Selling your dental practice can be a very emotional process and one that is fraught with traps and mistakes, which can be easily avoided by following a few simple rules. In the following article I have set out five points (by no means all-inclusive) that if followed will help make the sale of your practice easier, more pleasant and a much more fruitful experience.
1 Appraisals
The starting place for any practice sale process should be getting a good appraisal. It needs to be a document
that you, the purchaser and the purchaser’s advisors and lenders can all rely on to be a fair representation of real value of your practice. The appraised value of any practice should be largely a function of the return on investment that it will provide to the purchaser based on its current operations and short term future operations that can be credited to the seller.
An over inflated appraisal will likely mean that your practice will sit unsold on the market for a longer period than if it was correctly appraised. Unreliable appraisals not only make buyers and their advisors wary but also have the same effect on lenders who will discount appraisals that are not based on solid business principals.
Always ask your appraiser how your practice will be appraised and verify with your accountant that the methodology suggested by the appraiser is based on sound business principals.
2 Develop a Plan
With your appraisal in hand sit down with your accountant, broker and possibly financial planner and determine how you are going to sell your practice. Are you going to “take the money and run”, are you going to work for a short period or a long period as an associate, is it important who you sell your practice to, are you ready to sell your practice -maybe you need to wait for a year or two? These are all questions that you need to have answers for. You will also need to determine what you are selling, shares, assets or a combination of both. The best person to advise you on this is your accountant as these decisions are largely tax related.
Make sure that you have good advisors and that you listen to them. Choose accountants, lawyers and brokers who are well respected in the dental industry. Hopefully your accountant is well versed with the details of a dental practice, your real estate lawyer however will probably be a poor choice to help you sell your dental practice. There are a good number of accountants and lawyers across the country who specialize in providing services to medical professionals. If you don’t know who they are try asking a local practice broker or even your banker. Before you put your practice up for sale make sure you and all your advisors know what you are selling and how you want to sell it.
3 Unnecessary Secrets
One of the questions most often asked by sellers is when do they tell their staff and patients that they are selling their practice. There are strongly held beliefs that the process should be a secret until the very last minute to avoid a loss of patients and staff. On the other hand, rumors are always perceived more seriously than the truth and once your practice is on the market it is very hard to keep it a secret.
There may be specific reasons for keeping the sale of a practice quiet and if so then that should be the strategy. However, once all your plans are made and your practice is about to be listed, if there are no overriding reasons for keeping your intentions a secret it is probably more beneficial to first tell your staff and be honest with patients if asked. In most cases the employment of current staff by the new owner will be on the basis of “continuous employ ment” and will form part of the sale agreement, so staff should not worry about the security of their jobs. The last thing a purchaser wants is for the staff to leave.
Let your staff know that you are carefully picking a successor who will carry on the current traditions of the practice and treat the staff and patients in the same way as you have been treating them. It will be better for them to hear the truth from you than rumors from someone else.
Similarly, be honest with patients when asked. Remember they come to you for their very personal dental care because they trust you. When you tell them that you are carefully picking out your successor they will also trust you with that. Of course, at some point you will need to introduce the new owner to them either by way of letter or in person and you may be surprised at how unsurprised most of them will be.
Honesty is always the best policy.
4 Focus On Your Outcome
Once you have decided how you are going to sell your practice and have determined what price you are prepared to accept for it, do not get sidetracked with irrelevant details or “noise.” Noise is anything that distracts you from your objective which in this case is to sell your practice as planned. Most people are very susceptible to noise, avoid noise at all costs.
Different advisors will use different negotiating tactics. Do not take any comments from a negotiation personally and do not let any comments distract you from your objective. Similarly you may find many of your colleagues have instantly become experts in the area of practice sales and valuations with lots of free advice. Do not get distracted by well intentioned friends.
One of the big advantages of having a properly prepared appraisal and a well thought out selling strategy is that it can help you from getting distracted by noise.
5 Time Is Of The Essence
Finally, you should know that the longer it takes to get a deal done the less likely it is to actually happen. Once you have found your buyer, instruct your advisors (usually the lawyers) to close your sale as quickly as possible. The longer it takes to actually get a deal closed the more time there is for unforeseen and unnecessary issues to arise.
Legally speaking, the squeaky hinge gets the oil. Real estate transactions, because people are moving etc. etc., tend to almost always close on time, the lawyers make sure of it. Dental transactions often take second or third place in a lawyers priority list. If you want your deal to close on time make sure you and your broker stay on top of both sets of lawyers to make sure that happens.
If you follow all of the points described above, I guarantee the sale of your practice will flow more smoothly and successfully than if you don’t.
Derek Hill a co-founder of The Hill Kindy Group Inc., and the Broker of Record for Hill Kindy Practice Sales & Realty inc., Brokerage specializes in the design and facilitation of all Practice Sales and the personalization and execution of all Transition or Stepped Sale Strategies. Hill Kindy Practice Sales & Realty Inc., Brokerage, St. Catharines, ON. T: 905-984-581
