Frequently Asked Questions for Sellers
You need to stay as long as it is agreed upon with the buyer. While rule of thumb would indicate an overlapping window of transition, it generally results in the best transition. A great many practices sell, and the buyer assumes practice duties while the seller never returns. The ultimate success of the new buyer is not related to the transition period.
This depends on location, type of practice, asking price, and most importantly, if you have a buyer in mind. In other words, if you have a colleague or associate that has expressed a desire to purchase your practice, then the deal is a lot closer than trying to find one. Generally, if a buyer is in hand, a closing can be accomplished in 60-90 days. If the practice needs to be marketed, a window of one year for desirable urban companion animal practices and two years or longer for a rural or mixed animal practices is an average time frame.
Again, what was agreed upon in the sales contract. Rule of thumb states anywhere from 2 weeks to 30 days is generally factored in the transition. However, the sales contract will list drug and inventory in the sales package which was figured in the total value. This figure is the total inventory that needs to be respected by the seller.
Unreported income, income diverted to personal use, and shady bookkeeping all result in reduced practice value. It really doesn’t matter what the practice is grossing, netting, or growing if you can’t document the practice revenue. If the revenue is not shown in tax returns or financials, then it won’t drop to the bottom line and result in excess cash flow and practice value. Remember “cash is king” when selling your practice, thus, all revenue needs to be documented and properly accounted for on financials. The lender requires proof of the practice value on the appraisal and without the proper documentation this cannot be accomplished.
I have been slacking off in my practice but it has a lot of potential. Will buyers pay for potential?
No. Buyers want proof, results, cash flow, and security. Lenders want proof, financials, and tax returns all documenting substantial excess earnings. Unfortunately, potential is possible future earning based on a subjective assessment of the circumstances. Without proof or results, generally buyers nor lenders will not pay for a practice’s possible future earning potential.