Retiring physicians and practice management experts reveal the process for a successful practice succession. Discover how to make a graceful exit from your business and simultaneously leave your patients in good hands. Read on for 40 tips and ideas.

When Hubert Goldman, MD, decided to retire, he had a difficult time finding someone to take over his medical practice. After 46 years in medicine, he was disappointed to learn that few physicians were willing to buy a solo internal medicine practice with fewer than 1,000 patients.

"It was very hard to get an appraisal on my medical practice," Dr. Goldman says. "There is no standard formula like the housing market. When I informed practice management companies about the size of my practice, they said it wouldn't be worth much. It's not very easy to sell solo practices, because many doctors want to go into groups or partnerships, or they buy a large practice because they want a lot of money."

Then, Sikander Kajani, MD, entered the picture. Dr. Kajani was a friend and colleague of Dr. Goldman. They were also neighbors of sorts. Their solo internal medicine practices were literally across the hall from one another at Northridge Medical Plaza and they participated in an on-call group with three other physicians.

"Because Dr. Goldman had a hard time finding a value for the medical practice," Dr. Kajani says, "I told him, 'At the end of day, if you can't find a buyer, I will take over your practice.'"

An assistant clinical professor at the David Geffen School of Medicine at UCLA and former president of the Los Angeles County Medical Association District 6, Dr. Kajani will officially begin treating Dr. Goldman's patients on Jan. 1, 2007. To help with the transition, Dr. Goldman moved into Dr. Kajani's office on Oct. 2, so he could introduce his patients to Dr. Kajani and help them adjust to the new space. Dr. Goldman is working part time with Dr. Kajani on Wednesday and Friday afternoons until January.

"When you are selling or transferring your medical practice to another physician, it is so important to have a good relationship with him," Dr. Goldman says. "I have known Dr. Kajani for 15 to 16 years, and we are great friends. Because we shared the same call group, we often treated each other's patients. I respect his ability. I feel confident he will take good care of my patients."

Practical Tips for a Smooth Transition
If you are like Dr. Goldman in that you are contemplating a practice transition, here are eight tips from physicians who have been there and experts who help doctors through the process.

1) Plan a year or more in advance.
The biggest mistake you can make is underestimating how much time it takes to close a practice, whether you are selling or dissolving it. "We advise our clients to begin the process a year out, because it takes four to six months to effectuate the actual transaction," says Arthur S. Shorr, of Arthur S. Shorr & Associates Inc., a practice management company in Woodland Hills. "There is an element of organized chaos to the process and that has to be recognized. If you don't budget a year, then you will make yourself crazy."

Erring on the side of caution, John La Gourgue, MD, a retiring Dana Point psychiatrist, actually started planning his practice succession years prior to his desired exit. Dr. La Gourgue, who is transferring his practice in December, always had a goal to retire at or around age 65. "I have been looking for an associate to replace me for the past three years," he says.

2) Maximize the value of your practice.
When Dr. Goldman tried selling his medical practice, he had a difficult time finding any takers because he couldn't convince buyers of its worth. Practice management consultants say that you can increase the value of your business by maximizing your efforts now.

Keith Borglum, a medical practice business consultant and licensed broker for Santa Rosa-based Professional Management and Marketing, insists that a selling physician clean up his office and desk, to make it appear more modern and attractive before potential buyers visit. He encourages doctors to ask for outside help because they typically cannot see the condition of their own space after having worked in it so long.

In addition, it's essential that you increase the productivity and profitability of your practice two to three years prior to the sale. "The value of the practice depends on the activity of the prior three years," Shorr says. "Psychologically, it is critical to trend the numbers upward. The last year of the practice must have some uptick reflecting vigor, as opposed to what the senior people do, which is slow down. When physicians cut back before selling a practice, it costs them a lot of money and degrades the buyer's confidence in the numbers."

3) Obtain a professional appraisal.
A professional, third-party appraisal of your medical practice will help you price the practice right and convince a buyer of its value, Borglum says. Use an expert who can demonstrate compliance with Uniform Standards of Professional Appraisal Practice, or who is a member of the Institute of Business Appraisers or American Society of Appraisers, he says. Medical practice appraisal is an unlicensed profession, but Borglum contends you can steer clear of incompetent appraisers by checking credentials.

The value of a medical practice is based on two things: tangible assets and intangible assets, or goodwill. Tangible assets include real estate, office furniture and medical equipment, such as exam tables and diagnostic devices. Intangible assets consist of the practice's financial history, patient flow, staff and potential earnings.

"For example, Dr. X has a successful internal medicine practice that brings in $250,000 a year," Borglum says. "And a regular internist makes significantly less at $150,000 a year. That extra $100,000 is worth something. Goodwill is the value of the intangible, or the extra earnings the buyer will receive by purchasing the practice."

4) Find a buyer you can trust.
When you are transferring your medical practice, aim to sell it to a friend, colleague or someone you trust. If you know the buyer, you have a better chance of obtaining a sound agreement and good replacement care for your patients.

"Our practice styles are similar," Dr. Kajani says of Dr. Goldman. "I am a general internist with a subspecialty in geriatrics. Dr. Goldman is an internist with an emphasis in cardiology. We have enjoyed covering each other's patients and we have been friends for many years. I thought taking over his practice would be a good fit. Money for the sale of the practice was not a huge issue."

Dr. La Gourgue expresses a similar sentiment toward Richard Granese, MD, the physician who will take over Dr. La Gourgue's  practice next month. Although they have only known each other a short time, Dr. La Gourgue is confident that Dr. Granese will treat his patients well.

"I met Dr. Granese at a pharmaceutical-sponsored educational dinner meeting," Dr. La Gourgue says. "Since we have gotten acquainted over the past year and a half, I have been really pleased to find a high-quality physician. It makes my transition much easier to know that someone will be taking good care of my patients."