The Memphis healthcare market is expanding quickly, creating a unique window of opportunity for owners of Hospice and Geriatric practices. Selling your practice is a major decision that goes beyond just the numbers. It’s about securing your legacy and financial future. This guide provides key insights into the Memphis market, what drives your practice’s value, and how to navigate the sale process successfully. Proper planning is the key to maximizing your outcome.
Market Overview
Selling your Hospice and Geriatric practice in Memphis means entering a market with strong foundations and significant momentum. The conditions are favorable, driven by both local strength and national trends. Understanding these dynamics is the first step toward a successful transition.
A Strong Healthcare Hub
Greater Memphis is not just a city; it’s a rapidly growing healthcare ecosystem. The local healthcare and life science industry has expanded by over 45% in the last decade. This growth is supported by a network of nationally ranked hospitals, creating a robust infrastructure for referrals and partnerships. For a practice like yours, this means you are operating in a well-respected and resource-rich environment that is attractive to potential buyers.
National Demand for Hospice & Geriatric Care
The demand for hospice and geriatric services is rising across the country. The U.S. hospice market is valued at nearly $30 billion and is projected to grow steadily, thanks to an aging population and the increasing prevalence of chronic diseases. This national tailwind provides a stable, long-term demand for the essential services you provide, making your practice a valuable asset in a growing sector.
Key Considerations for Sellers
Beyond the market, a potential buyer is looking closely at the inner workings of your practice. The story you tell with your operations, staff, and community standing is just as important as your financial statements. They want to see a business that is not only profitable but also stable and well-run.
Focus on showcasing your strong referral network with local hospitals and physicians. This is a primary driver of value. Equally important is your team. The expertise and dedication of your clinical and administrative staff demonstrate the quality of care you provide. Buyers also look for operational efficiency. This includes streamlined processes and the use of technology that contribute to healthy profit margins. Finally, an impeccable record of regulatory compliance is non-negotiable. Assuring buyers of your adherence to all healthcare standards removes a major area of risk for them and supports a smoother transaction.
Market Activity
The market for buying and selling hospice practices is dynamic. While broader economic factors can cause short-term shifts, the long-term outlook for quality practices remains strong. Here are a few key points about the current M&A environment.
- A Market Reset. After a period of very high deal volume and valuations in 2021 and 2022, the market cooled slightly in the past year due to interest rates and inflation. Many see this as a healthy correction, weeding out less-prepared practices and creating opportunities for well-positioned sellers to stand out.
- The Long-Term Outlook is Positive. Do not mistake a temporary slump for a permanent decline. The demographic trends driving the need for hospice and geriatric care are not going away. Sophisticated buyers and investors know this, and they are actively looking for strong, platform-ready practices for when market activity fully resumes.
- Consolidation is a Key Trend. We are seeing more common ownership between hospice agencies and other healthcare facilities like nursing homes. This means buyers are often looking for practices that can integrate well into a larger healthcare system, making a clean operational and financial story more important than ever.
The Sale Process
Selling your practice is a structured process, not a single event. It requires careful preparation and execution to protect your confidentiality and achieve the best possible outcome. The journey typically begins long before the practice is officially on the market. It starts with getting your financial and operational house in order to build a compelling case for buyers.
Next, a confidential marketing process is launched to identify and engage a curated list of qualified buyers, not just anyone. This helps create competitive tension to drive up value. Once offers are received and a preferred buyer is selected, you enter the most critical phase: due diligence. This is where the buyer inspects every aspect of your business, from financial records to contracts and compliance. Many deals falter here due to poor preparation. Successfully navigating this stage leads to the final negotiation of the purchase agreement and, ultimately, the closing of the sale.
The due diligence process is where many practice sales encounter unexpected challenges.
Determining Your Practice’s Value
What is your practice actually worth? The answer is more complex than a simple rule of thumb. While industry metrics like an average of $60,000 per patient or multiples of earnings are starting points, a true valuation looks much deeper. Sophisticated buyers value your practice based on its Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). This metric normalizes your financials to reflect the true cash flow of the business. It removes owner-specific perks or one-time expenses to show a buyer what they can expect to earn.
Here’s a simple example of how this works:
| Financial Item | Reported Figure | Adjustment | Adjusted Figure |
|---|---|---|---|
| Net Income | $500,000 | $500,000 | |
| Owner’s Salary | $300,000 | ($150,000)* | $150,000 |
| Personal Travel | $50,000 | ($50,000)** | $0 |
| Adjusted EBITDA | $700,000 | ||
| Owner salary is adjusted to a fair market rate. | |||
| *Personal expenses run through the business are added back. |
As you can see, the practice’s true earning power ($700k) is significantly higher than its reported profit ($500k). This adjusted number is what buyers use to apply a valuation multiple, making this process critical to achieving your practice’s maximum value.
Post-Sale Considerations
The work isn’t over once the sale documents are signed. A successful transition ensures the continued success of the practice, protects your staff, and secures your financial proceeds. Your role during the post-sale period is a key part of the deal structure and should be planned well in advance. Will you be staying on for a transitional period? If so, for how long and in what capacity?
Communicating the change to your dedicated staff is also critical for a smooth handover. Buyers place a high value on retaining key employees. Beyond the transition, consider the structure of your payout. Many deals today include an “earnout,” where a portion of your payment is tied to the practice hitting performance targets post-sale. You may also have the opportunity to “roll over” some of your equity into the new, larger company. This can provide a second, often larger, payout when that company is sold again years later. Planning for these possibilities is key to structuring an exit that aligns with your personal and financial goals.
The right exit approach depends on your personal and financial objectives.
Frequently Asked Questions
What makes the Memphis healthcare market a good place to sell a Hospice & Geriatric practice?
Memphis is a rapidly growing healthcare hub with a 45% expansion in healthcare and life sciences over the past decade, supported by nationally ranked hospitals and strong referral networks. This robust infrastructure makes practices here attractive to buyers.
What factors drive the value of a Hospice & Geriatric practice in Memphis?
Key value drivers include a strong local referral network, experienced clinical and administrative staff, operational efficiency through streamlined processes and technology, and a flawless record of regulatory compliance. These elements assure buyers of a profitable, stable, and well-run practice.
How is the sale process for a Hospice & Geriatric practice in Memphis typically structured?
The sale process involves preparation well before listing, including financial and operational organization. It includes a confidential marketing phase to attract qualified buyers, followed by due diligence where the buyer reviews financials and compliance, and concludes with negotiation and closing of the sale.
How is the value of a Hospice & Geriatric practice determined beyond simple financial metrics?
Value is often based on Adjusted EBITDA, which reflects true cash flow by normalizing financials—adjusting owner salaries and excluding one-time or personal expenses to show the earning power buyers can expect, providing a more accurate basis for valuation than just reported profits.
What should sellers consider for the post-sale transition of their practice?
Post-sale considerations include planning your role during the transition, communicating changes to staff to retain key employees, and deciding on payout structures like earnouts or equity rollovers. Proper planning here helps ensure continuity for patients, staff, and secures your financial outcomes.