You’ve put your practice on the market. You found a buyer. Now you begin negotiating a proposal letter. What’s important to you as the seller will depend largely on your needs and why you are selling the practice.
What matters most to both parties
Most of the time, practice owners simply want to maximize the sale price. However, there are situations where owners are willing to accept a lower price to close sooner – due to a move, health or family reasons, or a desire to step back and associate somewhere else.
If you need the sale to close quickly, it’s reasonable that you’ll be willing to give ground in other areas of the deal. If you have no time constraints, you can afford to wait for better offers.
How price is broken down in an asset purchase agreement
Regardless of your objectives, the purchase price will be a central point in the negotiation.
The purchase price is typically broken down between the various assets of the practice – and the majority of transactions are structured as asset sales. This includes tangible items like practice equipment and office furniture, but by far the largest asset is intangible: goodwill.
Goodwill is a catchall for the value of the practice’s name, the trust it has built in the community with patients, and its reputation. If you think that’s hard to place a value on, you’re right – and it’s also typically where the most significant portion of your sale price sits. Here’s more on how practice valuation works.
What buyers expect from the seller
Aside from price, there are a few other key areas to focus on.
Most buyers will want assurance that the seller is not going to continue practicing nearby, since that would reduce the value of the practice they just purchased. Non-compete agreements typically specify a geographic radius and a time period during which the former owner is prohibited from competing.
Buyers will also generally want the seller to stay on and help transition the practice after closing. The seller typically becomes a contract associate, compensated at some percentage of production. During this period, part of the role is helping patients feel confident in the new owner and maintaining the credibility of the practice through the handoff.
Where to be flexible – and where you can’t
Understanding all the financial levers available in a transaction is the key to negotiating well. There’s a saying among brokers: if both sides are grumpy but accepting about the final terms, negotiation has likely reached a fair middle ground – with both parties having given ground in some areas to gain in others.
Being clear with your broker and business partners about where you are flexible and where you are not will get expectations set early. Some of these require real reflection. Start thinking about them before you’re at the table so that when you have to make a decision, you already know where you stand.
Talk to PTG about what to expect from the offer process.
Frequently asked questions
What is goodwill in a practice acquisition offer?
Goodwill represents the intangible value of a practice – its reputation, patient relationships, and brand. It’s typically the largest single line item in a practice acquisition offer, often making up the majority of the purchase price.
Do I have to sign a non-compete when I sell my practice?
In most practice sales, yes. Non-compete agreements prevent the seller from practicing within a defined geographic area for a set period. The specific radius and duration are negotiable.
Will I need to stay on after the sale closes?
Most buyers expect a transition period after closing. The length and terms vary – individual buyers may accept a shorter handoff, while PE and DSO buyers typically require a longer commitment. The seller usually continues as a contract associate during this period.
How do I know if an offer is fair?
Price is one factor, but the full structure of the offer matters – earnout terms, transition requirements, non-compete scope, and equity provisions all affect the real value of the deal. An experienced M&A advisor can help you evaluate the complete picture.
