Selling your practice's goodwill

Selling your practice's goodwill

How do I sell my practice's goodwill to a practice that could benefit from the potential business?
Jun 01, 2008

Q: I'm considering selling my practice's real estate to a nonveterinary entity and then selling the goodwill to a practice that could benefit from the potential business. How do I go about selling the goodwill?

Gary I. Glassman, CPA
Your best option is selling goodwill—the intangible assets you've built up over the years—to a nearby practice, says Veterinary Economics Editorial Advisory Board Member Gary I. Glassman, CPA, a partner with Burzenski & Co. PC in East Haven, Conn. You're essentially selling your patient records (including the reminders) and the practice's telephone number. This allows the purchasing practice to fold your clients into its existing base with only slight increases in facility, equipment, and administration costs. A good portion of the revenue from servicing your clients goes directly to the new practice's bottom line.

Keeping the client base together is key. This is tied to the proximity of the purchasing practice. The further away the clinic is from your current location, the harder it is to hold the client base together, especially if there are other practices in between. Client transfers based on a change in location can cause as much as 30 percent of the client base to disappear, depending on the circumstances. And this lowers the value of your goodwill.

If a potential buyer is reluctant to agree to the transaction, consider selling him or her the goodwill on a contingent, or "retainage," basis. Establish a price based on how many clients the purchasing practice keeps over a three- to five-year period—the practice will pay you a certain amount per retained client file every year. "This takes the risk away from the buyer and allows you to command a higher price," Glassman says. "They're paying for what they know they're getting."

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