This article has been published in the Medical Republic 9/3/2021 – Find article here

I have been asked this question more times than I have had hot dinners. This has increased in recent times given GP practice acquisition race is on again and eye watering prices are being paid! !

If you own a General Practice and you have been reading the recent national newspaper headlines, you would have noticed the amazing prices paid for general practices. You would think you had just hit the jackpot. It may have triggered an inkling of curiosity to know more and ask how much is my practice really worth?

For practice owners, this article may help you contextualise a practical ‘call to action’ and save you significant time and money.

The first step is to treat your practice like an investment and not a job or a liability. Everyday what you do will determine your final destiny and its final value.

When I meet a new client, the first thing I say “it is my job is to fire you”. You need to work on and not in your practice. It should be a choice. Practices that rely less on their owner’s for income are worth more due to their intellectual property and have balance sheet value. Those that rely on their owners have profit and loss (EBIDTA) value. They are worth less because when they go so does the practice.

There is never a simple answer to valuing your practice. It all depends on how you treat it and where you sit on the above two extremes.

There are a lot of myths circling around the nation on this topic. I will attempt to confirm and dispel these myths. In the end you should be able to judge what you think your practice is really worth or at least know how to work it out or find out.

If you do not have time to read this, do not complain if you feel you keep working harder for less reward. This is about setting your priorities right. You can afford to become a better doctor for your patients and the community you serve. You can be fairly rewarded for working smarter and not harder.

In the late 1990’s, the well-run and bigger flagship practices in your local area commanded high prices. This encouraged many more practices to join the bandwagon. As a result, as more practices entered the market the corporate offers fell off the cliff from an EBITDA of 6 to 8 times to 1 to 2 times. Then in the last 12 months, we have seen prices for general practice skyrocket beyond 10 times at the height of COVID19.

Many practices are going for a bargain whereas others are going for an eye watering sum. In responding to the COVID19 vaccine roll out, aging practice owners are facing a serious dilemma. Do I renovate the house (practice) to meet the requirements? With new COVID immunisation laws, is simply doing nothing an option? Should I sell the house at renovators delight prices as the feeling of “it is getting all too hard and I am tired of this #$%#” feeling settles in?

Am I throwing in good money and time after bad?

Recent articles such as New GP vaccination items don’t add up and Patients should be free to choose even if the vaccine is not free can spook even the most courageous of practice owners to invest more money and time in these uncertain times. You need to have a long game plan.

Right now many practice owners are expected to dig deep into their retirement funds so they can lead the COVID19 fight. At the same time many are rightfully asking – to what end?

The real truth is that certain parts of General Practice are enjoying a mini boom. Patients are now more health conscious. It is a new environment. We need to get used to living through a perennial flu season for at least the next couple of years. Some have been able to take advantage of this but many are reluctant to do so.

Practices that can sustainably manage COVID19, technology, competition, staffing demands and new laws are simply worth more!

During my long career, I have often heard doctors talk down practice ownership to other doctors. It is sold as an unsolvable financial and mental burden.

For the optimist, with much uncertainty comes many new opportunities. Fortune does favour the bold.

Practices that can eat ‘change management’ for breakfast and remain sustainable are very attractive to buyers.

Practice owners who take the time out to think carefully.

How you and your practice ends up is a choice (after you have got the banks off your back). No one is immune to cognitive dissonance.

Just remember that after the day you retire, many patients would have moved on and may have even forgotten your name. You are not as indispensable as you think. If you accidentally seriously hurt your patient they want to see your face on the 6 o’clock news. Instantly it becomes irrelevant how many years of dedicated service you have provided them or their family.

Ultimately, your loved ones will either thank you or hate you for it. They will have a long time in retirement to nag you for all those times you were saving your patients lives at the expense of family dinners, holidays and financial security. Owning and running a practice comes with a level of responsibility and cost that often cannot be quantified. It is a worthy challenge.

What is my practice worth?

It would be easy to give you a simple number or formula to work out how much your practice is worth.

