There are multiple ways to sell your dental practice and understanding each option is the best way to avoid any pitfalls during your practice. Buyers want to see the numbers that support your asking price. A proper valuation will consider a number of aspects including the goodwill of the practice. Goodwill includes things like patient loyalty, relationships, and reputation. If your patients are loyal to you and not the practice they may seek another dental practice after your departure. This is a valuation issue that you should consider at the sale. The office location is often another desirable part of buying a dental practice. However, there is a possibility that your landlord may not be willing to take on a new owner under the same lease terms.
Knowing your practice's expenses and income will aid you in the sales and valuation process. Be aware of any unnecessary spending or debt. Consider all the things about your practice that are relatively small fixes but can boost its value. “Quick fixes” include increasing your patient flow by attracting new patients for potential buyers and updating office decor. Even the simplest changes can present well to potential buyers.
Although it is a good idea to make small changes to increase the practice’s value, any large unnecessary debt will be a red flag to potential buyers. Updating out of date equipment is a necessary expense however, buying the latest equipment should be avoided. It's also necessary to note that you should continue business as usual until the sale. Having solid books of business up until the end will help you get the best value of your business.
It may seem like a good idea to sell the practice and work as an associate until you retire but this arrangement may backfire. After decades of making all the decisions, having to work under someone else can be a huge adjustment. It could also create a strange dynamic for your team members. They may want to come to you for direction instead of the new owners, making it a hard transition for them as well.
It is the best idea to get a third-party appraisal to determine the value of your practice. It is not uncommon for practice owners to over value their practice due to hard work and investment or emotional attachment.
There are multiple ways to value a practice and you should use several to help you determine the best asking price. Possible valuation methods include income-based valuation and market-based valuation.
It may be tempting to aid the buyer using referrals for any kind of kickback or fee-splitting however, these arrangements can violate laws or fee-splitting restrictions. These violations can be costly in civil penalties and even criminal charges.
You have worked hard at building your practice and selling it can be an emotional endeavor. That coupled with the nuances that make up the sales process can be a lot to take on alone. It is in the best interest of you and your practice to have a team of advisors to help you during your process. Among your team of advisors should be an attorney and an accountant.
A financial advisor will be helpful in accurately assessing your personal finances. Selling your practice will impact your personal income for the rest of your life. You want to ensure you have enough funds to retire, invest, and do any other personal business ventures you see fit.
An experienced healthcare broker will help you find serious buyers for your practice. They take a fee from the overall sale but they’re worth it. Their networks, experience, and information will save you time and effort in the long run. If you already have a buyer lined up it is a good idea to have a transition specialist that will help with valuation and general agreement development.
Frequently Asked Questions
Q: What factors should I consider when selling my dental practice?
A: Factors to consider include the practice's financial performance, goodwill (patient loyalty, relationships, reputation), office location, lease terms, and potential improvements.
Q: How can I determine the value of my dental practice?
A: Getting a third-party appraisal is recommended to accurately determine the value. Valuation methods can include income-based valuation and market-based valuation.
Q: Should I make small fixes or invest in major equipment upgrades before selling my practice?
A: Small fixes that can boost the practice's value are recommended. However, be cautious of unnecessary debt and avoid buying the latest equipment. Focus on updating outdated equipment instead.
Q: How should I handle the transition period after selling my practice?
A: It's advisable to continue business as usual until the sale is complete. This ensures solid books of business and maximizes the value of your practice. Working as an associate under new ownership can be challenging, so carefully consider if it aligns with your plans.
Q: Is it legal to offer referrals or engage in fee-splitting arrangements during the sale?
A: Referrals with kickbacks or fee-splitting arrangements can violate laws and fee-splitting restrictions, leading to costly penalties and potential criminal charges. It's best to avoid such arrangements.
Q: What role do advisors play in selling a dental practice?
A: Advisors, such as attorneys, accountants, and healthcare brokers, are crucial for a smooth transition. They provide guidance on legal matters, financial assessment, finding buyers, valuation, and agreement development.
Q: How can a financial advisor help in selling my practice?
A: A financial advisor can accurately assess your personal finances and ensure you have sufficient funds for retirement, investments, and personal ventures after selling your practice.
Q: What benefits does a healthcare broker bring to the selling process?
A: A healthcare broker has a network of serious buyers, industry experience, and valuable information that saves time and effort. Although they take a fee from the sale, their expertise is worth it.
Q: Should I involve a transition specialist if I already have a buyer lined up?
A: It is still beneficial to have a transition specialist who can assist with valuation and general agreement development, ensuring a smooth and successful transition even with a pre-identified buyer.
At Dental & Medical Counsel, PC, we understand navigating the legal process can be tricky. We believe every doctor deserves the best advice and service so doctors can do what they do best, treat their patients. We make their lives easier by providing expert guidance, so they can focus on their personal and professional aspirations.
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About Ali Oromchian, Esq.
In addition to practicing law for almost 20 years, Ali is also a renowned speaker, throughout North America, on topics such as practice transitions, employment law, negotiation strategies, estate planning, and more! Ali has helped hundreds of optometrists realize their professional goals and looks forward to aiding you in navigating the legal landscape.
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