Office Locations:

Sarasota, Florida

Toll Free:
(877) 988-0911

Fax:
(708) 361-3220

Buying or Selling a Business or
Professional Practice

Exiting the Business or Acquiring a Business or Practice

At some point, owners will decide they are ready to leave the business. A key employee, or a competitor might buy it, or perhaps a son or daughter will take it over.

• If owner underestimates the business value.
  Owners who think their business is worth $X when it is actually worth $2X are leaving money on the table. Maybe they want to, but they should do it by choice, not by accident. Inter-family transfers are especially dangerous – there are IRS issues, as well as "Mom and Dad gave you more than me" issues.

• If owner overestimates the business value.
  Owners who think their business is worth $X when it is actually worth $½X will have troubles. They risk killing a sale by demanding too high a price. Worse, such owners often drive potential buyers into the arms of competitors.

Buy/Sell Agreements

Imagine two 50/50 owners and a signed buy/sell agreement drawn when they started the business and setting the value at $X amount. Imagine the company has grown and is now worth $10X but the buy/sell agreement was never updated.

• If owner underestimates the business value.
  The first owner to leave (or the owner’s heirs) would get ½ of the original $X when they should have gotten $5X.

• If the owners overestimate the business value.
  The first owner to leave (or his heirs) gets most of the value of the company. The remaining owner’s value – and future security – is devastated.

• If owner underestimates the business value.
  You think your business is worth $X and plan accordingly. But when you leave the scene the IRS decides your business is worth $5X – and your heirs must sell the company fast to pay the estate tax.

• If owner overestimates the business value .
  There is no downside (from an estate tax perspective) if you think your business is worth $X when it is really worth $½X.

Our Expertise in Working with Professional Practices

The professional practice differs from other business types and presents unique challenges. The value of a professional practice is generally the sum of the physical assets and the intangible assets – which are typically the greatest contribution to the practice value. The intangible assets of a professional practice are called ‘goodwill’ and can be difficult to value.

• If the professional underestimates the value.
  Owners who think their practice is worth $X when it is actually worth $2X do not receive value for years of building their reputation and systems.

• If the professional overestimates the value.
  Owners who think their practice is worth $X when it is actually worth $1⁄2X will create a difficult situation for themselves. They overestimate how much will be available for retirement. They also risk killing the sale of their practice by demanding too high a price.

Professional Practices Summary Valuation Reports

This level report gives you the information you will need to:

• Buy or sell a practice;

• Evaluate relevant information such as the community demographics, efficiency of staff operations and any contracts which would be part of the sales transaction;

• Have an approximate value of the practice;

• Document the financial condition of the practice;

• Document the history of cash flow;

• Document the history of profitability;

• Project future earning potential;

• Determine financial trends;

• Write a comprehensive business plan; and

• Negotiate a fair price.

Other Situations Benefitting from Valuations:

Divorce  |  SBA Loans  |  Retirement or Estate Planning