in,” says John Cotton, vice president, Business Banking Sales Manager, East Region, at U.S. Bank. “If you have an opportunity to lower the cost of a product or transition to a more efficient product, that also has the potential to increase the sale price of a practice.”

8. Avoid real estate risk.

Location is a key attribute of any business, and relocating a medical practice can be costly and disruptive to patients. Both a buyer and the lender who is financing the transaction might view a short-term lease (less than five years) as a stumbling block to a sale. It’s also beneficial to have an assignable lease so that a buyer can easily take over the lease that is already in place.

9. Keep your foot on the gas.

One of the common problems that arises with doctors who are nearing retirement is that they start downshifting. They may reduce their schedule from working five days a week to three or four, or they may stop doing specialty work.

“Lenders don’t like to see a decline in revenue, because it suggests there may be a problem with the practice,” says Van Eps. Rather than tapping the brakes, the prudent thing to do is show a pattern of increasing revenue for a healthy and growing practice to maximize the sale price.

10. Make sure to account for net proceeds of a healthcare practice sale.

Sellers often focus on the potential sale price of a practice, but it’s important to evaluate the net proceeds from the sale.

Consider any commission fees, debt repayment on a practice loan or tax implications related to a sale. Consult with your financial advisor and accountant to understand the bigger financial picture before proceeding with a sale.

“Especially when your retirement is largely based on the sale of that practice,” Persichetti says, “make sure that you truly understand the amount you’re going to walk away with, and whether that is sufficient to support your retirement for the next 20-plus years.”

Key takeaway

It's important to work with a healthcare banker who can understand your financial needs throughout the life cycle of a practice – starting it, scaling it and eventually transitioning. Your banker can help you navigate each of those stages from planning and financing to maximizing operating efficiency.

“The common misconception is that if you take some of the people out of the equation, you can save money, because you don’t have to pay them,” says Persichetti. “In reality, you might have saved a fee, but you ended up losing money, because you didn't get the maximum dollar.”