What roadblocks should I avoid when selling my psychiatry business

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Often there’s not much said about selling a psychiatry practice. As financial advisors for therapists, we encourage you to avoid getting caught off guard as there are many details you should consider. It’s not just a simple changing of titles. We’ll explore what psychiatrists should do when selling a business in this blog.

Before we get into the blog, we are a financial planner for therapists and mental health professionals. If you are interested, it may be a good idea to check out the following blogs about finance for therapists:

Financial tips for therapists starting a private practice!

How does a therapist decide on a fee structure?

How to expand your therapy practice to another state

When do therapists retire (and how?)

Finding a buyer for your psychiatry practice – don’t overlook it!

It may sound like a simple thing – it’s not!

Find the right person to take over your psychiatry practice, or things get much more complicated than they need to be.

Questions to ask would be:

  • Does this person know how to be an owner-operator?
  • How is this person going to be trained?
  • Does this person have the financial savvy to operate this practice responsibly?
  • Is the successor’s personality a match for my clients and staff?
  • Are they a moral fit? Do they possess the right character and integrity for this role?

Structuring the offer

Most psychiatry practice sales are structured as an “earn out”. This means in addition to the price paid, the seller earns a certain percentage of the future proceeds of the business, usually a percentage of either revenue or earnings.  

A number of different factors can be taken into account, such as how involved the seller intends to remain after the sale, what the composition of the team is likely to be post-sale, etc. Many psychiatrists will stay on as a consultant for at least a few months after selling their practice to ensure continuity. If key employees were to exit the practice, it may compromise the future earnings potential. If real estate is included in the business’s assets, it may drive up the purchase price. All of this must be taken into account.

Payments are usually structured over a period of time. You will likely not be paid in a lump sum. This is important to take into account if you are depending on proceeds of the sale for your retirement.

Don’t forget about tax!

Just as with any asset, capital gains tax must be paid – selling a psychiatry practice is no different. The tax will be levied on the difference between the costs you incurred to start and run the business – its basis – and the sale price.

Certain portions of the sale may be considered compensation for services, like consulting. This would be taxed as ordinary income, as opposed to a capital gain.

Taxes are not to be overlooked here, as you may have to pay out of pocket if you don’t have the cash on hand. Be sure to consult with your CPA for suggestions on how to manage taxes in this situation.

For more insights, please see our blog on closing a therapy practice.

So – are you ready to sell your psychiatry practice yet?

We hope that you enjoyed this article on selling a practice as a psychiatrist. Make sure you do your diligence and tread carefully as this is a huge decision!

As financial advisors for therapists, psychologists, and private practice owners, we believe that mental health is a noble profession, and a successful career in this field, if managed correctly, can be enough to take of your financial needs.  If you are a therapist looking for financial advice, closing down your therapy practice, or thinking about retirement, contact us for a chat.


Therapists should consult a lawyer for specific relevant to their situation as nothing in this blog or video interview may be interpreted as legal advice.

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