When looking at the finances of those that run a private practice, they often have a gaping hole in their assets. That’s because they value their therapy practice or solo business at zero. But by not selling your private practice as you think about retirement, it leaves significant money on the table.
Instead, looking to position your practice for a sale in the years before you want to step away – or step back – from the practice, will give you significant advantages as you enter the next phase of your career or life.
The idea that you could sell your private practice is something that many therapists or solo business owners may not realize. Yet, even garnering $200,000 for your practice can go a long way to securing your post-practice lifestyle. It’s not an easy process, but one that can be done through some important planning tactics.
To help break this down into easier steps, I’ve developed a series of videos about the selling process. These videos take a person through different stages of the process, from realizing you could sell the practice, who your target buyers will be and even the value it can have to your clients since you can hand-pick your successor.
But there are two ways to sell the business that you should understand at the beginning. This opens up a wide swath of potential buyers, giving you more options.
The Buy-Sell Agreement For Selling Your Private Practice
One of the great tactics to sell a private practice is to handpick a successor, eventually make them a partner, and then agree to a buy-sell agreement.
These can be developed in a number of different ways, through either life insurance or installment plans (see below). But they do require more time, since you need to know who you want to buy your practice and give them time to become a partner within your solo business – making it not so solo anymore.
The value of this strategy is you can agree to a price for the company when you’re in good health and working. This gives you the ability to negotiate willingly, as opposed to trying to sell as your health fails or worse.
The partner agrees to the price and the style of purchase, allowing for the business to fund the sale when you step away.
It’s good for you, your future partner and your clients, since they will begin to recognize the person who is stepping into your role before you decide to quit.
Using an Installment Plan’s Flexibility
Installment plans can also provide you with a swath of new potential buyers. They break up the purchase price of the practice over many years, allowing future sales of the business to fund the purchase.
Installment plans work a lot like a mortgage. The buyer puts a certain percentage down – like 20% of the price of the business. Then they make quarterly payments, which includes interest, over the life of the loan, say 10 years.
This reduces the amount the buyer has to pay upfront. It also reduces the payments you receive on a yearly basis, allowing you to spread out the sale for tax purposes. It offers a chance to plan. And it provides income in the early years, after you step away from the practice.
The downside? You have to pick the buyer well. If they cannot keep the business running, they could default on the loan. Working with a lawyer can ensure you have ways to re-attain the business, if they fail to pay.
Despite its downsides, it offers a great way to turn the asset you value at zero into something worthwhile.
Understanding this can reduce a common downside to current private practice planning and create financial returns in the practice you and your clients know has value.