Selling your dental practice? Follow these eight tips from the pros!

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The sale of a dental practice consists of the sale of the underlying assets, which may include supplies, equipment, furniture, operatories, and office space or real estate. These are considered “hard” assets and the value of these assets can be estimated based upon comparables.

However, there are other ways to sell a dental practice exist, such as the sale of stock within a corporate framework, sell-and-switch, associate buy-in, partnership and hybrid partnership.

Consider these eight tips when selling your dental practice.

1. Keep it simple! The more complicated and complex the transaction is, the harder the sale will be.

In general, prospective buyers look for practices with favorable leasing arrangements, modern set-ups, and great reputations. Do you have a great Yelp rating? Or maybe you own an entire office building and receive additional rental income from tenants?

When marketing your dental practice for sale, highlight these competitive aspects! They definitely matter!

2. Stop advertising to students!

Myth:Many assume that an associate or even a student fresh out of dental school will jump at the opportunity to purchase their dental practice. WRONG!

Fact: Many recent graduates do not have the financial resources to purchase a practice. Banks are also EXTREMELY hesitant to lend large business loans to recent graduates given their mediocre credit scores.

3. “Growth Potential” has little to no value, so stop marketing it!

Myth:Advertising “growth potential” might seem like a great marketing pitch, but this is far from true.

Fact:Many buyers prefer a mature practice with a steady cash flow and constant referral base, rather than those with “growth potential.”

Don’t expect a premium by pitching “growth potential.” If you feel that your practice does have growth potential, be prepared to fully explain.

4. Be cautious with business brokers!

Once you’re ready to list your dental practice for sale, you’ll need an accurate assessment of the fair market value of your dental practice. This is difficult. Remember, it’s all about supply and demand.

You can have a dental practice that’s worth $1M dollars on paper, but if no one wants to practice in your area, it’s worth nothing.

Business brokers can help you by obtaining an appraisal, marketing, and eventually helping you sell. But, based upon the feedback from our users, brokers tend to overpromise and underdeliver.

Remember, brokers are paid a percentage of the selling price. They have an incentive to lock in the sale as fast as possible. Don’t get us wrong, as some brokers have done a great job. Before signing with any business broker, be sure to check their reputation.

Appraisers are just what the name says. These are specialized accountants that will give you the fair market value of your practice.

The best way to value your practice is to list all the hard assets on an excel spreadsheet and assign a fair market value to them. Here’s an example:

Asset Estimated Fair Value
Office Building $230,000
Office/Lab Supplies and Equipment $70,000
Operatory Equipment $70,000
Furniture $5,000
TOTAL $375,000

In this example, your practice would be worth at least $375,000.

Don’t forget the laws of supply and demand. If no one wants to practice in your area, you might be forced to sell your practice for much less than $375,000.

Myth: I run an extremely profitable dental practice (for example, making $250,000/year after expenses). I should be able to sell my dental practice for a huge premium.

Yes and no. Remember, it’s all about supply and demand.

If you’re practicing in a small town with no other providers, congratulations on running a successful dental practice! However, when it comes time to sell, if no one wants to practice in that area, forget about that premium.

Click here to learn more about practice valuation

5. Start the marketing process early with Clineeds!

Finding and connecting with the right buyer is no simple task! Start the marketing process early by listing your dental practice for sale on Clineeds. Be sure to mention unique features and include professional pictures of your office.

Listing your practice on Clineeds is a great way to put your practice in front of thousands of healthcare professionals for FREE!

Click here to sign-up

6. Get your financial documents ready!

Your dental practice is like any other business. Potential buyers will comb through your financial documents prior to any sale. Have them ready and organized in a binder for review.

It is appropriate to ask the buyer to sign a non-disclosure agreement (NDA) prior to providing these documents. Your lawyer can help you draft a standard NDA. Likewise, you can find a generic template from the internet.

Here are some things to include:

  • Tax returns (last 3-5 years)
  • Lease agreements (last 3-5 years)
  • Salaries/ bonus structure of staff (last 3-5 years)
  • Status and financing of office equipment (last 3-5 years)
  • Patient encounters, services rendered, gross collections, bad debt (last 3-5 years)
  • Payer mix (cash, third-party insurance, Medicare/Medicaid)
  • Intangibles: clinic protocols, referral sources, online reviews

7. You’ll need a lawyer!

Use the services of a qualified lawyer throughout the entire process. These include drafting non-disclosure agreements, letter-of-intent forms, and eventually the final contract.

It’s definitely to your advantage to hire a lawyer who has experience in the healthcare industry, understands healthcare regulations (Stark Law/Anti-Kickback Laws), and has worked on similar transactions.

8. Congrats on selling your practice! But consider staying on a little longer to smooth out the transition process.

The transition from an established provider to a new provider is an important and delicate process. You don’t want patients to leave the practice. Here are some suggestions:

  • Work in tandem with the new physician for 30-60 days and personally introduce your patients to the new provider.
  • Send a letter to all your patients stating that you have sold your practice to a new provider and include a biographical sketch of the new provider.
  • Host a meet-and-greet day for your patients to interact with the new provider.

Clineeds is an online platform designed to help healthcare professionals buy, sell or lease commercial office space or sell entire practices.

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2 Comments

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  1. Bethany Birchridge

    March 23, 2018 at 10:32 am

    I liked that this article mentioned to bring your lease agreements and tax returns from the the 3-5 years. I feel like this will really help the buyer see what kind of income to expect from the business. My neighbor is getting older and may retire soon, so I think this could help him sell his business.

  2. This is a very well written post, my compliments. Your information really helps me out to grow my dental marketing. I create a great listing that really helps me sell my practice.

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