10 Tips for Selling Your Practice

by Corporate Relations and Business Strategy and Communications Staff

Selling a psychology practice can be a difficult process. The challenges include finding the right buyer, wading through legal and financial complications and handling clinical matters. Coupled with lack of knowledge about the process, some psychologists can be discouraged from selling their practice when they retire, relocate, change positions or change careers.

However, with diligence, attention to detail and willingness to compromise, you not only can reap the financial rewards of selling your practice. You also stand to gain the satisfaction of
handing off a business that took years to develop to a competent successor who can continue to provide beneficial services to the community.

1. Plan ahead
   Planning ahead is a critical first step in organizing a practice sale. Consult with your lawyer and your accountant or financial advisor early in the process. They can help you anticipate and handle legal and financial issues, comply with any state laws governing the sale of your practice, and evaluate your insurance needs as you wind down your involvement in the practice.
2. Use professional advice
   Using professional consultants is important throughout the sale process. Some practitioners turn to a business broker to handle various aspects of the sale, from appraising the practice to negotiating with potential buyers. Before hiring professional help, check their references and verify that they do not have a conflict of interest in the sale that will prevent them from representing your best interests. Read the “Using practice consultants to your best advantage” article.
3. Get an independent appraisal of the practice
   Assigning value to a practice is challenging because the value is largely based on intangibles, such as reputation and personal relationships. An independent appraiser will typically consider the following factors in valuing a practice:

• Tangible assets — These fixed assets include real estate, equipment and furniture.
• Intangible Assets — Goodwill, usually the largest intangible asset, represents the value of the practice’s name, client base, reputation and established relationships.
• A variety of other factors — including the practice’s area of specialty, location, age, reputation and earnings history, as well as liabilities and accounts receivable.

4. Set a realistic asking price
   No matter how much you think your practice is worth, if your asking price exceeds its fair market value, it will be difficult if not impossible to find a buyer. In setting a price, take into consideration the availability and interest of buyers in your region as well as recent practice sales.
5. Find the right buyer
   In finding the right buyer for your practice, money may not be your biggest consideration. Other factors, such as the reputation, practice philosophy and business management skills of the buyer, also typically factor into the sale. Finding a competent successor will not only facilitate the business transition, but also will help you to meet your ethical responsibility to help your clients find appropriate care after you leave the practice.
6. Be willing to compromise
   Most sales require both the seller and buyer to make compromises. As the seller, you should stand your ground — for example, don’t let the buyer set a price and dictate contract terms that you can’t abide.
   
   But you also need to be flexible. Offer to take steps that can add value to the deal and ease the owner’s and the clients’ transition. For instance, if a buyer can’t meet your price, consider accepting payment in installments. You might also consider offering your services as a consultant for a period of time after the sale or indicate your willingness to introduce the new owner to your professional contacts and your clients.
7. Protect Your interests
   Consult with your lawyer to ensure that appropriate protections are included in the final sales contract, such as a clear definition of the seller and buyer’s role in the transition, the seller and buyer’s financial responsibilities, and protections against breach of contract.
8. Know the tax consequences
   Taxes have a big impact on how much you ultimately earn from the sale. Careful planning is the key to reducing your corporate and personal federal and state tax liability from the sale. Consult your tax advisor for assistance.
9. Be mindful of legal, ethical and professional obligations
   Contact your state, provincial or territorial psychological association; your state licensing board; the APA Ethics Office; and the APA Practice Organization to ensure compliance with the legal, ethical and professional obligations associated with selling your practice. Your duties related to informing clients of your departure, ensuring continuity of their care, record storage, informed consent and other matters may vary according to state law.

10. Don’t forget administrative details
    Be sure to handle administrative details leading up to and after selling your practice. From changing publication subscriptions to closing bank accounts to notifying your professional contacts and referral sources about your transition, administrative details are an easily neglected but important part of selling a practice.