The media would report high profile healthcare transactions with numbers thrown left, right and centre, yet many people simply have little understanding or context of what it ACTUALLY represents. Private, unlisted transactions are unregulated and media reports are often based on hearsay or ‘street talk’ without any context. Needless to say all of this makes for a great talking point at the family BBQ or local doctors meeting with a charismatic entrepreneur!

In reality, this is often a difficult question for practice owners to contemplate. Complex structures, poor financial literacy and a lack of comparable public information makes it hard to assess. Just anecdotal variable sales evidence.

Today’s fast moving environment is far more sophisticated and complex. The new digital footprint age makes it near impossible to recreate a more favourable past or transaction. Whether it is the tax office or a disgruntled buyer, it is much easier for your past to instantly catch up with you for better or worse. There is a lot to be said in engaging honestly with potential buyers. Your professional reputation and legacy is often on the line.

Adding to this complexity is when your own financial adviser cannot simply explain your numbers back to you.

Accordingly, it is important to understand and explore the context of ‘practice value’ before we can ask our advisors the right questions.

Just another vanity metric?

Growing up, each year my late father would invite a real estate agent to inspect the family home and tell him how much it was worth. Concerned that we were about to sell our beloved family home, I asked him why he kept doing this with no intention of selling? It seemed like an embarrassing waste of time with the real estate agent.

For financial security reasons, he felt safe knowing what the family home was worth. Born in India, in 1947 at the age of 17, his family lost everything due to the partition of Bengal. With only their suitcase, they had to leave their homes, furniture and my grandfather’s legal practice behind.

Every time you check out the local online real estate section, subconsciously you may be guilty of the same thing my father used to do with real estate agents. I am certain that many of you can relate to my story. Such needs are no different if you own a practice.

Beyond greed, we all have our genuine personal reasons for seeking to regularly take stock of our financial security. You should not feel guilty or be put off from making inquiries. Like a regular annual health check up, it is a prudent approach. Your practice should be treated like an investment and not an overhead, read my interview Your practice as an investment Medical Journal of Australia.

Practice values vary widely

Prices do vary widely for a variety of reasons. Unlike buying or renting a house, it is not possible to make a meaningful comparison of your practice on the internet.

For a buyer, a value is based on what a bank is prepared to lend or for an investor what they are prepared to invest. Some practices you simply could not give them away. Others are offered a rare and breathtaking amount of money. Overnight, your general practice may be worth double to 10 times more than you think simply by ensuring your practice is presented in a way that follows generally accepted principles (whether that be accounting, governance, clinical etc.) 

COVID19 has added more complexity beyond your solid track record. Your future potential and needs to make strategic street sense. Not everyone is bullish, many are nervous of a local outbreak and its impact.

Healius and Medibank last year forked out hundreds of millions to purchase general practices throughout Australia. They proved there is a healthy appetite for certain types of general practices that are a strategic fit to their operations.  

The headlines have certainly moved a plethora of new and existing practice owners to reconsider how  or when they should exit. This will fuel an unprecedented demand and invigoration of new re/investment and competition into the GP marketplace. It is my hope that this can be met by a future generation of doctors.

The pragmatic world is surrounded by well intended but savvy bankers, lawyers, accountants and advisers. They may have an influence on the final price paid for your practice.

Advisers and bankers are less concerned by how the selling practice owner feels. It remains a practical assessment of risk and numbers for them. Advisers are often transactional, but you have to live with your decision and commitment. They do not want to risk being sued for not asking the tough questions. So what can you do? Be confident and ready to answer. Potential purchasers and future practice owners can be easily put off by the smallest of details e.g. unsigned employment or provider agreements and unclear financial statements.

In the hope a corporate or any potential owner will simply write you a big cheque, think again. It is a process and not just an event. Your practice has to always be ready for sale. 

You never know when you have had enough, when you need to strategically secure a new doctor or when you suddenly fall sick or ill and can no longer work. 

How to value your practice?

Warning if you are not into detail it may be a good idea to refer this to somebody who is. It is really not that complicated so it is worth a further read.

Back to the coffee mug. 

Times have changed, when it comes to putting the price on your general practice. Due to the increasing regulatory and technological sophistication It goes beyond the book value plus goodwill. More sophisticated and accurate tools are being used by buyers, advisers and banks.

