Making the practice run without you, on the lender's clock

Why does a solo practice sell for less than its numbers suggest?

Because the appraiser works from a ruling that says what leaves with the owner can depress the price. Revenue Ruling 59-60, still the controlling IRS ruling for valuing a closely held business, tells the appraiser that "the loss of the manager of a so-called 'one-man' business may have a depressing effect upon the value of the stock of such business, particularly if there is a lack of trained personnel capable of succeeding to the management" 1Ref 1Internal Revenue Service, Large Business & International Division (2014).Valuation of Non-Controlling Interests in Electing S Corporations – A Job Aid for IRS Valuation Analysts.Revenue Ruling 59-60's discount for the loss of the manager of a one-man business where no trained personnel can succeed to the management, and its definition of goodwill as earning capacity supported by prestige, a trade or brand name and a record of successful operation in a particular locality..

The same ruling says what goodwill is made of, and the list reads uncomfortably in a practice of one. Goodwill rests on earning capacity beyond a fair return on tangible assets, with the prestige and renown of the business, the ownership of a trade or brand name, and a record of successful operation in a particular locality furnishing support for intangible value 1Ref 1Internal Revenue Service, Large Business & International Division (2014).Valuation of Non-Controlling Interests in Electing S Corporations – A Job Aid for IRS Valuation Analysts.Revenue Ruling 59-60's discount for the loss of the manager of a one-man business where no trained personnel can succeed to the management, and its definition of goodwill as earning capacity supported by prestige, a trade or brand name and a record of successful operation in a particular locality.. In a one-clinician practice the prestige belongs to a person, and so does the record.

But nothing in that doctrine says the value has to stay there.

Moving it takes years rather than months. The evidence a lender reads is a record of the practice already operating without its owner.

What the buyer's lender checks

Three things, before it will lend a stranger the money to buy your practice: what an independent appraiser says the business is worth, whether the agreed price sits above that number, and, at $3 million and above, whether the revenue is likely to hold after you leave. SBA's loan rulebook, SOP 50 10, requires a business valuation from an accredited Qualified Source on every 7(a) change-of-ownership loan 2Ref 2U.S. Small Business Administration, Office of Financial Assistance (2026).SOP 50 10: Lender and Development Company Loan Programs — Version 8.1, effective 10/1/2026.The SBA 7(a) change-of-ownership requirements used throughout: the Qualified Source business valuation on every such loan, any price above the valuation covered by equity, the 24-month aggregate cap on seller consulting and the bar on the seller otherwise remaining with the business, the full-standby condition for a seller note to count as equity, the $3 million Quality of Earnings threshold with its owner buyout and ESOP exemptions, the earnout prohibition with performance rebates applied to loan principal, and the QoE's customer-concentration, contract-continuity and revenue-durability line items..

That valuation caps how much debt the deal can carry. If the amount paid for the business exceeds the business valuation, the difference must be made up by equity 2Ref 2U.S. Small Business Administration, Office of Financial Assistance (2026).SOP 50 10: Lender and Development Company Loan Programs — Version 8.1, effective 10/1/2026.The SBA 7(a) change-of-ownership requirements used throughout: the Qualified Source business valuation on every such loan, any price above the valuation covered by equity, the 24-month aggregate cap on seller consulting and the bar on the seller otherwise remaining with the business, the full-standby condition for a seller note to count as equity, the $3 million Quality of Earnings threshold with its owner buyout and ESOP exemptions, the earnout prohibition with performance rebates applied to loan principal, and the QoE's customer-concentration, contract-continuity and revenue-durability line items.. A price negotiated above the appraisal is a request for more cash from the buyer.

Above a threshold the lender orders a second document. For initial acquisition and business expansion loans with a purchase price equal to or greater than $3 million, measured before any buyer equity or seller financing is applied, the lender must also obtain a Quality of Earnings report alongside the business valuation 2Ref 2U.S. Small Business Administration, Office of Financial Assistance (2026).SOP 50 10: Lender and Development Company Loan Programs — Version 8.1, effective 10/1/2026.The SBA 7(a) change-of-ownership requirements used throughout: the Qualified Source business valuation on every such loan, any price above the valuation covered by equity, the 24-month aggregate cap on seller consulting and the bar on the seller otherwise remaining with the business, the full-standby condition for a seller note to count as equity, the $3 million Quality of Earnings threshold with its owner buyout and ESOP exemptions, the earnout prohibition with performance rebates applied to loan principal, and the QoE's customer-concentration, contract-continuity and revenue-durability line items.. Owner buyout and ESOP structures are exempt.

