Blog Viewer

The Importance of Knowing When to Sell Your Private Practice and How to Value Its Worth

By Anthony Centore posted 06-19-2020 08:48


Years ago, I had a few weeks of back and forth friendly communication with a woman who was selling her counseling practice. Finally, I decided to make an offer… which she flatly responded, “No thank you.” 

I was shocked.

“Have I offended you?”

“No! You’ve been very polite.”

“Is it an issue of money?”
“No! Your price seems fair to me.”

“Has another buyer expressed interest?”
“No! There are no other interested parties.” 

“Then what!?”

“I’ve been a solo practice for a long time. I don’t like the idea of a larger practice taking over.”

And that was it. To her, the thought of her practice changing was an outrage, incomprehensible. She left our negotiation to search for a solo practitioner that would presumably run her practice for the next 30 years, as she’d done for the last 30.

A buyer can respect and honor a seller’s legacy. A seller can demand a buyer demonstrate that he/she will properly care for their clients and community. However, after the sale, a practice might (and most likely will) change in many ways. At some point, a seller needs to be ready to let go.

Evaluating the Worth of Your Practice

Your counseling practice could be worth a lot more than 3X profit. For instance, say you have contracts (e.g., a court contract to counsel DUI offenders) that guaranteed your company increasing revenue and profit for the next 10 years. Or, say your business includes material assets—a slew of high-end equipment, or even a building. Either of these scenarios could raise the value of your business.

However, your company could be worth less than 3X profit. For example, say your company’s revenue has been declining for several years. This trend would be a red flag to acquirers. Or, say that one of the company’s key employees is likely to leave after the sale. This happens often in the counseling field. Sometimes it’s the owner, who is also a key revenue producer. Other times, it’s one of the counselors that works at the practice who might not hang around (i.e., “Counselor Smith has worked here for 15 years. But when I sell, he’s likely to consider that a good time for him too to move on too”). In either of these scenarios, a practice for sale will show revenues that are nearly guaranteed to drop after the sale of the practice.

A thought to consider as you evaluate your company’s price: “If I leave the practice, what remains that an acquirer would consider valuable?” The answer to this question is not always obvious. A dedicated staff is valuable. A telephone number that generates new client leads every day is valuable. Email lists, websites, relationships with insurance companies—all these things could be valuable to an acquirer.

When to Sell

Deciding to sell your private practice is a highly personal decision. However, it’s important to know when it’s time to let go, which takes us back to the narrative from earlier.

At the time I spoke with the woman who had her private practice on the market, she had been winding down. Her practice was open only 3-4 days a week. Also, being in her 70s, she hoped to pursue activities with her husband while she was still healthy enough to do so. As far as I can tell, she ran her practice for another year or two, but never did sell. In the end, it just closed down. Emotionally, I think it was easier for her to close down than to sell.