Selling your dental practice is not an overnight procedure. It’s a long-term process that requires methodical planning, due diligence, and time – often taking several months to effectively transition a practice successfully. After all, you want to get the highest valuation possible for your practice. As a seller, this means positioning your dental practice in the highest regard for potential buyers and having the systems in place to facilitate a seamless transition.
Learning the steps to selling a dental practice can help you better understand the overall process and hopefully alleviate the overwhelming aspects of transitioning your practice. The guidance of a dental practice advisor can certainly absorb much of the workload, all while helping market your practice to a much wider network of potential buyers. In any case, there are common steps involved when selling a practice, along with some helpful tips to get you started.
1. Prioritize Your Goals
Before initiating the marketing and selling process of a practice, it’s important to first identify what’s most important to you and what exactly you’re trying to achieve. In many dental practice transitions, maximizing financial return is the primary objective. For others, timeliness of completing a sale by a certain date is more important. Some dentists prioritize finding the right buyer who will retain their staff after transition. Considerations like these will help determine the trajectory of selling a practice, as well as knowing what you’re willing or not willing to negotiate.
2. Establish Your Team
It’s not uncommon for dentists to do their own homework in an effort to handle the sale on their own to save money. However, there’s a lot more to selling a dental practice than what meets the eye, and there are experts in the industry for a reason. Dentists find that these advisors are well worth every penny in the long run. Among the advisors who can help facilitate your transition include dental practice advisors, attorneys, and accountants or CPAs. Consider recruiting the help of these experts as part of your team and keep them informed on all of your decisions and considerations when transitioning your practice.
3. Obtain a Practice Valuation
Once you’ve established your transition goals, team and overall plan, the next step is to determine what your practice is worth. In doing so, not only will you want to know what your practice is worth today, but you’ll also want to understand how to maintain its value until you are ready to sell. The practice valuation should be conducted by an experienced dental practice advisor, or an accounting professional who’s familiar with dentistry and understands the current marketplace for practice sales. Your advisor can then help you identify the right listing price.
4. Determine Your Ideal Transition
After you’ve acquired a valuation for your dental office, you need to then assess how satisfied you are with the value placed on your practice and what next steps are needed based on that assessment. Dentists who find that they’re unhappy with a valuation can often work a couple more years to make up the difference, or find other ways to increase the value of the practice. Conversely, dentists who are happy with the valuation need to determine the next steps in selling and transitioning the practice. For example, do you wish to walk away once the sale is final or do you want to work as an associate after the sale? There are situations when an entity will purchase your dental practice but hire you back to work as an associate. Whatever route you wish to take, it’s good to know your desired direction before going to market.
5. Take Your Practice to Market
Once the practice valuation and preliminary planning is in place, you now need to get your practice in front of potential buyers. Like any form of marketing, the more people that learn about your practice for sale, the greater chance you’ll have in selling it. Marketing your dental practice may involve avenues like investing in on-line ads, website listings, social media promotions, networking, or working with practice advisors. Experienced dental practice advisors typically have solid networks in place, which can help get your practice in front of qualified buyers. Whatever marketing strategies you wish to employ, make an effort to cast the widest net possible in order to attract the most interest in your practice.
6. Identify Potential Buyers
Once you start getting interest from potential buyers, you’ll need to qualify those candidates to determine if they’re credit worthy for a loan. Making sure potential buyers qualify for financing is a critical first requirement, as there’s no point in investing your time and effort trying to sell your practice to individuals who are unable to acquire a loan to buy it. For potential buyers who do qualify for lending, take measures to have them sign a confidentiality agreement and assess their interests to ensure they align with your goals and priorities as defined in step one. In most cases, a practice advisor can handle these duties and vet qualified buyers who will ensure your legacy is sustained and your staff and patients are respected in the process.
7. Due Diligence
Parallel to the step above, in the process of selling your dental practice you’ll need to gather and share information to interested parties. This includes having a history of tax returns, a breakdown of staff compensation and benefits, the number of active and new patients, and other financials of interest. Having this information documented and readily available will help facilitate the selling process. The preparedness also displays that you’re organized and committed to making the sale final.
8. Considering Offers and Negotiating
Once you receive an offer / Letter of Intent (LOI) for the purchase of your practice, there are a few primary options you can take:
1. Accept the offer terms the way they are presented
2. Counteroffer and negotiate the selling price
3. Reject the offer entirely
Each option has varying implications. In most cases, declining an offer without any form of a counteroffer is a sign to the potential buyer that you are not interested in that individual taking over your practice. This important step in selling a practice needs to be thoroughly weighed out before immediate conclusions are made. Your advisor can guide you through this important decision making process.
9. Solidify Financing
In the world of dental acquisitions, seamless financing is no longer a given. This is especially true for young dentists who reflect a large portion of the buyer pool. Credit scrutiny is more strict, particularly if they still have debt from their schooling. Ultimately, you’ll want to secure a financial commitment with the buyer and his or her lender, and fully ensure the deal is solid. This is yet another area in which a practice advisor can take the weight off your shoulders and handle much of these intricate details.
10. Prepare Practice Operations for Transition
Prior to closing the sale of your practice, there are several operational matters you’ll need to address to ensure the office is prepared for a smooth transition. While every practice has unique systems and operations in place, some of the most common matters include making payroll arrangements, notifying office staff and patients, communicating with vendors, setting expectations, and handling other miscellaneous tasks to prepare the practice for transition.
11. Finalize the Transaction
Once you’ve accepted an offer and due diligence has been addressed, it’s now time to close the deal. With the help of your team, documents such as the Asset Purchase Agreement, Bill of Sale, Lease Assignment, letter to your patients, and termination letter to staff (if applicable), need to be drafted, reviewed, and approved by all parties. Carefully reviewing documents and the terms is critical to ensure a smooth transition.
With a qualified advisor by your side, they can help facilitate these arrangements in a way that makes everything much smoother and stress-free. At USDT, we offer knowledge gained from decades of experience handling thousands of dental practice transitions. Not only do we provide experienced counsel for buying and selling a dental practice, but some of our advisors were successful dentists and practice owners themselves, and serve as trusted advisors in the valuation, negotiation and final steps to selling a dental practice.