Purtzki, Johansen + Associates


Don’t let the lease termination spoil your retirement

Purtzki-eviction notice

After 25 years of looking after patients, Dr. Bob, who just turned 60, looks forward to working less and spending more time on his leisure activities. He is planning to sell his practice in a few years.

When he checked the lease, he realized he could not extend the lease when the current term expires in 4 years. The lease also had a clause that the landlord could terminate the lease for demolition after giving 12 months’ notice. With this lease, no dentist would buy his clinic.

What options should Bob consider?

    1. Move to a new location. Sure, there is the cost of new leaseholds and some new equipment. Despite the extra expenses, Bob gets excited thinking about moving from his third-floor office into a brand-new retail space appealing to his patients and staff. He could sell the clinic for more money by adding new patients and an associate.
    2. Sell the goodwill and work as an associate. The goodwill of his clinic is estimated at $500,000 based on his annual gross of $600,000. Bob is considering selling the goodwill for $500,000 and working as an associate for 3 years, guaranteeing the buyer that the revenues would not drop below the $600,000 annually during his associateship. He prefers this kind of transition to the haggling about patient charts.
    3. Practice merger. If Bob is planning to work another five years and with enough patients to cover a four-day workweek, Bob may want to consider merging with another practice in a larger space. Practice mergers with compatible owners increase production, reduce overhead, and increase practice value.
    4. Join a start-up clinic. The biggest fear for a dentist starting from scratch is having no patients. Bob can help by selling the goodwill and perhaps some of the equipment. The start-up dentist would also be thrilled to have Bob as his mentor and help grow the clinic with the support of his experienced staff.
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