Do You Sell Your Healthcare Business
Now or Later?
At some point every business owner has an exit strategy. Many owners of healthcare businesses are at a place in their life where they are considering different avenues. During their business analysis and discussions with family the question is asked, “Should I sell, and if I do, should I sell now or later?”
During your search for the right answer for you and your family here are some important points for you and your family to consider.
1. The new Healthcare Reform is causing a number of uncertainties. There is uncertainty regarding if, or how much, healthcare reimbursements will be cut to help pay for the reform.
2. There is absolute certainty that government regulations will be intervening at a greater depth, but will this intervening require healthcare businesses to increase capital expenditures in order to offer a wider range of services, and will the new services provide either no reimbursement, or an extremely small reimbursement?
3. The Healthcare Reform is supposed to bring a large influx of new customers into the market. Some business owners have high expectations for a new boom in their business. However, new customers are not expected until 4 years after the implementation and expenses occur. Will the Healthcare Bill be overturned after pharmacy owners have already invested more? Will there be an adequate return on any new investments? What additional taxes and other expenses will occur in the 4 years before the increase in customers? Will the people of the U.S. follow the projections and all of them sign up for healthcare? What happens if they don’t? If the healthcare bill is not amended, or repealed, there are expectations that it could take 20 years before the full affects are in place. To be able to take advantage of an influx of new customers, will you still own your healthcare business in 20 years?
4. Almost everything you own and use for personal, or business, purposes is a capital asset. When you sell a capital asset, the difference between the amounts you sell it for and the amount you paid for it (the basis), is a capital gain or a capital loss. In the U.S., all capital gains must be reported and the appropriate tax paid. At the end of 2010, capital gain taxes are expected to increase 5% due to the Bush Tax Cuts expiring. This would put Capital Gains Tax at 20%. However, there has also been some hearsay that an additional 5-8% could be added to that. Waiting until 2011, or a later date, someone selling a business would realize a net decrease of at least 5% on the portion of funds received for the business that are attributable to capital gains.
5. In any analysis of selling now or later, it should be understood that if the government increases tobacco taxes to discourage smoking, then the same would happen regarding consumer spending when personal taxes are increased. Increasing taxes will not encourage new sales when you are dealing with consumers. With the economic down turn, how many times have you heard of people consuming smaller daily portions of their medications to save money? How many people will only have their teeth cleaned once a year instead of twice? How many medical tests will not be scheduled by the consumer to avoid the expense? If your customers are going to have less spendable income next year, will your profits increase?
6. It has been reported that it typically takes a year of economic improvement to bring the unemployment rate down 1%. How long has the national average been hovering around 10%? What is the unemployment rate in your area? How many years will it take the customers in your area to get back to full employment?
7. When a business is sold, some of the money from the transaction may be taxed as personal income. Taxes in
2011 and beyond will be higher than the taxes in 2010. Some of what is being reported in regards to taxes:
A. The standard deduction for a married couple will be decreased.
B. Child tax credits will be reduced.
C. Capital Gain taxes increasing from 15% to 20% and maybe more.
D. Taxes on dividends will increase from 15% to 39.6%.
E. Estate taxes after the $1M exemption will increase to 55%.
F. The tax bracket of 10% will be increased to 15%.
G. Tax bracket of 25% rising to 28%.
H. The 28% bracket will be increased to 31%.
I. Taxes in the 33% bracket will move to 36%.
J. And if you are in the 36% bracket you will see a new 39.6% rate.
It is a general observation that when there is uncertainty business owners have a tendency to dig in their heels and stay where they are at. Owners have a higher comfort level digging in and watching instead moving forward with a new plan that contains so much uncertainty. However, is this really the best strategy?
1. If healthcare reform,
taxes, or the economy is going to affect the profitability of your healthcare business, get involved in an industry roll-up, either nationally or locally, to combine numerous businesses into fewer
2. There is currently medical practice and pharmacy business funding available at below 6% interest rate, for 10 years, and can be used for an acquisition of a healthcare medical practice or pharmacy, partner buy out, or refinancing the real estate where the medical practice/pharmacy business is located.
3. Finance Consultants and Business Brokers who have seen a decline in their business due to the economy – funding medical practices and independent pharmacies could be a targeted niche. Contact firstname.lastname@example.org
4. Because funding doesn’t happen overnight, any business owner or seller wanting to complete a medical practice or pharmacy transaction before the end of 2010 needs to have their paperwork in by the end of August 2010.
Business Funding Secrets provides business lending secrets, tips, and techniques for business owners seeking business loans and venture capital. You can access important business funding information when you subscribe today to the Business Funding Secrets Newsletter at: www.BusinessFundingSecrets.com
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