The intention of this nonprofit is to make the practice transition process simple and straightforward. To succeed in its mission we need to attract both seller and buyer, and make the logistics and financial conditions acceptable—no, appealing — to all.
On the one hand, sellers need to have a friendly format whereby they may fully describe their practice and its appeal to a prospective buyer through narrative prose and not just the traditional, boring line-item listing. Additionally there must be plenty of room for photos.
On the other side, we need to offer the prospective buyers a consumer-friendly website which contains the directory of practices for sale and a set of financial arrangements which cannot be beat. The nonprofit specifies a sale and a contract with no traditional banks or lending institutions involved. As a result, the goal is to avoid the standard loans which add points and the standard interest rates which may be burdensome to an individual already carrying significant debt.
The process works as follows:
- The nonprofit will determine the value of each practice for sale by requesting the appropriate documentation specified by VPT’s CPA. The ‘for sale’ price will be 90% of that practice value—an immediate 10% savings for the buyer. The seller and buyer may negotiate the sale price further, however, the price may only be adjusted lower than the 90% price.
- The buyer will pay 5% of the practice sale price at the closing.
- The financing will be provided only by the seller, a private loan with no financial institution involved. The buyer and seller will agree to abide by one of the three VPT contracts which have been drawn up by the nonprofit’s attorney. The model contracts are as follows:
10 years at prime rate minus 1 ¼%
15 years at prime rate minus 1%
20 years at prime rate minus ¾%
- The prime rate for the full length of the contract will be determined on January 1 of the year in which the contract is signed, and this prime rate figure will remain constant for the full length of the loan. A clause to allow an early payoff will appear in each contract.
- Only very minor changes to the contract will be permitted, and these changes must be agreeable to both parties and also approved by the nonprofit.
- The sale or lease of any real estate associated with the practice is not part of this process and will be the responsibility of the buyer and seller to work out on their own. VPT will take no part in any real estate negotiations. Should the buyer and seller work out a private loan concerning the real estate, it might be advisable to include a statement which stipulates that the real estate reverts back to the seller in the case of a default
- There is no commission charged to the seller.
- There is no fee charged to the buyer.
- The seller will pay a one-time VPT membership fee of $595. This membership fee will cover the costs of gaining a website directory listing, the practice valuation, and the legal contracts offered.
- Both parties will sign a waiver agreement as provided by the nonprofit.
- Once the seller pays the nonprofit’s membership fee he/she may access all of the documents described previously and begin the process of creating their website listing.
- Once the seller receives the nonprofit’s practice valuation figure, he/she may have 10 days to decline their membership and request a refund of $195. The remaining $400 will be retained by the nonprofit to cover the cost of the CPA’s practice valuation charges.
- Once the seller agrees to the practice valuation figure and signs the waiver form, the practice will be listed on the website directory. (John, this box is open to all.)