Change-of-ownership financing sits in federal regulation as well as agency policy: SBA's change-of-ownership text grounds the transaction in 13 CFR 120.202 3Ref 3Code of Federal Regulations (Office of the Federal Register) (2026).13 CFR § 120.202 — What percentage of a business must the Applicant own?.Used only as the regulatory anchor SBA's own change-of-ownership text invokes, to show that this financing path rests on federal regulation as well as agency policy. No numeric term is attributed to it..

How long can you stay after the sale?

Two years at the outside on an SBA-financed sale, and in a consulting role only. On an initial acquisition or business expansion change of ownership, the buyer's business may contract with the seller as a consultant for a period not to exceed 24 months, in aggregate and including any extensions 2Ref 2U.S. Small Business Administration, Office of Financial Assistance (2026).SOP 50 10: Lender and Development Company Loan Programs — Version 8.1, effective 10/1/2026.The SBA 7(a) change-of-ownership requirements used throughout: the Qualified Source business valuation on every such loan, any price above the valuation covered by equity, the 24-month aggregate cap on seller consulting and the bar on the seller otherwise remaining with the business, the full-standby condition for a seller note to count as equity, the $3 million Quality of Earnings threshold with its owner buyout and ESOP exemptions, the earnout prohibition with performance rebates applied to loan principal, and the QoE's customer-concentration, contract-continuity and revenue-durability line items.. Outside that transitional role the seller generally cannot remain an officer, director, stockholder or employee.

That cap is the deadline behind everything else here. Whatever only you know has to be written down, taught and visibly working inside 24 months of closing. A practice whose referrals need your face for longer does not fit the rule it will be financed under.

The cheapest way to find out where you stand is to leave.

Take the dry run: block a full week, stay unreachable, and read what breaks. Whoever calls anyway, whichever queue stalls, whatever password only you hold: that list is the work order for the year. Run the week again two quarters later and compare the lists.

How the money reaches you

In two pieces, and the second is more restricted than most sellers expect. A seller note counts toward the buyer's required equity injection only when it is on full standby for the term of the 7(a) loan, meaning no payments of principal or interest reach the seller until the SBA loan itself is retired 2Ref 2U.S. Small Business Administration, Office of Financial Assistance (2026).SOP 50 10: Lender and Development Company Loan Programs — Version 8.1, effective 10/1/2026.The SBA 7(a) change-of-ownership requirements used throughout: the Qualified Source business valuation on every such loan, any price above the valuation covered by equity, the 24-month aggregate cap on seller consulting and the bar on the seller otherwise remaining with the business, the full-standby condition for a seller note to count as equity, the $3 million Quality of Earnings threshold with its owner buyout and ESOP exemptions, the earnout prohibition with performance rebates applied to loan principal, and the QoE's customer-concentration, contract-continuity and revenue-durability line items.. Seller earnouts are prohibited outright 2Ref 2U.S. Small Business Administration, Office of Financial Assistance (2026).SOP 50 10: Lender and Development Company Loan Programs — Version 8.1, effective 10/1/2026.The SBA 7(a) change-of-ownership requirements used throughout: the Qualified Source business valuation on every such loan, any price above the valuation covered by equity, the 24-month aggregate cap on seller consulting and the bar on the seller otherwise remaining with the business, the full-standby condition for a seller note to count as equity, the $3 million Quality of Earnings threshold with its owner buyout and ESOP exemptions, the earnout prohibition with performance rebates applied to loan principal, and the QoE's customer-concentration, contract-continuity and revenue-durability line items..

A buyer rebate is the permitted cousin. Rebates based on the business's performance after the sale are allowed, and the money pays down the loan's principal instead of reaching the seller 2Ref 2U.S. Small Business Administration, Office of Financial Assistance (2026).SOP 50 10: Lender and Development Company Loan Programs — Version 8.1, effective 10/1/2026.The SBA 7(a) change-of-ownership requirements used throughout: the Qualified Source business valuation on every such loan, any price above the valuation covered by equity, the 24-month aggregate cap on seller consulting and the bar on the seller otherwise remaining with the business, the full-standby condition for a seller note to count as equity, the $3 million Quality of Earnings threshold with its owner buyout and ESOP exemptions, the earnout prohibition with performance rebates applied to loan principal, and the QoE's customer-concentration, contract-continuity and revenue-durability line items..

Value that only becomes visible after closing cannot be paid for after closing.

It has to be visible at the valuation, which is why the two years before a sale decide more than the two months of negotiation. Every line below sits in Appendix 15 2Ref 2U.S. Small Business Administration, Office of Financial Assistance (2026).SOP 50 10: Lender and Development Company Loan Programs — Version 8.1, effective 10/1/2026.The SBA 7(a) change-of-ownership requirements used throughout: the Qualified Source business valuation on every such loan, any price above the valuation covered by equity, the 24-month aggregate cap on seller consulting and the bar on the seller otherwise remaining with the business, the full-standby condition for a seller note to count as equity, the $3 million Quality of Earnings threshold with its owner buyout and ESOP exemptions, the earnout prohibition with performance rebates applied to loan principal, and the QoE's customer-concentration, contract-continuity and revenue-durability line items..