The above formula on the cup with exception to the Bushfires and the Coronavirus has been a long held traditional business valuation tool used by business valuers and our legal system.

The future maintainable earnings approach is the most popular method to value any business using a multiple of earnings. This is euphemistically referred to as the EBITDA approach in the industry.  EBITDA stands for future Earnings Before Interest, Depreciation and Amortisation (EBITDA). This number comes from your net profit in your profit and loss statement. It is then adjusted for future years based on average expected earnings usually over a 3 to 5 year period. 

The value is then calculated based on your EBITDA x multiple (no. of years).

By multiplying the EBITDA over a number of specified years for this particular investment ( the practice) a singular value for the practice can be established. The multiple or multiplier is used to express the number of years and investment will pay back in full.  Using a multiple of say 1, this means 1 year, it can be as many years as the buyer expects to generate a full return on its investment. For general practice the number is between 1 to 5. I normally see 3 to 4 for general practice.

(Disclaimer:This is a ‘quick and dirty’ overview. Please seek professional advice before acting on this information. It should provide you with a starting point for discussion).

A crude back of the envelope example if you project an annual investment rate pre-tax return of 30% (3.3 multiple or 3.3 years) to 10% (10 multiple or 10 years) based on your estimated future maintainable profits say EBITDA $100 p.a. then the value of your practice may be $330 to $3,000 on sale (i.e. $100/30% or $100/10% respectively). The lower price is due to more risks being involved in the acquisition. 

This methodology is a commonly used GP practice corporate valuation tool often quoted in the national financial newspapers.

A big warning if a practice has a profit sharing agreement. Joining as an owner if you are subject to that agreement’s profit sharing arrangement. For example if you can only share in the costs of the practice entity and you keep 100% your billings outside this entity, then the value of the entity is only worth as much as your share entitles you to in the profit sharing formula. If the financial statements are not showing a net profit or a constant loss,  then it may be worth very little. You would not be expected to pay much for an ongoing liability. In this case joining the entity may be a permanent liability. It would be hard to  sell, unless a radical change to the profit sharing arrangements was pre-agreed to prior to the purchase. In the early 1990’s this type of associateship expense sharing arrangement was in place. This led to an significant undervaluation of general practice. 

Smart medical corporates, bought many practices on the cheap for this reason. Many owners did not understand what they really had or what it was valued at. They were wooed by the flashy letterheads, dinners and charismatic billion dollar doctor founders. Many did not want to pay for independent legal and accounting advice, not realising they sold their practices on the cheap like pathology rents.  Corporates put these business models and numbers into a more logical and understandable model for others to buy into for a premium.

By the late 1990’s when the corporatisation of Australian General Practice had begun I would see 8 times multiples for flagship practices. Dominated by the major players, these multiples dropped in the early 2010’s to 1 to 3 times. 

Last year this number skyrocketed with some new players on the block. Purchases beyond 10 times your estimated future practice earnings. 

Who you are planning to sell to and timing is everything.

So what is the true market value of my practice?

For some cynics you could be forgiven for thinking all this talk about  EBITDA and multiples is frankly a load of rubbish. You would be right and wrong for one simple reason. 

The true market value of anything is based on a simple principle.

“Business valuers in Australia typically define market value as:

the price that would be negotiated in an open and unrestricted market between a knowledgeable, willing but not anxious buyer and a knowledgeable, willing but not anxious seller acting at arm’s length.”

To find out the true value of your practice you have to be a willing seller and require no less than two genuine competing buyers. The final price is what the winning buyer agrees on. 

The EBITDA approach assists in determining what price a person is prepared to pay for certainty. Being aware that this methodology is commonly being used helps you understand how to better price your practice to a willing buyer beyond a gut feeling.

A number of key factors affect the value of your practice

Understanding these key factors can help you improve the value of your practice. It starts with the right attitude. Treat your practice like an investment and not a liability.

Wealthier people are healthier! This includes the financial health of your practice

Look after yourself first, so you can help others.

