Selling a Practice

Selling a practice is emotional, complex, and often time-consuming. Below is a basic overview of the transition process.

Valuation of the practice

A practice should be sold at fair market value (FMV). Many times, a practice is placed on the market for sale, and the owner is not absolutely certain as to its value.

The Purchase Agreement (and LOI)

The Purchase Agreement (and LOI) should include:

• the amount of the purchase price
• the allocation of the purchase price between tangible and intangible assets (Goodwill, etc.)
• the exclusion of prepaid expenses and assets
• the amount of any deposit(s) account receivables
• any adjustments to the purchase price

Generally in the purchase of a practice, the accounts receivable are not an acquired asset and therefore are not sold at the time of the closing.

Also, practice assets generally do not include:

• Real property
• Cash and bank accounts
• Pension funds
• Insurance proceeds/cash value of an insurance policy
• Artwork, personal effects, diplomas, and certifications of the selling physician

The liabilities of the practice should be identified and listed in the agreement (and LOI), including:

• Lease agreements, including equipment leases
• Service agreements for equipment, billing, and staffing
• Government audits and investigations

The structure of the sale is critical, will it be an asset or stock sale?

Key documents for selling a practice should include:

• Non-disclosure and non-compete agreements
• Letter of Intent
• Purchase Agreement
• Agreement
• Post-Sale Employment/Independent Contractor Agreements
• Patient notification letter
• Staff termination and transition letter