- Prepare for the Transition to a New Owner & New Management
When you make the decision to sell your dental practice, start to prepare your practice for the new owner. Start putting things in order so the practice runs smoothly and “on its own” without total dependence on your management. Maintain the current patient schedule and production levels even through an open escrow. The practice should not, especially now, depend solely on you. This will make your practice more attractive to prospective buyers and make the transition to the new owner easier for both of you. We have found perceived transferability is a vital factor in both the speed of the sale and the price the buyer is willing to pay.
- Establish a realistic price for your dental practice
The marketplace will ultimately determine the selling price; you need to know the market value or worth of your practice. A dental practice is unique and each practice has distinguishing characteristics such as location, size and type of equipment, philosophy of practice etc. Practices are valued within a wide range 60% to 85% (sometimes more) of annual collections. Look to an experienced dental practice transitions consultant to establish a comprehensive appraisal in order to get the most value out of your practice.
- Accept the Financing Facts
You may want to finance part of the sale of your practice especially if the buyer is a recent dental graduate. Seller financing may help close the deal and seller financed practices generally sell for higher prices. Consult your CPA. The allocation of the asset purchase value determine the sellers financial tax obligation.
- Update & Clean Up Your Financials
Make sure the financials for your practice are accurate, detailed, and up-to-date. Questionable financials or unclear financial information can be a deal killer. Present yourself well “on paper,” look at your financials from the perspective of your buyer, rethink all those “perks” and hidden assets and make sure the financials are easy to understand. Also remember that buyers won’t pay for what you can’t reliably prove. A good buyer won’t be looking at just your practice; they will look at a number of practices and buy the best one in their price range.
- Look at Your Practice from a Buyers Perspective
You have worked hard to build your practice and naturally you are proud of your accomplishment; but you must be realistic about the practice’s deficiencies and correct or improve what you can. Put yourself in a prospective buyer’s position the next time you go to your practice; pretend you are a buyer looking at it for the first time. How impressed are you? With this in mind, make the necessary improvements.
- Time for “Spring Cleaning”
Remove unused and obsolete equipment and inventory. Buyers will not want to pay for it and they may worry that it is getting added to the selling price if they see it lying around. This is a good time to see what else needs to be cleaned up or just removed to make the best possible impression. Just because you are selling, now is not the time to let the practice slip. It’s important that prospective buyers see your practice at its best: bustling, and showing no signs of neglect.
Here are a few areas to focus on:
- Keep normal operating hours and stay involved in the practice. There is a tendency for sellers to relax and slow down when they put their practice up for sale. Maintain the same conditions even though you want to slow down. A declining practice is much more difficult to sell.
- Repair signs, replace outside lights, and do a general spring cleaning for first impression purposes. Tidy the outside premises (if applicable). Spruce up the interior as well.
- Repair items that are included in the sale.
- Maintain inventory at normal operating levels during the sale and escrow period.
- Confidentiality . . . keep your selling plans to yourself
Experienced dental practice brokers understand the importance of confidentiality and it is important for you to understand this as well. Confidentiality works both ways. We know you are best served by your staff and patients hearing of your sale from you first not from vendors or other dentists. A practice broker helps by using nonspecific descriptions of the practice in advertisements and profiles, requiring signed confidentiality agreements with all buyer prospects, and screening of buyer prospects. The broker will constantly stress confidentiality to the buyer prospects they show your practice to. However, as the seller, you must also maintain confidentiality about the pending sale in your day-to-day practice activities with customers, employees, vendors, and even your friends until the purchase agreement has been completed and accepted. Employees, suppliers, and even customers might react negatively to your “news,” and you need their stability and loyalty more than ever at this crucial time. It is best to keep your plans strictly confidential, especially with regard to your employees, suppliers, and customers.
- Get & Use Professional Advice
Many practice owners think that no one knows their practice like they do. They think they can do it all – tax, legal, marketing, negotiation, etc. You are not a practice broker, accountant, and legal advisor all rolled up into one person. This is a critical business transaction. Use professional help and advice when necessary, but more importantly, listen to the experts. Avoid costly errors in judgment and only trust those with extensive experience in the dental practice transitions field.
- The Structure of the Deal is Important
The selling price may not be the only thing to consider. You may find that the real problem is in the details. Your dental practice transition consultants will consult with you on all the nuances of your particular deal and guide you to make the best possible decisions.
- Be Prepared to Negotiate Sensibly
Don’t reject an offer without giving it serious consideration and discussing it with your consultants. Study it closely, just because you didn’t get your full asking price doesn’t mean it is a bad offer or that it can’t be negotiated into a good one. The offer may have points that will offset the purchase price, such as higher payments or interest, a consulting agreement, more cash than you anticipated or a buyer that you are comfortable with. The right buyer could be more important than a higher price, especially if there is seller financing involved. If you must counter-offer, do so only on those points that are really critical to you. Be flexible and willing to negotiate on the important points.
Did you like this article? Check out our other dental industry blog posts such as things to know before you sell your dental practice and do I need a dental practice broker?
If you have any questions or would like additional information, please call us at 678-482-7305 or email at firstname.lastname@example.org