Flight stewards always say in an airplane emergency you should put your oxygen mask on first or you will not be able to help the person next to you. The same applies when it comes to owning and running your practice and your personal investments. The real message is that self-care is important and often overlooked.

Poverty breeds ill health and ill health breeds poverty.

Many studies prove the wealthier you are, the healthier you are to help others. GP practice owners are expected to donate their time to service the unviable new MBS COVID19 item numbers. Unless you are financially strong and prepared to donate financial resources, you may not legally be able to meet this expectation. Insolvent trading is a criminal offence in this country under the Corporation Act 2001. It is not a discretionary choice, so think carefully beyond your moral and ethical duties. Can you afford to commit to programs that may not be financially viable? How will this impact the value of your practice or your retirement nest egg? Does it even really matter?

Your practice is not something you can take ‘upstairs’ with you. It should be treated and looked after like an active investment. It is like looking after a child. It can make you or break you depending on how they are nurtured.

For many practice owners, looking after this ‘active investment’ is meant to make up for not having “employee superannuation” and “long service leave” when you retire. It is your biggest and most significant life investment you have made.

The old school

My late father was a Do It Yourself (DIY) practice owner. He sold his medical practice for nothing. In fact, he never tried. He passed away in 2006, ten days after he retired. He was old school. Ignoring good advice offered, he left the farm (practice) empty-handed. He had a do nothing or minimalist approach when it came to running his practice.

He was never a great believer in spending money on lawyers, accountants or advisers. With the best of intentions, he was a DIY doctor. Selling never crossed his mind. There is nothing wrong with that.

Selling down some or all of your practice is a choice. It is this decision that is the primary reason for seeking out how much it is worth.

Like my father, if you have no intention in selling, then finding out its value may be of little consequence. The only exception is if you are heavy in debt and the bank is asking or you are simply curious what it could be worth.

I have a client whose 10 GP owners had a $12 million turnover. At the time they said it was worth nothing. To test them I offered $1 for it. After simply explaining what it was worth and why, they immediately rejected my offer. With a better understanding of why they treat their practice like an investment and it has experienced remarkable success.

Your practice could be worth more than the value of outstanding liabilities, written down plant, equipment book value plus 15% of the turnover as goodwill if you can simply understand and present your financial books correctly and in a logical manner.

You owe this to yourself and your loved ones to read on.

The two main reasons practices owners sell below their price expectation
  1. The Practice Owner(s) are not financially literate. 

Owners do not understand and regularly monitor their key numbers, the bottom line and how they work or fit into a practice owner investment portfolio. They make the fatal mistake of leaving it to their accountant (some less ‘medically experienced’ financial advisers struggle to simply explain their numbers to their client). The blind unknowingly ends up leading the blind;

  1. Succession planning is an (reluctant) ‘afterthought’. Not a ‘planned-thought’. This is the most common mistake overlooked when setting up a practice. 

Unfortunately for most people, your accountant and lawyers are used only for tax returns and not succession planning purposes. Often, the way a practice is structured can instantly dilute the value of the business. These initial cost savings you may have asked for, usually do more harm than good in the long run.

It is not unusual to see a practice owned by a tax driven family or a unit trust. This can create significant but avoidable difficulty and cost at the time of sale. Especially when the numbers and business models do not make sense. I have seen many sales lost due to a lack of openness, transparency and ownership transferability.

From day one, practices MUST be built on commercial grounds that embrace what you want, so you can successfully stay open, monitor and eventually be easily saleable whether you are ready or not.

Ensuring you understand (without having to always ask your lawyer or accountant) that you have the right structurespractice agreementssystems and people in place is a useful start. It is not hard. It is a big mistake to bury your head in the sand and then complain later. 

Ultimately, it is your responsibility. You cannot blame anyone else. If you want to, then you should probably resign as an owner for legal reasons. Being an honest fool is not a legal defence, especially when it comes to not acting with a duty of care. Negligence can be a criminal offence.

A good GP holistically educates their patient on their health, similarly your advisers should be there to educate you on your wealth. If you still do not understand your numbers you may have a serious problem/opportunity. New ‘cloud’ technology platforms and services have made understanding your numbers and business much easier to achieve in a manner that is cost-effective and easily accessible.