What revenue that survives the sale means in a solo practice

It means next quarter's schedule fills for reasons that do not require you personally. Where the price reaches $3 million and a Quality of Earnings report is required, that report must test customer concentration risk, contract continuity, and the likelihood that existing revenue and margins will be maintained after the sale 2Ref 2U.S. Small Business Administration, Office of Financial Assistance (2026).SOP 50 10: Lender and Development Company Loan Programs — Version 8.1, effective 10/1/2026.The SBA 7(a) change-of-ownership requirements used throughout: the Qualified Source business valuation on every such loan, any price above the valuation covered by equity, the 24-month aggregate cap on seller consulting and the bar on the seller otherwise remaining with the business, the full-standby condition for a seller note to count as equity, the $3 million Quality of Earnings threshold with its owner buyout and ESOP exemptions, the earnout prohibition with performance rebates applied to loan principal, and the QoE's customer-concentration, contract-continuity and revenue-durability line items.. Below that price no report is required, and the three questions still describe what a buyer is paying for. In a solo practice the customer is usually the referral source, and the contract is usually the payer agreement.

The appointment book is the other half of that test. The solo prescriber's schedule is a mix of visit types only a clinician holding the same license and privileges can deliver, so a successor with a narrower scope inherits a smaller book than the one that was valued.

How many referral sources count as enough is a figure nobody publishes, and the rulebook sets none. What it sets is the requirement to test the risk, so your own answer should already be written down: who referred last year, how many each sent, and what happens to that flow when the name on the door changes.

Getting the practice out of your head and into the business

Start with the records and the systems, because a successor operates those on day one. HIPAA defines a designated record set to include any record used, in whole or in part, by or for the covered entity to make decisions about individuals, which reaches past the chart note and can take in the appointment record 4Ref 4U.S. Department of Health and Human Services (2025).45 CFR § 164.501 — Definitions.The definition of a designated record set as any record used, in whole or in part, by or for the covered entity to make decisions about individuals, which reaches beyond the chart note and can include the appointment record.. A practice that keeps those decisions in one person's private calendar has nothing to hand over.

Ownership of the tools counts as much as their contents. Buying the stack in order helps here: the scheduling system, the clinical record, the clearinghouse connection and the billing history belong under the practice's own accounts, reachable by somebody who is not you. An EIN is free, applied for online and issued immediately, and it is what a practice puts on W-9s and payer paperwork in place of the owner's Social Security number 5Ref 5Internal Revenue Service (2026).Apply for an Employer Identification Number (EIN) online.That an EIN is free, applied for online and issued immediately, and is the identifier a practice puts on W-9s and payer paperwork in place of the owner's Social Security number..

Most of what a buyer reads next has no rule behind it at all. Practices commonly write down the intake script, the cancellation policy, the refill routine and the weekly close, and buyers commonly ask whether the lease and the vendor agreements can move to a new owner. None of it appears as a line item in the change-of-ownership appendix, and it is what makes a diligence file dull to read.

One route to a practice that runs without you is a second clinician who buys in and stays. Equal owners, no tiebreaker is the failure mode to settle before money changes hands, and the deadlock clause is where counsel earns its fee.

What the closing documents call it

The price gets split across asset classes, and everything you built that is not equipment lands in the last one. In an asset sale the purchase price is allocated across seven asset classes by the residual method, and Class VII assets are goodwill and going concern value, taking whatever is left once cash, securities, receivables, inventory and equipment have been assigned their fair market value 6Ref 6Internal Revenue Service (2025).Publication 544, Sales and Other Dispositions of Assets.The seven asset classes and the residual method for allocating the price in an asset sale, with Class VII goodwill and going concern value as the residual class..

Both sides report the same split. Where goodwill or going concern value attaches, or could attach, to the assets and the buyer's basis is determined only by the amount paid, buyer and seller each file Form 8594 7Ref 7Internal Revenue Service (2021).About Form 8594, Asset Acquisition Statement Under Section 1060.That both buyer and seller file Form 8594 where goodwill or going concern value attaches, or could attach, to the assets and the buyer's basis is determined only by the amount paid..

No agency publishes a multiple for a practice of one, and any figure quoted as the standard is somebody's convention.

That Class VII line is where years of work turn into one figure, and the split across the classes is negotiated. Take it to your own CPA before the letter of intent hardens, and bring the appraisal with you.