By Susan Spear
From the Spring 2019 Journal of the Colorado Dental Association
The time has never been better for the retiring or transitioning dentist to sell her/his dental practice to another dentist seeking to acquire an established office. It is possible to find a qualified buyer who meets your criteria. There are many buyers today who are seeking a business that allows them to treat patients as they choose, own and manage a small business, and provide a personal touch to dental care for their patients. They want what you have experienced over your tenure. They are seeking the private practice with a good staff, sound management principles, good equipment, modern technology, and a location within their practice demographic. Most new buyers qualify for outside financing and have the experience, financial stability and a game plan to move forward. In some instances, buyers may be purchasing a second dental practice to help augment their current productivity. With so many dentists competing for the same patients, this increases their market share without having to change their practice philosophy.
Six Steps to Selling Your Practice
- Transition Planning: Successful dental practice transitions don’t just happen. Like your beautiful crown preparations, they require planning and implementation to get the results you want. Consider working with a trusted licensed broker to help you determine which method of selling your practice is the best for you. Is it a direct sale, associate buy-out or partnership sale? Create a timeline that includes knowing how long it might take to sell your practice. Although there may be many similar characteristics for the operations of dental practices, they are not created equal. Private buyers are looking for what is unique about your practice.
- Preparation: Once you decide to sell, view it as a strategic process to present the best and most effective position of your practice at the time you sell. Before selling, take a good look at your practice and office space. Use this time to clear up information in your dental software to ensure your active patient count and other statistical information is correct. Do you have old patient records that should be inactivated? If you haven’t already done so, it is a good time to update to digital x-rays because many of the buyers today may have limited or no experience with film x-ray techniques. If updating is too difficult to undertake, realize that a buyer may need a credit toward making the change when they purchase. Clean out old storage areas to remove equipment that no longer works. Remove storage boxes and items, which look more like junk than valuable dental equipment. Consider removing excessive pictures or other decorations that are more personal than attractive. Paint walls and update flooring if possible. Fix damaged torn leather on the patient chairs and clear messy counter tops where necessary. You might even tackle the “dentist’s desk!”
- Profile and Value Your Practice: Before you sell, have a formal trusted practice valuation (not evaluation) completed, which will present an accurate and defendable purchase price for your business. You will need to gather the “right” information for your buyer, not just what you think they want to see. You will be required to present the year-to-date income and expenses of the practice. This may mean keeping your accounting up to date. You will also need financial reports for the last three years, both income and expense reports and tax returns for the business. Your documentation will also include many statistics, comprehensive equipment lists, etc. Having this and other information in place before selling greatly increases the success of finding the best buyer.
- Protection: The days are gone for using a trusting “hand shake” to ensure the security of your private information and contracts that are legally defendable. Buyers should agree to a professional Confidentiality Non-Disclosure Agreement, which extends to the other people they may share information with. All buyers want and need extensive information about your practice. This information is very proprietary. An advantage of working with a licensed and experienced broker is that your information will be managed and handled appropriately to prevent unwanted risk to you and your practice. You will also need sound legal documents that are fair and equitable for both parties to transfer the ownership of your business.
- Communication: Resist telling patients about your impending sale. Telling patients too soon about selling can lower its value to a buyer. It is very important that when you do communicate with patients, you have already determined who the buyer will be. Be prepared to introduce the new owner and support the transition with staff and patients. Of course, this can be difficult after 30 or 40 years in practice, but your endorsement of the process and the new owner is part of the goodwill value of your practice. Proper communication is one of the most important aspects of a smooth transition.
- Process: There will be questions, decisions, communications, negotiations, paperwork—lots of paperwork—and nuances different from any transaction you have experienced in the past. Keep an open mind and work toward your objective. Remain “actively” involved throughout your process. Be available for communication with your broker and other advisors to help move information quickly and efficiently. Engage in and follow through with your transition plan. Be available to answer questions and support the process as thoroughly as possible.
The number of qualified buyers is greater than it has ever been. Many dentists are mobile because of reciprocal licensing and move when seeking the right opportunity. Banks are lending money, buyers are seeking practices, and privatized dentistry is strong!