Closing Shop 101 (Week 2): Is Selling an Option?

Last week, we started a series on what to do if you have to close down your private practice. Every business person needs to consider an “exit strategy,” what they plan to do when it’s time to leave. Whether you retire, move, become a stay-at-home parent, or change careers, no one can stay in business for ever.

One option is for you to sell your business. You’ve spent time and energy (and maybe even blood, sweat, and tears?) building this beautiful asset. Shouldn’t you be able to reap the rewards of your hard work?

The Basics

Selling a business is like selling a house. You transfer the ownership and management of your business to a buyer. Everything business-related now belongs to the new owner(s). These may include: marketing materials, websites and domain names, instruments, supplies, computers and other electronic equipment, office space (leasing or owning), office equipment, contracts, etc.

Keep in mind, though, that selling your business is only an option if your business is incorporated or an LLC. You cannot sell your business if you run a sole proprietorship. In the eyes of the law (and the IRS), with a sole proprietorship you and your business are one and the same. There is no separate legal and taxed entity to sell.

The million dollar question, of course, is…how much? The easy answer is that your business is worth whatever someone is willing to pay. But in terms of what to list as a selling price? That’s something I can’t answer, because it depends on so many factors: your business assets (e.g. real estate, equipment, etc.), location, demand for services, current processes and procedures, etc. You will need to talk to your lawyer and accountant to determine a fair and reasonable asking price.

Pros and Cons

There are pros and cons to going the selling route. Here’s my short list:

Pros

• You get financial reimbursement for the asset you have built. This money can be used to reinvest in whatever you want: another business, an investment portfolio, real estate, etc.
• You will be free of owning and managing a business.
• It will probably feel good knowing that what you spent time building will continue on.

Cons

• It will take time, money, and paperwork to “do it right” (e.g. with your lawyer and accountant).
• If you truly enjoyed managing a business, you may need to find other things to keep you occupied!
• You’ll need to plan for a different monthly cash flow.
• You’ll have to “let go” and trust that the new person will come in a take care of your “baby” and your clients.

Why I Didn’t Do It

I thought long and hard about selling my business. I also thought long and hard about just selling my client list (an option I didn’t consider until someone else brought it up).

In the end, I decided not to. Here’s why:

• The primary reason is that I wanted to take Neurosong with me. I wanted the option to re-open a private practice in Warrensburg, and to use all the same websites and marketing materials I currently have.
• My clients have a contract with Neurosong because they wanted to work with ME. You can’t sell that type of relationship. Selling may have been a more viable option if Neurosong was bigger and supported more therapists–who would continue to be employed by Neurosong under new ownership and management. But that wasn’t the situation.
• I didn’t feel I’d get a good enough price to make it worth selling the business.
• Many of my clients had just gone through a therapist transition when one of my therapists left in March to take a job in Denver. From a therapeutic standpoint, I didn’t feel it was fair to them.

As a final note, did you know that there are people who specialize in helping you develop an exit strategy? Alex from Exit Plan Pros left a comment on last week’s post. If you’re interested in more personalized assistance, maybe they can help (this is not an endorsement, just sharing information:D).

I also used SCORE for help me sort through my options. SCOPE provides free mentorship and training for small business owners, and the mentors I used helped me clarify the best option for closing down my private practice.

Tagged as: Exit Strategy, Private Practice