“I doubt I’ll sell my practice when I retire”
A smaller practitioner shared this view with me recently. He is 60 and his current turnover is around £120k. He said to assume his net profits are around £80k pa.
My friend had noted that were he to sell his practice he would be lucky to secure a capital sum of much more than £120k (being around once times his recurring fees).
After paying 18% CGT, at current rates, he would be left with, at most, around £100k (and this might only be received over a 12-24 month period). If invested the annual income from this figure would be a very small amount as compared with his current £80k annual income. Of course one hopes he would also receive pension income too. However my friend had an alternative plan:
He reckons that it would make more sense to simply allow the practice to run down. As long as he feels comfortable and competent to continue servicing clients why bother trying to sell his practice? If he ends up with a practice that’s only one quarter its present size his net income would be around £25k. To achieve the same figure from investments would require him to have £1m in the bank. There’s no way he could sell his practice for anything approaching such a figure.
I was wondering how common is such a view and approach or are there other options for my friend to consider.
2 Responses to ““I doubt I’ll sell my practice when I retire””
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None online Rosemary. Most people who have commented to me about this suggest that the practitioner could merge his practice with another and seek a recurring consultancy from the purchaser – this should put him in much the same position financially (possibly better) and with less stress, responsibility and hassle.