Valuing your practice is like valuing a child who should stand on their own feet

A high valuation is driven by a number of key “feet standing factors”.

For practice owners, significant blood, sweat and tears are involved in setting up and running a successful practice. Wanting a child to grow up fast can be an emotionally and financially draining exercise. In the end, the process may either hurt or impress you. Ultimately it is something you want to feel proud of and feel a sense of satisfaction too.

To be of value, your practice must demonstrate that it can continue to make a profit without you. It is the ultimate recognition. It is your way to leave your mark and legacy when you are able to pass it to the next generation in at least a ‘going concern’ position. The price should be fair and should reward you for the fruits of your labour and allow those that succeed you to continue your vision. Some of my single site clients have been operating continuously for over 60 years with the intention and vision of continuing indefinitely.

The right practice focus is key

Ultimately, a medical practice owner’s clinical workload should be a choice by design and should be enjoyed. It should set a good example to encourage aspirational owners to buy into and encourage the next generation of young doctors to pursue a pathway in primary care

Practices where owners earn while they sleep are highly sought after and valued. The GP owners should not be living hand to mouth.

They should not be solely relying on seeing that one additional patient just to meet their overheads. A Ball and chain approach drowning in red tape is not attractive.

Practice owners should encourage and mentor other providers to help out, not fight for patients. There is plenty of demand around. Practices with more than one owner and providers are worth more. The banks and investors love the shared security of multiple GP owners who put their own houses and livelihoods on the line should one fall ill or die. A lower flight risk of practitioners and patients increases the value of the practice.

In my experience, it is easy to spot the smart ones. These owners make time to research and work ON their practice and not just IN the practice. One day a week to be precise. They have a strong and committed management team. They see being penny wise but pound foolish is not where the smart money is. They understand, there is no point the patient survives but the practice dies. Everyone loses at that point.

They use their time wisely. They are not busy just chasing high-volume consults and saving patient lives. They know that it is not sustainable in the long run without risking burnout, a Medicare audit or one serious medico legal problem that could wipe them out!

Smart owners are hungry to see and act on the bigger picture. They are in control and want to shape their own future, with a smart internal and external team. They play the long ‘infinite’ game, leverage their time and strategically invest in doing things the right way the first time.

By working smarter and not harder, they can focus on the practice’s future and not just their own. Ultimately, it is about responsibly handing over the baton for the next generation to take over in a safe, sustainable and financial responsible manner.

What should I be doing now?

Should I be doing anything now as a practice owner? The answer is ABSOLUTELY!.

Always be ‘ready to sale’ should you ever have to. Selling your practice for a fair value is a long term (3 to 5 year) process. It is not just an event. If your practice is in dying, you will not realise its full value. Nobody wants to buy tickets to the Titanic. Everyone wants to watch a movie with a happy ending.

Ask the right questions, then ask for the right answers in writing!

When it comes to business arrangements and talking to your accountant/lawyer, push your advisers a little harder for some holistic and not just piecemeal advice.

Unfortunately, in my experience, I often hear from advisors “you did not ask me, so I did not tell you or you were on a budget so we did not address that”. This may feel frustrating and overly unhelpful. You thought that was part of their job. This is made even harder as you do not know what you don’t know. Donald Rumsfeld famously spoke of the “known unknowns” and “unknown unknowns”.

Be clear about what you need and want

In my experience, I have seen a desperate practice owner give away their practice to a GP on a family holiday trip. The new GP owner did regret taking on!

Some need to get rid of their practice to pay off debts, others sell because they want to retire or strategically secure a new doctor.

At short notice, you should be able to quickly take out and show future doctor owners a solid practice owners agreement along with financial statements that speak for themselves. The documentation should align with your business model and structure. Most owner agreements and structures are fragmented, poorly drafted and inconsistent, so if you are organised, you are already ahead of your competitors. Most purchase offers are time sensitive so you need to be organised

The practice agreement is like preparing your living will. It should set out the buy in process, decision making procedures, profit sharing and exit arrangements. It should address those tricky issues upfront. It is easier to make an agreement when you are friends and it is impossible if you become enemies.

