Deciding when to sell your healthcare company is one of the most critical decisions you’ll face as a business owner. While waiting for the “perfect” time might seem strategic, it can often backfire. Delaying the sale of your healthcare company exposes you to significant risks, from fluctuating market conditions to operational challenges that can reduce the value of your business. Here’s why acting sooner rather than later may be the smarter choice.
1. Market Conditions Can Impact Selling Your Healthcare Company
Healthcare markets are dynamic and influenced by factors like regulatory changes, economic trends, and technological advancements. These external pressures can dramatically affect valuations when selling your healthcare company.
- Regulatory Risks: Policy changes can lead to reduced reimbursement rates or stricter compliance requirements.
- Economic Shifts: A downturn in the economy or changes in interest rates can diminish buyer appetite and valuation multiples.
- Industry Trends: Healthcare sectors such as behavioral health, telehealth, or dental practices experience peaks in buyer demand, but these trends are temporary.
Waiting too long to sell could mean missing the optimal window of opportunity.
2. Buyer Interest May Decline If You Delay Selling Your Healthcare Company
The healthcare industry sees waves of consolidation, where strategic buyers aggressively acquire companies in specific niches. For example, private equity groups are currently interested in behavioral health and dental practices, but these trends won’t last forever. Delaying the sale of your healthcare company could mean missing premium offers from strategic buyers or private equity firms that have limited timelines and shifting priorities.
3. Tax Policies Can Reduce the Proceeds From Selling Your Healthcare Company
Tax considerations play a significant role in maximizing the proceeds of selling your healthcare company. Current capital gains tax rates might be more favorable than future ones, especially with proposed legislative changes on the horizon. If rates increase, you could lose a significant portion of your sale’s proceeds to taxes. Consulting a tax advisor can help you understand the financial benefits of selling under the current tax framework.
4. Operational Risks Increase Over Time, Impacting the Sale of Your Healthcare Company
The longer you hold onto your business, the more it is exposed to risks that can affect its valuation and attractiveness to buyers:
- Employee Turnover: Losing key employees can disrupt operations and reduce buyer confidence.
- Market Competition: Competitors may innovate faster, leaving your business less competitive.
- Unforeseen Events: Lawsuits, data breaches, or personal health challenges can complicate the sale process.
Selling your healthcare company while it is stable and performing well mitigates these risks.
5. Life Events Can Force an Unplanned Sale
Unanticipated life events, often referred to as the “5 D’s,” can force you into an unplanned sale, potentially at a reduced valuation:
- Death
- Disability
- Divorce
- Disagreement among partners
- Distress (financial or operational crises)
Planning your exit in advance ensures that you won’t have to sell your healthcare company under unfavorable circumstances.
6. Buyers Want Predictability When Buying a Healthcare Company
Buyers are typically more interested in stable, predictable financial performance than in speculative growth potential. Delaying the sale of your healthcare company to achieve “one more year” of growth may:
- Expose your business to fluctuations in performance.
- Highlight operational weaknesses, such as dependence on the owner.
By selling when your business demonstrates consistent results, you make it more attractive to serious buyers.
7. Strategic Buyers Are Ready Now to Buy Your Healthcare Company
Strategic buyers and private equity groups often operate within specific timelines for acquisitions. If your business isn’t ready when they’re actively seeking opportunities, you risk losing premium buyers to competitors.
For example, a DSO (Dental Support Organization) looking to acquire a dental group may move on to other targets if you delay the sale of your healthcare company.
How to Prepare for Selling Your Healthcare Company
To ensure a successful sale without unnecessary delays, follow these steps:
- Engage an M&A Advisor An experienced M&A advisor can help position your company for a competitive sale, connect you with the right buyers, and guide you through the process.
- Optimize Your Financials Focus on improving EBITDA, reducing unnecessary expenses, and demonstrating scalability to attract premium buyers.
- Prepare a Comprehensive Exit Strategy Develop a plan that considers personal, financial, and market factors to maximize your outcome when selling your healthcare company.
- Conduct a Business Valuation Understanding your company’s current value can help you make informed decisions about timing and price expectations.
Final Thoughts on Selling Your Healthcare Company
While it might seem wise to delay selling your healthcare company in hopes of achieving a higher valuation, the risks often outweigh the rewards. Fluctuating market conditions, buyer trends, and operational risks can significantly impact your business’s value. By preparing early and acting proactively, you can take advantage of current opportunities and maximize your exit.
If you’re considering selling your healthcare company, reach out today to explore strategies for optimizing your valuation and achieving your financial goals.
About Dr. Allen:
Dr. Allen Nazeri, aka “Dr. Allen,” boasts over 30 years of global experience as a healthcare entrepreneur. He is the Managing Director at American Healthcare Capital founded by Jack Eskenazi , and Managing Partner at PRIME exits. Dr. Allen provides strategic growth consulting to leadership teams of both privately held and publicly listed companies, ensuring their preparedness for successful exits through Mergers and Acquisitions.
Dr. Allen holds a Dental Degree from Creighton University and an MBA in M&A and Investment Banking from the University of Bedfordshire. Dr. Allen is the author of “Value Engineering: Strategies to 10X the Value of Your Clinic and Dominate the Market!” and the brand new book “Selling Your Healthcare Company at a Premium”. Dr. Allen offers a free valuation to healthcare business owners ready for a partial or complete exit strategy. To have a confidential discussion about your company and receive a free valuation, please Contact Dr. Allen via email Allen@ahcteam.com or Call (702) 506-3392.
