“In seminars I have attended on selling one’s practice, the speakers said begin planning the sale 5-10 years out. They were not kidding. Knowing how your practice is valued (everything excluding the land and building, if you own it) is ABSOLUTELY CRITICAL to avoid being underpaid. If it turns out that your practice, like mine was 10 years ago when I had it appraised, has low profitability, you will get much less than you think after the sale. I was shocked and really dismayed when I found out I could only get 50% of annual revenue for my four DVM practice.
Once you understand valuation AND have your practice positioned for a proper sale price, your education really begins. Know the difference between a stock sale and an asset sale? Do you know the differences in taxation between them? Do yourself a favor. Go talk to your accountant. Ask what taxes will be due on the sale and prepare yourself for some rough news. Did you know, in an asset sale, that the sales proceeds from inventory and equipment are taxed at your ordinary income rates? The rest, called Good Will, is taxed at a lower rate using Capital Gains tax rates (15 or 20% depending on your income that year). When I added it all up, I was about to give up almost 40% of the sales proceeds on taxes. I was shocked and dismayed yet again.
The real estate is a separate issue. If you lease your space, you will not be able to sell your practice unless the lease is assignable and has favorable terms for a buyer or the landlord will negotiate. If you (and the bank) own it, there will be capital gains taxes due on any increase in value from the time you bought it.
But there is hope! There are some complex ways to diminish the impact of these taxes on your nest egg. I highly recommend you look into these by calling Gary Ackerman, DVM of Business Transition Services, Inc. He is one of very few in the USA who has a broad knowledge base in taxation of business transitions and has an intimate familiarity with the business of veterinary medicine. I have found him to be a person of integrity and dedication to service.”