I often tell my clients that going into business with someone is comparable to marriage. Remember after marriage, the second most important decision you make in life is who you go into business with. Both are expensive in a divorce! These days the process is much easier with templates combined with experienced and qualified advisors. It should pay for itself.

In my experience, it is impossible to negotiate a good deal on the 11th hour especially when you have to change your structures as a result of horrendous tax and legal consequences. It takes time to coordinate your team and advisers.

The process will pay for itself even if you are not planning on selling. You will immediately add more value and create a more sustainable and attractive practice.

Key factors that affect the value of your practice

There is a large difference in the price of a general practice.

If you are still reading this, we are about to enter into some hopefully easy to understand high level key internal and external factors that drive the value of your practice up or down.

Before jumping into those magical valuation formulas, it is important to understand the context and basic principles that drive the value of your practice up or down. Practice value is quantified by these formulas.

The higher the risk and higher the return and less value your practice is worth

Often doctors feel ripped off when they are made to pay for goodwill (which is hardly fair) and are more prepared to pay for the tangible assets. The reality is any practice that enjoys a reputation where both their patients and their providers keep returning to their location, then the practice is most likely worth more than the second had equipment being bought in the sale. If you can guarantee patients will be in the waiting room on a Monday morning, this is a real intangible value that is bankable.

A fundamental principle in investing and determining the value of your practice or any investment is risk. If the buyer perceives a higher risk the buyer expects a higher return and will offer a lower price for your practice to compensate for any unforeseen financial loss. The hardest bit is to know what risks do and do not exist. The more open and transparent the seller is the lower is the risk.

Practices that are able to simply explain their future value to a potential buyer can expect a higher value for their practice. Like buying a house off the plan, there is little or no money on offer if you have no plan.

People are prepared to pay a higher price for certainty

Hoping somebody will buy you is not a strategy. Wishful thinking will most likely leave you bitterly disappointed. It is not really a choice unless you want to leave a liability and not a legacy behind. Practice owner’s will have to walk and chew gum on this issue.

It is your choice to decide on what strategy to use in order to drive up fair value for your practice. From “do nothing expect nothing” approach to “do everything the right way” approach. There is potentially no limit to what your practice could be worth. The recent eye watering Healius and Medibank prices paid for general practices are a case in point.

Practices with financially scaleable intellectual property are hard to find. They are worth a lot more than a traditional practice that does not have a clear vision or strategy, less systemised and engaged with all their stakeholders. Your job is to explain this point of difference clearly to a potential buyer.

The greatest risk to buyers is the retention of doctors and the impact of a change of ownership. The aimis to reduce this uncertainty and secure a higher value for your practice.

Know your potential buyer

Is it a corporate, a doctor, a practice manager or non-medical investor?

The capacity and appetite to pay more for your practice will depend on the purchaser’s background. Know what they want first. Surprisingly, doctors are more likely to pay a higher price for other reasons such as control/influence.

For example, corporates generally like larger group practices greater than 8 doctors with room to grow. In my experience and according to corporate financial reports, the optimum size is 12 FTE GP’s per site. Value is increased for multi-disciplinary practices with on-site pharmacy and allied health.

For smaller practices sometimes it is easier and better to look under your nose and simply mentor and sell to your enthusiastic registrar who will rope in their friends. You only need one to set off a chain reaction. Make sure they are a strategic fit and can add value, avoid offering ownership just because they are a high biller. A low billing trusted doctor who teaches and has regular contact with registrars is strategically worth more than a higher biller.

This is why I love teaching practices. You can offer a future and not just a percentage. It is cheaper and the easiest way to recruit and retain quality doctors. Recruitment companies can be useful but come at a cost. Focus solely on recruiting the right culture of owners that share your vision.

Be clear and upfront from day one, put it in writing and you can attract a higher premium on a partial or full sell down of your practice.

Future profitability matters!

