Should I Merge With Another Practice?
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If you run a solo practice where:
- you have a gross income of 350,000 dollars or less;
- you feel isolated in your work and overcome by management responsibilities;
- you feel you are prepared to unload some of the business running duties, emergencies and weekend shifts;
- you are searching for a way to increase your practice in view of selling it later on;
You might want to consider the following information:
Data from various studies and comparative analyses show that practices with gross income equal to or higher than 600,000 dollars are more profitable than the small 300,000 dollars/year practices by at least 5 percent of gross revenues. Furthermore, practices with more than 300,000 dollars in revenues are easier to sell for a good price. As a result, small practice owners would benefit quite a lot from a merger with either another small practice or with a larger one. Such a merger, especially in the case of two small practices, would result in higher profits and increased appeal when the owners choose to sell it.
Furthermore, fixed costs like rent, utilities, accounting services, insurance, would most likely decrease if two businesses merge. If the costs decrease, the profitability of the business hikes, and so does the value of the practice. In order to smooth the transition period when practices merge, the owners should consider the following:
- whether they have compatible philosophies regarding medicine, business, management and client relations;
- independence and autonomy will not necessarily disappear, but most often they will be sacrificed for the sake of good cooperation and compromise;
- the merger will take place at all levels of the practices involved – computer systems, software, taxes and accounting, staff benefits and compensations, procedures, policies, and more;
- clients and staff need to understand the benefits they will get from the merger;
- a successful merger depends on careful planning and cooperation between all the parties involved.
The financial rewards and, consequently, the living standards will significantly improve for those practice owners that plan their mergers carefully and implement quickly and fully all the measures that are necessary for a smooth transition.
Will you be one of them?
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