July 8, 2019
by Shawn Peers, Dental Peers
There comes a time in the life of every dentist/owner when the moment to sell their practice is upon them. It can be a difficult decision. Your practice is “your baby”…your life’s work.
For most, it will be their most valuable asset.
And they often feel the years of hard work they have put into “their baby” means it is worth top dollar!
The question is will buyers feel the same way.
Outside buyers simply see your practice as a mix of physical assets, lease obligations and numbers from financial statements. They do not (yet) have any skin in the game and, consequently, do not attach any emotional value to the practice.
So how do you maximize the value of your practice to an outside purchaser?
To start with, you need an evaluation! In fact, I recommend you have one and then update it annually, even if selling is not in your near future. This way, you will always know the approximate value of your practice. It makes retirement planning that much easier.
The next step may be updating your office technology.
You may be thinking “I am selling soon! Why would I waste money on new technology? I will never see the return on my investment!”
Before you jump to that conclusion, there are a number of factors to consider. The first is the rate of depreciation or capital cost allowance.
Some classes of capital property acquired after November 28, 2018 may be eligible for favourable treatment in the form of accelerated capital cost allowance. This can provide a significant tax benefit that would offset part of the cost of some forms of capital equipment. You should discuss potential eligibility and the benefits of this with your accountant.
A second consideration is the desirability of your practice. It may still be a sellers market , but that does not apply for every seller. Buyers can be very specific about what they want and they will not pay top dollar for a practice that does not meet their criteria.
A modern, up-to-date practice is something that gets the attention of a buyer. Sophisticated buyers understand that patients are demanding modern standards of care and the modern equipment that can deliver it. Outdated technology is less appealing to patients.
And that makes it less appealing to buyers. They will not pay you top dollar if your practice requires a significant investment in new equipment as well. They will simply wait to purchase a more modern practice, leaving yours on the market for a longer period of time.
And the longer your practice remains on the market, the more its value will decline.
The reality is that both patients and dentists expect modern facilities today. That is simply the cost of admission in today’s business world. If you are not prepared to incur that cost, don’t expect purchasers to meet your price when you sell.
 This does not include an associate. But keep in mind, an associate may feel at least part of the practice value was created by their work and they should not have to pay YOU for that!
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