Your practice value is based on the future expected profit (earnings) adjusted for unexpected costs. Start with your accountant’s annual profit and loss statement. Where it says net profit, it should be positive and ideally it should increase  in accordance with your one pager strategic plan. Certain costs like excessive wages rents paid to related parties like the wife or property trust needs to be adjusted to market value. This may improve your practice value. A low profitability is not always a bad thing.  If it can be seen this may lead to higher profitability such as an IT upgrade such as implementing the Doctors Pay Calculator as a new way to recruit and retain doctors.  

Future risk matters!

Other hidden costs include but are not limited to pending long service leave, liabilities (e.g. debts and reinvestment required) and litigation risks. My personal favourites are the underpayment of staff wages, payroll and tax office “employee v contractor” risk and pathology rent compliance due to out of date or non-existent documentation. No matter how big or small you are they are poorly understood and implemented correctly in Australia. This is a buying opportunity and not a problem.

Buyers will factor in a $10,000 or up to $1m or more upfront discount depending on how serious your problems are, until it is not worth it. So expect any offer to decrease based on any problems you were aware of or did not attend to prior to a sale.

Ultimately, the basic formula usually stays the same but the number can dramatically change depending on certain material factors as suggested above.

Your valuation numbers are adjusted down or up for a given level of future risk. This is based on an overall risk rating or multiple of earnings for items that cannot be particularised. I call it the gut feeling multiple. I will illustrate this point later.

The bottom line?

In order to secure an accurate value it is important to look at these material factors first as different buyers will use a different multiple to vett any discount offer to mitigate any downside risk.

These are the critical intangibles considering that will enable a practice to secure a premium on sale. Whether it is a sell down or sell out it is a critical provider recruitment and retention strategy

When is the best time to buy or sell?

Finally when is the best time to sell?

If you are a buyer

You know what you are doing and have a good business model you can implement rapidly. The best buys are in debt and divorce. As a minimum make sure you are a good strategic fit beyond money. Can you grow the pie?

If you are a seller

You are ready to sell and let go of total control. Either the new owners are a great strategic fit or you are about going into full retirement mode.

A big tip for registrars is to buy from a doctor who trash talks owning any practice. You will get a bargain if you can make them a good offer. Remember they need you in order to sell to the next generation, you are their link.


Due to increasing complexity, there are increasing natural barriers to entry. The demand for quality established practices is high. Due to regulatory and technology reasons,  practices are becoming more complicated.  Assessing tangible factors such as the building, plant and equipment with intangible factors such as systems and goodwill is increasingly becoming more difficult. 

Intangible factors play a greater role than they used to in an increasingly digitised GP world. This is why we see such a large disparity in practice values.

Smart buyers need a good set of financial statements, well documented systems that clearly substantiates your business model. Increasingly this is critical when convincing a potential owner, corporate or a bank manager to pay a fair premium for all your hard work.

If you choose to do it properly, you can become a price maker. You can set your own price. If you choose not to, you become a price taker. Expect buyers to low ball a price by picking out holes in your practice.

When it comes to valuing your practice, understand your business model and structure. Simply explain it. Then you will be in a better position to sell your practice for what it is really worth.

Best of luck to all of you.

For more insights visit our blog.

About me: David Dahm BA (Acc.), CA., FCPA, CTA, FFin, CPM, FAAPM, FAIM, FGLF.

Chartered Accountant, Chartered Tax Adviser, Registered Tax Agent, Former AGPAL Surveyor 10 years of service

David Dahm is CEO and founder of the national medical and healthcare chartered accounting firm Health and Life and global Founder and CEO of the not for profit project the International Healthcare Standards and Ethics Board (

After a serious work related car accident in 1989, and nine operations later I continue to be a patient and provider advocate. I enter my third decade as a national Chartered Accountant for Medical and Healthcare practices in Australia. I am a former 10-year Australian General Practice Accreditation surveyor. I come from a medico family. I have served on the AAPM national Board and was the inaugural national Chair of the Certified Practice Manager CPM post nominal. I continue to provide accounting tax and practice management advice to many practices all over Australia.

You know who you are and I thank you for this real honour and privilege to serve you and your community through you. Note, I am not a lawyer please seek appropriate legal and accounting advice. This information is for general information and discussion only.

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