There are many variations in designing a structure that is fair to you, the seller, and also to your successor. We highlight some of the most common below and have provided examples.
1. Fixed Payment
In a fixed payment sale, once a value is determined for the practice, that value is divided by the number of years of a fixed payment. (There may be a discount factor for payment in fewer than 3-4 years.)
2. Earn-Out
In an earn out structure, there is typically an upfront payment equal to 20-50% of the value of the practice. There are then subsequent annual payments based on a percentage of the revenue generated by the book in that year.
3. Partnership Terms
In this structure, you choose to sell portions of your practice over time. As an example, you may choose to sell 25% now and receive a lump sum for that value and maintain and grow 75% of your practice. Then in 5 years you may choose to sell another 25% up to 75%. The advantage is that you realize liquidity now and you protect your value for a future date.
