Thinking About Selling Your Dental Practice?
Understandably, many dentists are initially hesitant when it comes to the idea of selling their practice. Their practice is their identity and, while retirement is a time for new beginnings and fun, it is a big change from the daily life a dentist is accustomed to.
The natural reaction to something that is unsettling is to prolong having to face it or to ease into it without fully committing to it. While this may be the comfortable approach, after facilitating hundreds of dental practice transitions, I can tell you, with 100% confidence, that this is the wrong approach to take when selling a dental practice. Putting one toe in the pool to test the waters does nothing but cause prolonged stress and typically leaves you with a lower net yield on the practice sale.
Why? Because timid sellers attract timid buyers and timid buyers seldom end up being true buyers. As a case in point, I recently went through the process of selling my home. I am embarrassed to admit that I broke a broker’s cardinal rule. Instead of practicing what I preach, I tried to sell it myself. I listed it on “For Sale by Owner” and on Craigslist to see what kind of interest I would get. I thought that, as a dental practice broker, I could easily do this myself. The house is a nice house, in a desirable neighborhood, and the price I set was comparable to others in the area so how hard could it be? Well, I did get some ‘offers’ but the offers were about as strong as the efforts I had put into selling the house. The people that responded to my ads were primarily people or companies interested in renting to own. They wanted to try out the house for awhile and possibly make an offer to buy it, at some point in the future. And, IF they decided they wanted to buy it, they may or may not be able to get funding and we would still have to negotiate the price.
This is the same type of situation we often see when dentists are not sure if they are ready to sell their practice or not. They may talk to their family about it and may start going through the process of interviewing a buyer or two on a Sunday afternoon, but in their mind, they aren’t committed to selling the practice. They are testing the waters and IF an offer happens to come along, they may or may not make a move at that time.
Similarly, some dentists think bringing in an associate is a good solution. The associate is like a ‘rent to own’ tenant with no guarantees of ever buying the practice and no pre-agreed upon terms for a potential purchase. The associate gets the luxury to ‘try it before they buy it’. This puts all of the risk on the owner and gives the associate (or potential occupant, in my case) the advantage of negotiating power if a purchase is desired at some point. This is not a good path to go down and rarely ends well for the selling dentist.
When I got serious about selling my home, I enlisted the services of a professional realtor. Once the professional was in control, we had two solid offers in three days, at a higher price than I originally asked for. When I became a committed seller, I attracted committed buyers. When I was just testing the waters and seeing what happened, I got buyers that wanted to do the same. And even though I paid my real estate broker for his services, I ended up with more money in my pocket and the process was done in a short time period with very little stress.
So, before you start the process of selling, go through the necessary steps to make sure that is what you want to do. Everyone’s situation is different. This is a very personal decision based on many factors.
If you are curious and just want to know what kind of price you may be able to expect, if you were to sell your practice, multiple last year’s revenue by .80 and there is a good starting place (assuming your practice is in a good location, still growing, etc.) If you are serious and you really want to sell your practice, don’t waste time and resources trying to do it yourself. Contact a professional who will do a complete valuation and tell you exactly what price you can expect based on the specifics of your practice.
Questions such as:
- Am I ready to sell? Emotionally, financially and physically?
- Why am I really ready to sell now? Is it due to disability, burnout or family?
- What are my plans after I sell?
- What specific expectations do I have of the person or entity that I sell to?
- Can I visualize what the perfect transition will look like?
There are a lot of factors that determine the best time for you to sell, but once you make the decision that the time is right for you, you will be well served to allow the professional transition brokers to handle the sale of your practice.
For a free value assessment of your practice, click here.
Author: Pete Newcomb, CEO Southeast Transitions