Succession planning is one of the most important, yet often overlooked, aspects of running a successful practice. Whether you’re planning to step back in a few years or simply want to strengthen your position, having a clear strategy in place can help maximise your practice’s value and ensure a smooth transition when the time comes.
The current landscape
Medical practices across Australia are facing sustained cost and pricing pressures. Rent and wage increases, persistent inflation and interest rate uncertainty have all tightened margins. There also remains the ongoing challenge of attracting and keeping doctors, plus now there are new rules around bulk-billing incentives.
These factors are driving more practice owners to start thinking about their next phase, whether that’s bringing in new partners, selling, or winding down. We’re also seeing greater creativity in ownership structures and more collaboration between practitioners, including practice managers.
What you’re really selling
When it comes time to transition, it’s important to understand exactly what’s on offer. A medical practice sale can include business goodwill, patient records, practice collateral, equipment and, in some cases, the rooms or premises themselves. Each of these elements has its own valuation method and tax implications.
For example, goodwill is treated as a capital asset subject to Capital Gains Tax (CGT), while equipment is generally assessed for income tax purposes. Whether the sale is structured as a ‘going concern’ will determine whether GST applies, and this can impact the cashflow of the transaction. Having a clear understanding of what’s being sold helps the conversation, manages expectations and avoids the potential for unexpected tax outcomes.
Maximising practice value
Building the value of a medical practice takes time. The practice's numbers are of course important, but so too are the qualitative factors.
A practice with good numbers (i.e. profitable/financially sustainable) is likely to be a well-organised practice, have reliable systems, good human resources and multiple doctors. All these factors increase the chances for a successful succession event.
Small, consistent improvements in the practice, such as better use of technology, streamlined workflows, or enhanced billing numbers can increase profitability and long-term value.
Regularly reviewing the drivers of your income sources and the costs to deliver good health outcomes ensures you’re not leaving money on the table. In many cases, even modest improvements to billing can lift earnings by tens of thousands of dollars annually.
Understanding valuations
There’s no single approach for valuing a medical practice. Each transaction is unique. The most common approach is to value a practice on an earnings basis, which is why improving the numbers of a practice is key to increasing longer term value.
The valuation may not always match the final price, so the challenge is justifying the value. What we find helpful is having a clear explanation about how “good” the practice is. This includes all the intangible things (Goodwill) such as reputation, systems, team stability and patient relationships that sustain the business.
Planning ahead
Effective succession planning should begin years before you’re ready to sell or transition. It’s both a financial and lifestyle decision, and the earlier you start, the greater your options.
Key considerations include:
- Tax structuring and CGT concessions: make the most of small business reliefs and rollover options.
- Retirement planning and super strategies: consider how the sale proceeds align with your long-term wealth and retirement goals.
- Ownership transitions: consider whether gradual buy-ins are a viable and practical option.
A structured plan allows you to exit on your terms, achieve maximum value, minimise tax, and ensure continuity for your team and patients.
At Cutcher & Neale, we’ve worked with medical professionals for more than 70 years, helping them grow, protect and eventually transition their practices with confidence. If you’re beginning to think about your next step, now is the time to start the conversation.
Find comfort and clarity in your financial future. Speak to a trusted advisor today.
Stuart Chan has nearly 30 years of experience in Accounting and Financial Services, helping clients navigate complex financial decisions with confidence. Known for being enthusiastic, professional, and honest, he simplifies strategies, educates clients, and provides trusted advice that makes a real difference.
