The Most Important Factor in Practice Transitions: Effective Communication
By Rod Johnston, MBA, CMA
As practice transition consultants, we are often asked “What is the most important factor in facilitating a successful practice transition?” The simple answer is Communication. While it is imperative for the buying doctor to build a strong team of advisors, complete due diligence on the practice, secure financing, and navigate the closing process, all else could be lost if there is no effective communication between the buyer and seller during and following the transition of ownership.
As part of the due diligence process, the buying doctor should schedule a face-to-face meeting with the selling doctor well in advance of closing. We typically recommend this meeting be held at the seller’s office after operating hours, with the practice transition consulting attending if possible. The initial meeting is designed to allow both parties to get to know one another, ask any questions they may have regarding the practice or each other, discuss practice philosophies, etc. During this meeting, the parties may also exchange contact information so they can reach out to each other directly to discuss any remaining questions or concerns leading up to closing (while also keeping the practice broker in the loop).
The buyer typically learns a great deal about the seller and practice during this interaction and leaves the meeting knowing if the opportunity is the right fit for them. Once the buyer and seller have met and established a personal connection, we also find that negotiations are more amicable and the closing process goes much smoother.
With a fee-for-service and/or personality-driven practice (where most of the patients or clients are coming to the practice specifically because of the seller’s personality), we have found that a second meeting between the buyer and seller in a more casual setting such as lunch, dinner, or happy hour can allow the parties to loosen up and gain additional insight into each other’s personalities, interests, practice philosophies, etc. It is important to mention that we suggest the parties steer clear of discussing pricing, allocations, or any other negotiable items during any of these meetings.
Throughout the closing process, the buyer should clearly communicate his or her expectations of the seller leading up to and following the sale and the seller should notify the buyer if he or she is unwilling or unable to fulfill these obligations. Regardless of the seller’s post-closing plans or obligations, the selling doctor should plan to serve as a resource to the buyer following the sale and be available for a phone consultation to answer questions and offer advice.
By effectively communicating throughout the transition process, the buyer and seller will have established a solid foundation for a smooth and successful healthcare practice transition.