Selling to a family member: A rewarding but complex strategy

Key considerations for a smooth, successful family sale.

Selling your practice to a family member can be rewarding, but it also carries unique risks that can put an incredible strain on personal relationships (and damage your practice) if not handled well.

How does this model impact practice value?

In family sales, there can be expectations for a “friends-and-family discount,” but think carefully before offering below-value pricing. Undervaluing your practice can lead to lingering resentment and regret for the seller or cause the buyer to mentally devalue the practice and take a more casual approach to practice ownership (which can feel like a devastating lack of respect to the seller). Getting a professional valuation early in the sale conversation ensures an accurate valuation based on current market standards and lending guidelines. Once you are clear on value, discuss your pricing strategy transparently and frequently to keep unspoken expectations from damaging the sale (and your relationship).

How will I be compensated?

Family sales frequently involve owner financing. However, missed payments can permanently strain even the strongest relationships. Third-party financing protects the relationship from the complications of a family loan. The lender also conducts an objective, thorough review of the practice, which can uncover issues both parties missed. A chiropractic broker can help connect you with chiropractic-friendly lenders.

When should I start this process?

It’s best to start preparing yourself early and not just financially. Selling to the next generation can be emotionally challenging, as they often have a different vision and ownership plan for the business. Consider what professional goals you will need to accomplish prior to the sale and what plans can continue under joint or new ownership.

If you are planning for a sale five or more years in the future, encourage your family member to work in different positions within the practice; this helps them understand how the clinic really works, and working their way through the company is a great way to earn your staff’s respect. This plan also lets you transparently and gradually prepare your employees for this transition, using messaging to assure them the transition will occur when the practice and the new owner are both ready.

When you feel a sale could take place within one to two years, have direct conversations to confirm your family member is ready, willing and able to buy your practice. Avoid assuming anything; just because you have a great practice doesn’t mean they will share the same passion for owning your practice and living in your community, or that they feel fully equipped for ownership.

Once you’re both committed and ready, it’s time to begin the sale work; you’ll need an updated valuation, a detailed training and transition plan and contracts. Expect this process to take a minimum of four months—longer for doctors who haven’t done a previous valuation, own large or complex practices or are very busy. This timeline is usually surprising, as “it seems like it should be simple” to many doctors. Setting clear step-by-step timelines helps prevent resentment from building below the surface, which is common if either party feels they’re jumping through hoops without an end in sight.

What professional help do I need?

Selling your practice to a family member seems like it should be a simpler sale model, but in reality, the underlying relationship often brings added complexity. Generational differences, conflicting visions, blurred lines between professional and family relationships and the high personal stakes for all parties can all complicate communication and expectations. While many try to handle these sales themselves to avoid sale costs, having an expert in family chiropractic practice sales manage your transition is usually a wise investment in preserving relationships and improving sale success and satisfaction for both parties. Also engage an experienced business contracts attorney and CPA early in the process to ensure contracts are comprehensive, financials are accurate and tax requirements and ramifications are considered. If the buyer and seller will co-own the practice, you’ll also need a detailed operating agreement to outline roles, compensation, allocation of control over decisions and dispute resolution processes.

When is this model a good fit?

This model works best when both parties are equally committed to the sale, have compatible goals and have a relationship strong enough to handle the tough conversations and heightened stress that are a natural part of these transactions. If the relationship is already strained or major disagreements exist about the sale or future of the practice, this model is not advised; the familiarity of the family relationship means disagreements can escalate more quickly, and conflicts are often handled with less patience and professionalism than in a non-family sale, too often resulting in long-term damage to the relationship.

Optimize your practice for this model

Don’t start this process with the expectation that selling to a family member is easier; respecting the family sale’s unique challenges from the start gives you the best foundation for success. Avoid the most common missteps in these sales, such as lack of communication, preparation and support, and treat your family member as you would treat any other buyer. Have the practice professionally valued and engage a team of specialists (practice sale advisor, attorney and CPA) to structure, guide and support the sale. Also talk about the transition early and often, especially the hard conversations about price, the seller’s post-sale role and responsibilities and compensation and expectations for both parties. And above all else, protect the relationship by communicating carefully and respectfully throughout the transaction.

Crystal Misenheimer, a leading expert in chiropractic practice sales, is the first and only chiropractic broker to earn the coveted Certified Business Intermediary (CBI) designation from the International Business Brokers Association (IBBA) and sets the gold standard in expertise, quality and service. A former clinic owner, she is uniquely qualified to provide comprehensive support on the complexities of clinic valuations and practice sales. Contact Misenheimer and her team at 888-508-9197, marketplace@progressivepracticesales.com or online at progressivepracticesales.com.