Selling Your Own Practice (continued)
We have had doctors request an outline of considerations for selling their own practice. Since Legacy Practice Transitions is one of the most experienced consulting firms engaged in the business of purchasing and selling practices, we thought you might appreciate this outline on "How to sell your own practice." This outline will cover most of the topics that should be considered when selling a practice on your own. They include:
Step #1
Should You Sell?
1.Determining your goals.
2.Is selling your best option?
3.Exploring all your other practice options.
4.Walk-away or pre-sale, which is best for you?
5.Sell, or add an associate?
6.Post-sale considerations.
Step #2
Financial Considerations
1. Determining your practice value.
a.Valuing equipment, furniture and supplies.
b.Intangible value.
2.Writing your own practice evaluation.
3.Establishing the purchase price.
4.Establishing the down payment and financing terms.
5.Writing a 10-year computerized income and expense proforma, including projections for:
a.Working capital.
b.Installment payments.
c.Inflation effects on income and expenses.
d.Seller's post-sale production.
e. Purchaser's added production.
f.Production related expenses.
g.Fixed expenses.
h.Determining interest expense.
6.How to allocate purchase price.
7.Tax considerations for the seller.
8.New tax legislation and the effect on professional corporations.
- Organization of information for the purchaser.
Step #3
Locating the Purchaser
1.Placing advertisements.
2.How to write blind ads.
3.Contacting senior students.
4.Screening applicants.
5.What to look for in a résumé.
6.Scheduling after hour interviews.
7.Selling to recent graduates.
8. Practice merger alternative.
9.Maintaining confidentiality while selling your own practice, including:
a.Keeping the news from your staff.
b.Keeping the news from your patients.
c.Keeping the news from your colleagues.
- Selecting a purchaser that’s right for your practice.
Step #4
Banking and Seller
Considerations
1.Preparing the purchaser for the bank, including:
a.Preparing a financial statement.
b.Presenting the income and expense projections to the banker.
c.Answering the banker's questions.
d.Locating a co-signer.
2.Establishing your first-in-priority secured position over the bank.
3.Handling seller loan subordination requests.
4.Coordinating the bank loan closing with the practice closing.
Step #5
Working With The
Attorneys and Accountants
1.Working with the attorneys, including;
a.Scheduling meetings with the purchaser's attorney, with your attorney.
b.Getting the purchaser's attorney to return your attorney's calls.
c.Getting your attorney to return the purchaser's attorney calls.
d.Getting your attorney to return your calls.
e.How to plead with your attorney.
f.How to plead with the purchaser's attorney.
g.How to select a new attorney.
2.Working with your accountant, including:
a.Scheduling meetings with the purchaser's accountant, with your accountant.
b.Getting the purchaser's accountant to return your accountant's calls.
c.Getting your accountant to return the purchaser's accountant calls.
d.Getting your accountant to return your calls.
e.How to plead with your accountant.
f.How to plead with the purchaser's accountant.
g.How to select a new accountant.
3.How to explain your needs to your accountant and attorney.
4.How to remind your attorney and accountant of your needs.
5.How to control billable hours by your accountant and attorney.
6.How to keep accountant and attorney fees from being higher than your selling price.
7.Maintaining your friendship with the purchaser during adversarial negotiations, including:
a.Using "My attorney wants this!" and "But I can't say for sure; it's up to my attorney."
b.How to assure the purchaser that you are not as bad as your attorney is.
c.How to assure the purchaser that things will be better after the closing.
Step #6
Contract Considerations
A contract should cover a multitude of subjects for the protection of both parties, for example:
1.Sale of assets and description of categories.
2.Purchase price and method of payment.
3.Allocation of the purchase price for tax purposes.
4.Inspection of the premises by the purchaser.
5.Title considerations.
6.Signature date and closing.
7.Date of possession.
8.Cash and accounts receivable.
9.Prepaid fees, extended treatment and work in progress.
10.Outstanding patient contracts.
11.Acknowledgments and warranties of seller.
12.Acknowledgments and warranties of purchaser.
13.Assumption of patient care by the purchaser and refunds.
14.Announcements of the transaction.
15.Bulk sales tax considerations.
16.Taxes on the sale and transfer of assets.
17.Prorated expenses including staff considerations.
18.Restrictive covenant considerations.
19.Post-sale non-solicitation of patients.
20.Post-sale patient communication by the seller.
21.Individual patient record value.
22.Liquidated damages upon breach or default.
23.Additional consideration for the purchaser.
24.Waiver of right to protest by the purchaser and seller.
25.Specific performance by the Seller.
26.Assignment of warranties and covenants for death or disability.
27.Use of seller's name after the sale.
28.Patient records responsibilities.
29.Bill of Sale for both corporate and individual interests.
30.Expenses associated with the transaction.
31.Attorney's role after the sale.
32.Indemnification by both parties.
33.Notification of lawsuits.
34.Integration of entire agreement.
35.Choice of law.
36.Binding effect, rights of assignment.
37.Severability of invalid sections.
38.Notice of relocation.
39.Waiver of breach or violation not deemed continuing.
40.Lease and/or lease assignment.
41.Arbitration of disputes.
42.Item headings and interpretation.
43.Personal guaranty.
44.Corporate approval and certification.
45.Post-sale provider agreement.
46.Definitions of liabilities and collateral.
47.Establishing your security interest in the assets.
48.Validation of security interest, U.C.C. filings.
49.Sale or transfer of collateral and other assets.
50.Judicial encumbrances and defense of title.
51.Maintenance of the assets and insurance.
52.Notice of relocation and discontinuance.
53.The office lease as security.
54.Addition of an associate to the practice.
55.Financial statements.
56.Events of default, acceleration.
57.Notice of default and right to cure.
58.Rights and remedies on default.
59.Debtor restrictive covenant.
60.Right of first refusal in the event of a sale by the purchaser.
61.One general obligation - cross collateral.
62.Nonwaiver.
63.Waiver by debtor.
64.Right to offset.
65.Termination of security interest.
Step #7
Closing the Sale
1.Scheduling the closing with the parties and their respective attorneys and accountants.
2.How to handle last minute negotiations.
3.How to counter unreasonable and unfair last minute changes to a contract.
4.How to make unreasonable and unfair last minute changes to the contract if it is to your advantage to do so.
5.How to get the attorneys to agree to last minute changes.
6.How to plead with the other party’s attorney to be reasonable.
7.How to plead with your attorney to be reasonable.
8.Go back to Step 3, number 1.
Step #8
After the Sale
Congratulations if you made it to this point; very few get here on their own. Now, to successfully complete this transaction, consider the following when dealing with the purchaser after the sale:
1.How to communicate with the purchaser candidate after your lawyer has talked to him.
2.How to send letters to your purchaser to communicate with him.
3.How to defend yourself following a lawsuit filed by an irate purchaser.
4.How to hire another lawyer to defend yourself in that lawsuit.
5.How to sue your purchaser for payment of the purchase price.
6.How to select a lawyer to defend yourself against lawsuits from your former patients who have been told by the purchaser that your professional services bordered on malpractice.
7.How to purchase a ticket to South America without leaving a forwarding address.
These are just a few topics that need to be addressed contractually in order to protect the interests of both parties. Some of these subjects may not be familiar, and we would be glad to schedule a consultation to review the importance of these items.
LegacyPracticeTransitions.comThis article was written by a former colleague.317-745-2901